My understanding is that lenders should not be checking the FCRA box unless the information in the credit report contributed to the denial. FCRA only requires the adverse action notification when information in the credit report was actually used in making the denial. Our FCRA notice includes two boxes, one if the decision was based on information from a consumer reporting agency and the other if there was information from another source. Our procedures require that we pull a credit bureau to get a "score". If the score approves the loan but the lender declines it due to reasons such as the appraisal may reveal that the property doesn't support the loan or income or employment couldn't be verified, the actual reason for the decline was not from the bureau. So would we be correct in marking the box for information from another source even though we did pull the bureau? We've been going back and forth on this and my thought is that we would not mark the first box since the score from the bureau approved the loan. Would appreciate a second opinion. Thank you very much!

First, you are correct that you should not mark the "credit report" box unless the credit report contributed to the denial (in whole or in part).

The "outside source" box should also only be marked if applicable. This info must reflect upon the consumer’s credit worthiness, credit standing, capacity, character, general reputation, personal characteristics or mode of living [§615(b)]. Typically, this is info from an employer, landlord or other banks not reporting to the credit bureau.

It is absolutely fine to mark the "Credit report" box even though a credit report was pulled. By marking this box, you are telling the applicant there is something negative on their credit report. That way, they can dispute it if it isn't true. You are NOT disclosing you pulled a credit report.

David - thank you. If the reason turns out to be "unable to verify income", we wouldn't mark either box would that be correct? We use a combined Reg B/FCRA notice so the reason would show up in the Reg B section and neither box would be marked in the "Discloure of Use of Information Obtained from an Outside Source". Am I understanding that correctly?

"unable to verify income" could be info from the employer, which would trigger the "outside source" disclosure.

Well, I think it would depend on whether the employer refused to verify or could not be contacted (no outside source at this point) or verified a different amount than what the applicant indicated (requires disclosure).

Randy's exactly right. That's why I said "Could be info from the employer."

I caught that David and knew what you meant - I was just trying to add a little clarification Have a good weekend.

One more I'd like to ask about - application is for a car loan. What if the the application is approved but when it gets ready to close, the applicant tells the lender the reason they wanted the loan was because their current car is being repossesed? The lender indicates that for some reason this information was not reported to the credit bureau nor indicated on the application so did not get factored into the decisioning information. The lender now wants to deny. I'm thinking in this instance neither box would be marked since this information was provided directly from the applicant. Would that be correct? Thank you as always for your help.

That would be correct and I agree with the action your loan officer wants to take.

FWIW, I agree as well. The CR had nothing to do with your decision. Therefore, no FCRA disclosure.