Adverse Action Notices, when do you need them?
Two federal laws — the Equal Credit Opportunity Act (ECOA), as implemented by Regulation B, and the Fair Credit Reporting Act (FCRA) — reflect Congress’s determination that consumers and businesses applying for credit should receive notice of the reasons a creditor took adverse action on the application or on an existing credit account.
WHAT IS ADVERSE ACTION?
Regulation B defines adverse action as:
A refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer (to grant credit in a different amount or on other terms), and the applicant uses or expressly accepts the credit offered;
A termination of an account or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor’s accounts; or
A refusal to increase the amount of credit available to an applicant who has made an application for an increase.
A creditor must provide notice if it has:
Taken adverse action on a completed credit application;
Taken adverse action on an incomplete credit application;
Taken adverse action on an existing credit account; or
Made a counteroffer to an application for credit and the applicant does not accept the counteroffer:b
Notice is not required if:
The transaction does not involve credit;
A credit applicant accepts a counteroffer;
A credit applicant expressly withdraws an application; or
The creditor approves a credit application and both parties expect that the applicant will inquire about its status, but the applicant does not inquire within 30 days after application (the approved application is treated as withdrawn)
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Jennifer Finlay
Director of Marketing and Sales
407-583-9199 jennifer@youroata.com
