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Reg B Section 202.9

(a)(2) Content of notification when adverse action is taken.

A notification given to an applicant when adverse action is taken shall be in writing and shall contain a statement of the action taken; the name and address of the creditor; a statement of the provisions of Sec. 701(a) of the Act-(ECOA Notice); the name and address of the federal agency that administers compliance with respect to the creditor; and either:

(i) A statement of specific reasons for the action taken; or

(ii) A disclosure of the applicant’s right to a statement of specific reasons within 30 days, if the statement is requested within 60 days of the creditor’s notification. The disclosure shall include the name, address, and telephone number of the person or office from which the statement of reasons can be obtained. If the creditor chooses to provide the reasons orally, the creditor shall also disclose the applicant’s right to have them confirmed in writing within 30 days of receiving the applicant’s written request for confirmation.

(3) Notification to business credit applicants.

For business credit, a creditor shall comply with the notification requirements of this section in the following manner:

(i) With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), a creditor shall comply with paragraphs (a)(1) and (2) of this section , except that:

(A) The statement of the action taken may be given orally or in writing, when adverse action is taken;

(B) Disclosure of an applicant’s right to a statement of reasons may be given at the time of application, instead of when adverse action is taken, provided the disclosure contains the information required by paragraph (a)(2)(ii) of this section and the ECOA notice specified in paragraph (b)(1) of this section;

(C) For an application made entirely by telephone, a creditor satisfies the requirements of paragraph (a)(3)(i) of this section by an oral statement of the action taken and of the applicant’s right to a statement of reasons for adverse action.

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Listed below and highlighted in BLUE , is the new revision to Reg B that requires that the additional notices and disclosures, (other than the one that can be provided "orally") as required in the above quoted 202.9(a)(3)(i), be provided in a form that an applicant may retain.

My question is: Since a commercial loan officer can only "orally" disclose the "statement of action taken",and some banks don't use a commercial loan application, how are some of the other banks addressing this requirement on denied commercial applicants with revenues under $1MM?

Have the regulators found a "back door" to encourage banks to use written applications for commmercial loans?

Or am I just trying to read too much into this and wishing it to be true?

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202.4

(d) Form of disclosures. A creditor that provides in writing any disclosures or information required by this regulation must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by Sec. Sec. 202.5 and 202.13, in a form the applicant may retain .

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Maybe I'm off the mark here, but I don't see that there is a dilema here.

"Since a commercial loan officer can only "orally" disclose the "statement of action taken"," I don't see that "oral" is the only permitted method of disclosure.

"202.4

(d) Form of disclosures. A creditor that provides in writing any disclosures or information required by this regulation must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by Sec. Sec. 202.5 and 202.13, in a form the applicant may retain ." What I read is that if the disclosures are made in writing, they must be retainable by the applicant. For example, information appearing on a computer screen must be printable or the written notice cannot be a sign on a desk "If you have been declined, blah blah blah."

We give all commercial loan applicants their statement of rights under Reg B as part of our accepting a credit request. And yes, the commercial lenders howled over this.

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" What I read is that if the disclosures are made in writing, they must be retainable by the applicant.

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Robert,,no offense,,but I think you may be off the mark here.

Section 3(i) states:

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a creditor shall comply with paragraphs (a)(1) and (2) of this section

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Which means, IMHO, that you must provide the disclosures (other than the oral one),,,,in writing.

Anyone else?

You can do either...orally or in writing...if in writing it must be in a form they can keep, ie a letter, denial form, etc. This is what we have done, since the examiners are regularly asking for commercial denials these days...and since borrowers are often time offended by the up-front statement of their rights IF denied (even tho you know good and well you'll be making the loan)

We developed a "Commercial Loan Info Sheet" which gives basic info about the loan...particularly helpful for HMDA purposes! If the loan is subsequently denied, we send a denial similar to the one listed in the model forms section irregardless of over or under 1M. Keeps everything nice and clean and within the reg and out of the shredder.

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You can do either ...orally or in writing...if in writing it must be in a form they can keep, ie a letter, denial form, etc.

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Joker,,,I am afraid I must disagree.

My contention is that you can only provide " the statement of the action taken " in an oral manner.

All of the other parts of the notification,(1.Creditor's Name & Address, 2.ECOA Notice, 3.Regulators Name & Address),,,,,,must be in writing .

So if you are a bank that does not normally send a written AAN on commercial loan denials,(because they are being notified orally),,,,then with the advent of the new revision in Section 202.4, requiring that disclosures be " in a form the applicant may retain ",,,,one could get nailed in an audit, for not being able to prove they were provided.

Dan,,,Am I wrong here???

And what does your bank do???

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Dan,,,Am I wrong here???

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Not IMO. The only exemption (that I'm aware of) given for the the applicant’s right to a statement of reasons for adverse action to be given orally is if the application is done entirely by telephone.

We send an AAN instead of giving the statement.

Sorry..I guess that's really what I was getting at...instead of giving the statement, we do an AAN...The statement can create hard feelings. It also makes things simpler by not doing one thing for one group and another thing for the other group...keeps it consistent.

With respect to BUSINESS credit requests, the whole "written disclosures in a form the customer can keep" applies to businesses with revenues of $1MM or less. It does not affect your declines of requests from large businesses.

There are two ways to handle the written disclosure requirement:

1. Give the business applicant the statement of their right to a written statement along with the ECOA notice, and the name and address of the creditor as part of an "up front" notice that is given at time of application, OR

2. Send out a full Adverse Action notice at time of denial.

We decided to go the "Up front" notice route, and actually turned the letter into a bit of a marketing piece that touts our many fine products and services. We also threw in the CIP notice to boot.

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For requests from Businesses with revenue over $1MM, you are only required to:

(A) Notify the applicant, within a reasonable time, orally or in writing, of the action taken; and
(B) Provide a written statement of the reasons for adverse action and the ECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor's notification.

That's a real big IF.

A very precise answer.

Exactly what I was looking for, from a Diamond Discusser.

Thank you very much Bonnie, for stateing it so well.

Also, some very good ideas about combining disclosures with marketing materials.

Thanks again,,,Bonnie.

Don't you just love BOL!!!!

Do we need to track the denials on our HMDA log? We are not HMDA reportable, but we do report our commercial loans for CRA and I don't recall having to indicate how many denials we had. This was our first year of reporting, so please bear with this question. Thanks!