Question: We need to know what to do in the following situation. A consumer prepares an application and has an initial discussion with the loan officer. The loan officer explains what additional information is needed and gives the consumer a list of this information. The consumer leaves the form with the loan officer. We never hear from the consumer again. Is this a denial, a withdrawal, an incomplete application or what? Do we need to send a notice? If so, what notice do we send?
Answer: First, be sure you have application procedures and that your loan officer followed them. The greatest vulnerability to a violation is for the loan officer to have different types of conversations with different applicants and to handle their applications differently. Procedures protect the institution and also ensure that consumers get the same information.
For purposes of this answer, I'll assume that the list of information given to the customer is a prepared list that you give to all customers. However, much depends on what the loan officer told the consumer about the application process and whether the loan officer in any evaluated the applicant's qualifications.
First, the application wouldn't be complete until you have all of the information that you need to make a decision. Ordinarily this would mean the information on the checklist. However, it is always possible that the loan officer actually made a denial based on something the customer has provided to the loan officer. This could be a recent bankruptcy, for example. If this happened, the lender made a denial and owes the customer an adverse action notice.
Next, you can always follow up with a notice of incompleteness. The notice of incompleteness explains that the consumer must provide additional information and without it, the creditor cannot process the application. This notice essentially reminds the consumer that the ball is in their court. You can always use this notice as a safety net when you aren't sure what else to do.
Finally, what you probably have is a withdrawal. The customer took home the list and never followed up. Even though you may have an application form filled out and signed by the consumer, the application is not complete. The consumer left knowing (if the loan officer did the job right) that there was more to do to complete the application. Not providing the information can be construed as a withdrawal. In that case, make a notation to the file and close it up. You don't need to send any notice to the customer.
There is leeway in how you choose to handle these situations. The most important thing for lenders to understand is that whatever they do, they must follow procedures. If they do that, the rest tends to fall into place.
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