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Denial Forms For Debit Cards
Question: We offer a debit card to our customers. When we deny the card, we send out the loan denial form we use for loan denials to inform the applicant they have been denied the debit card. Our Auditor seems to think this is in error. Do you know anything about the denial form and if it should be used for this purpose?
Answer: There are typically two types of "denial" notices (although some forms combine the two). One is the adverse action notice required by the Equal Credit Opportunity Act (ECOA). It must be furnished if the bank is taking adverse action related to credit. Since a debit card merely allows a customer to access their deposit account, and does not entail a credit feature, the ECOA adverse action notice would not be needed.
The other type of adverse action notice is under the Fair Credit Reporting Act (FCRA). The FCRA says that if a person "takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report", they must provide an FCRA adverse action notice. Details for the content of that notice are found in Section 615 of the FCRA (15 U.S.C. §1681m). http://www.ftc.gov/os/statutes/ fcra.htm#615
So, whether the notice you're sending out is appropriate or not depends on whether it is an FCRA notice or an ECOA notice. The ECOA notice would not be appropriate. The FCRA notice would be if the denial is based in whole or in part upon information contained in a consumer report.
Our thanks to Mary Beth Guard, Esq. for her response.
Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 6, 7/02
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