Denying a large commercial applicant

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Question:

I'm looking for some clarification on the Notice of Action Taken provided to businesses with revenues in excess of $1MM. Can a Bank choose to provide these businesses with an Adverse Action Notice which lists the reasons for denial, or is the Bank required to provide the Notice of Action Taken which does not list the reasons for denial? I wasn't sure if there were any reasons that would prevent us from providing an Adverse Action Notice as opposed to a Notice of Action Taken. Also, the provision does give the Bank the flexibility to notify the applicant, orally or in writing. If the applicant is notified orally, what would be the best course of action that the Bank or Loan Officer would need to take for compliance monitoring purposes? "(ii) With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, a creditor shall: (A) Notify the applicant, within a reasonable time, orally or in writing, of the action taken; an (B) Provide a written statement of the reasons for adverse action and theECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor's notification."

Answer:

It is always wise to read the official staff interpretations (a/k/a Commentary) in connection with the regulatory text.

Comment 9(a)(3)-4 to § 1002.9 of Regulation B says —

Quote
4. Manner of compliance. In complying with the notice provisions of the Act and regulation, creditors offering business credit may follow the rules governing consumer credit. Similarly, creditors may elect to treat all business credit the same (irrespective of revenue size) by providing notice in accordance with §1002.9(a)(3)(i).

As for notifying a business applicant orally, you need to have an enforced procedure that records the date, time, and circumstance of such conversations (phone, in person, etc.), and whether reasons were given in the notification. If an applicant who is not given reasons for the adverse action requests those reasons, your procedures should include an annotation of how and when that information is provided.