Risk Management: Credit Application and Decision Notices

Sometimes talking about credit application notices seems pretty dreary. In spite of the mundane nature of the topic, the risk for notification violations is high. Notices create a paper trail that is alarmingly easy to follow. And examiners follow that trail straight to the violation.This page lists the primary notice requirements that lenders must send to loan applicants. The notices are required by Equal Credit Opportunity, Truth in Lending, Fair Credit Reporting, and RESPA. Although the list is daunting, most of the notices can be handled by having an established routine such as an application packet with notices pre-loaded or an automated system that is programmed to generate the required notices. For several notices, there is simply no substitute for loan officer knowledge - and responsibility.

While training is essential for all of these functions, we have flagged several where training is particularly critical - and for which there is no real substitute. For example, loan officers simply have to go through training on selection of reasons for adverse action. The situation for each applicant varies and the factors in each application have different impacts on the decision. So there is no substitute for training to be sure that loan officers understand how to identify the reasons for denial.

For each of these notices, the loan officer has primary responsibility. Even though the action may be delegated to loan support staff, loan officers must understand that they are responsible for ensuring compliance with each notice.

Credit Application and Decision Notices Chart

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 14, 12/05