I just read Mary Beth's article on Adverse Action Notices and Co-Applicants. Where in the FCRA or the FTC's site does it say that when applicants are denied credit due to negative credit reports each applicant declined for that reason should receive an individual AA Notice that includes the FCRA language?

I have looked into this before. I did not find any guidance or language suggesting the need for a separate individual AA notice. I believe that it is sufficient to use a notice directed to both applicants.

FCRA 1681m and the Stinneford Letter .

Dan -- thanks for pointing out the Stinneford letter. Very interesting. It seems that the FTC perhaps failed to appreciate the distinction between sending a single AA letter to only the primary vs. sending a single AA letter but having it clearly addressed to both the primary and secondary applicant. In our business the co-applicants are typically spouses who share the same address. They would submit one application, receive one approval letter, if appoved, one statement etc. Seems redundant to send two separate AA letters?

So is it acceptable to use the same FCRA notice for married applicants if the notice is addressed to both of them? (Our Reg B and FCRA are combined.) From the Stinnett Letter Dan posted I would tend to think the notice needs to go to both separately.

Other scenario: What if it was only the credit report of one of the applicants that caused the adverse decision. The FCRA notice still has to go to the applicant whose credit report was fine, correct? So What should be indicated on the notice to the applicant whose credit report was fine?

Thanks!

No.




No.


The FCRA notice is only required for the applicant whose credit report was used in whole or in part to make the adverse credit decision.

I disagree. One notice may be sent to both a primary and co-applicant residing at the same address (regardless of whether they are married or not). The notice should be addressed to both.

When the Stinneford Letter became popular a few years ago, everyone freaked out. Including me. I changed our procedures to require our officers to prepare separate notices, but allowed them to mail them in the same envelope. It was a training nightmare!

When I arrived at my new bank, I followed the advice of a prominent compliance group and discontinued that practice! Now we do what "Where-it-say-that" does and send one letter addressed to both applicants. Joint applicants should have no expectation of privacy, again, whether they are married or not.

I know what Stinneford says, but does it really make sense to send two identical notices when you can send one?

We recently discovered that we were not sending notices to a co-applicant if they lived at a different address than the primary borrower. This is now fixed. Do we need to go back and try to rectify any past errors? We went back about 60 days and sent out notices as appropriate, but I think it would confuse customers to go back any further. Probably think there had been ID theft!

I would fix it (sounds like you have) and move on. I would not go back and resend AAN's. It's a risk management issue.

I want to make sure I understand this. If both an applicant and a co-applicant have bad credit and live at the same address, it is acceptable to send one notice that is addressed to both. However, if one applicant has bad credit and one has acceptable credit and they live at the same address, then we must address a notice to both, one for the bad credit and one for the other reason they are denied such as insufficient collateral. Is this correct?

Another question,

A husband, wife and husbands business partner "apply". We do not have to have a written application since it's not a home purchase or refi. The application we do have is a consumer app with husband and wife's information and a financial statement signed by the husband but not the husband's partner. We pull credit reports on all three and deny the credit, sending an AAN to addressed to all three.

Did we have a permissable purpose for pulling the partner credit report?

What if we have a note in the denied credit file signed by the husband stating that most of the money from the loan would be used to purchase a house?

If you used their credit report to determine they have "bad credit", each must receive a AAN/FCRA notice. This is clarified in the Stinneford letter which you can find at the FTC website.

You are correct that Reg B doesn't require a written application in this case; however, §202.7(d) requires evidence that the applicant's wanted to apply jointly.


Yes, if he was applying for credit.


I'm not sure what this has to do with anything. All 3 of them could be buying a house.

The wife and husband were applying and the husband wanted to pledge assets owned by the partnership. Half of the loan proceeds would go for business expenses and half for personal. But nowhere in the application is it indicated that the partner wanted to apply for the credit as well.