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Credit report dated earlier than application. FCRA violation?
Question: Our examiner is planning to write us up for violations of FCRA and ECOA because we have credit reports dated earlier than the dates on the applications. Is this a violation? What can I do to talk the examiner out of this?
Answer: Establishing the date of application is becoming more and more troublesome. Because the critical question under Regulation B is whether the lender acted expeditiously to process the application, examiners do tend to look for evidence that applications existed at the earliest possible date. They also look for an application because they believe an application is necessary to provide a legitimate business purpose for pulling a credit report.
This, unfortunately, does not always square with the business realities which today are driven by the competition to refinance loans. Often, a loan officer will pull a credit report before the applicant submits a formal application. Usually, this will enable the loan officer to discuss rates and loan product options with the customer. The loan officer is able to give the consumer useful information without actually evaluating the credit. This is permissible under FCRA because the conversation with the customer creates the legitimate business purpose for obtaining the report. The actual application does not need to exist.
With Regulation B, the question is murkier. Under Regulation B, you have an application when you have accepted a request for credit in accordance with your procedures. Your procedures are not simply what you say they are; your procedures are what you actually do. If the loan officer is actually evaluating credit in these conversations, then you probably are taking an application. However, if the loan officer is merely giving information to the consumer, it would not be an application.
To persuade an examiner that this practice is not a problem, you need to be able to show that loan officers are following the rules. This means that they have been well trained in the nuances of application-taking under Regulation B. It also means that they are not using this process to screen out less qualified applicants while encouraging the easy approvals.
Documentation is your primary method for making this proof. Have the loan officers keep track of these phone calls. Then you have a customer name to match the credit report that was pulled. You also have a date of conversation. Match this to procedures that give clear guidance on when and how to accept applications.
Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 1, 2/03
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