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#14873 - 04/05/02 05:48 PM Tatlebaum decision
Bear Collector, CRCM Offline
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On 6/22/01, the FTC clarified the Tatlebaum decision by stating that there was a legitimate business reason to pull an individual credit report on a business loan if the individual in question was to be personally liable on the loan.

What I am still not sure about is: if we pull a CBI on a sole proprietor or a guarantor and decline the loan because of derogatory personal information, do we have to send them a FCRA notice, or are we not required to do so because this is for business purposes?
Thanks for your response.
Leslie
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General Discussion
#14874 - 04/05/02 06:49 PM "O' Tatelbaum, O'Tatelbaum....."
elcinoca Offline
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Leslie, I don't recall (that's dangerous in and of itself) the Tatelbaum letter dealing with the issue of FCRA. But I posed a question on 01/08/02 just like yours. And Lucy Griffin's response was succinct:

"If you based the denial in whole or in part on the business owners personal credit report, then you must send the FCRA notice. The FCRA notice requirement is triggered, not by the type of loan under consideration, but by the fact that you used a consumer's credit report to make the decision."

Further in that Banker thread was a discussion about pulling a credit report on a Guarantor, which if the loan was denied, did not require the FCRA notice.

Check out that thread on 01/08/02.

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#14875 - 04/05/02 09:36 PM Re: Tatlebaum decision
Anonymous
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Here's the link to the post elcinoca mentions: FCRA adverse action thread

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#14876 - 04/05/02 10:36 PM Re: Tatlebaum decision
Princess Romeo Offline

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This is how I understand the whole Tatlebaum/FCRA area with respect to business credit, at least how it applies in California.

If the applicant is a sole proprietor, we pull the credit report. If the report plays in part in a decline, then a combined Reg B/FCRA notice is sent to the proprietor since, in California, an indivividual & sole prop are considered one and the same.

However, if the entity is a partnership, corporation, LLC, etc., and the credit report plays any part, the individual would have been a "guarantor" on the credit, and as such, the FCRA notice is NOT triggered. The FTC stated that the guarantor does not get an FCRA notice (it was in one of those letters - and help me if I can exactly recall which one - it may have been Tatlebaum I.)
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#14877 - 04/06/02 03:29 AM Re: Tatlebaum decision
Bear Collector, CRCM Offline
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Well, I appreciate everyone's input, but things are still as clear as MUD! I went back and re-read the January 8th post, and Lucy seemed pretty adamant that FCRA notices apply when you use a consumer report, regardless of the purpose. The second Tatlebaum letter really only addresses the pulling of credit reports, but not the communication of rights under FCRA when the loan is declined. That letter states that you only have a "permissable purpose" to obtain a credit report if the individual is going to be personally liable on the loan, such as a sole proprietor or a guarantor. That covers the signature authorization part, but does not address the notice part.
From what the some of the rest of you said, it seems that only sole proprietors aand guarantors are able to learn of their rights under Fair Credit, and everyone else is out of luck if business credit is involved.
My intepretation, like Lucy's, is that anytime you use an individual's credit and deny a loan because of that credit, they should be informed that they have the right to find out what happened and why and to correct it if necessary. However, that's my gut talking.
Is there a problem if we just include the FCRA notice on all AA letters regardless of the type of loan? That way we are covered and our loan officers don't have to think about if and when that should apply.
You know ... there are days when this stuff just isn't fun anymore! (And this is my favorite Act, too!)
Leslie
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#14878 - 04/07/02 02:59 PM Re: Tatlebaum decision
Anonymous
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Under <a href="http://www.ftc.gov/os/statutes/fcra.htm#615"> Section 615 of the FCRA</a> it says: "If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall [provide an FCRA adverse action notice.]"

When an individual is going to be cosigning a loan and you decide not to grant the loan based on information contained in their credit report, it seems pretty clear to me that that is adverse action as to them and a notice should be given.


Last edited by mbguard; 04/11/02 02:54 PM.
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#14879 - 04/08/02 03:29 PM Re: Tatlebuam II (it quacks, but isn't a duck...)
NotALawyer Offline
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Our bank brought this to question to outside counsel and we were given a copy of the FTC's staff opinion letter dated July 14, 2000 (AKA Tatlebaum II). I was informed that the FDIC concurred with the conclusion. Here is the excerpt that applies here:

(excerpt from letter)

Is it permissible for a creditor to send a combined ECOA/FCRA adverse action notification (similar to Form C-1) only to the primary applicant, even if the application was denied based on the co-applicant's (or guarantor's) consumer report?

For the reasons set forth below, it is our view that the answer is no with respect to a co-applicant and yes with respect to a guarantor.

Section 615(a) requires that "any consumer" with respect to whom adverse action is taken must receive the disclosures mandated by Section 615(a) is that action is based "in whole or in part" on information from a consumer report. (Emphasis added). In our view, the plain language "any consumer" includes a co-applicant. Neither Section 202.9(f) of Regulation B, nor the combined disclosure permitted in Appendix C, remove or modify that requirement with respect to co-applicants. The objective of the combined disclosures permitted by the Federal Reserve Board in Appendix C to Regulation B is only to simplify the paperwork involved in making EXOA and FCRA notifications to a single applicant, where both are required – i.e., the action by the creditor is both adverse to the applicant (ECOA), and is based in whole or in part on information from that applicant’s consumer report (FCRA).

Because Section 603(k)(1)(A) of the FCRA provides that, in the context of a credit application, “adverse action” shall have the same meaning for purposes of the FCRA as is provided in the ECOA, we look tot he definition of “adverse action” set for in Section 701(d)(6) of the ECOA, 15 U.S.C. Sec. 1691(d)(6), and Section 202.2(c) of Regulation B, 12 C.F.R Sec. 202.2(c)(1). Under these authorities, only an “applicant” can experience “adverse action.” Section 202.2(c)(1) of Regulation B, 12 C.F.R. Sec. 202.2(c)(1). They further specify that a co-applicant is an “applicant” but that a guarantor is not. Section 702(b) of the ECOA, 15 U.S.C. Sec. 1691a(b); Section 202.2(e) of Regulation B, 12 C.F.R. Sec 202.2(e).

Thus in response to the specific example posed in you letter, when there are two applicants a creditor cannot send a combined ECOA/FCRA adverse action notification only to the primary applicant if the application is denied, even in part, based on information in a co-applicant’s consumer report. In that circumstance, the co-applicant has been the subject of “adverse action” and must be provided his or her own separate notification to satisfy the requirement of Section 615(a) of the FCRA. If the creditor has provided the ECOA-required information specified in Section 202.9(a)2) of Regulation B to the primary applicant, it need not be included in the FCRA notice provided to the co-applicant.

The rule is different for a guarantor, because he or she has not experienced “adverse action” that triggers the notice required by Section 615(a) of the FCRA. As discussed above, Section 603(d)(1)(A) of the FCRA adopts the ECOA definition, which excludes a guarantor. Thus a creditor need not provide guarantor with an FCRA adverse action notice, even if the application is denied in whole or in part based upon information from the consumer report of the guarantor. Under these circumstances, therefore, notification to the applicant is all that is required.

(end excerpt from letter)

Just goes to show, there are exceptions to the rules and then there are EXCEPTIONS to the rules.

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#14880 - 04/08/02 06:17 PM Not Tattlebaum - but Stinneford
Princess Romeo Offline

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With respect to the FCRA notice to guarantors, you need to look at the Stinneford letter
http://www.ftc.gov/os/statutes/fcra/stinneford.htm

In the body of that letter it states:

The rule is different for a guarantor, because he or she has not experienced "adverse action" that triggers the notice required by Section 615(a) of the FCRA. As discussed above, Section 603(k)(1)(A) of the FCRA adopts the ECOA definition, which excludes a guarantor. Thus a creditor need not provide guarantor with an FCRA adverse action notice, even if the application is denied in whole or in part based upon information from the consumer report of the guarantor. Under these circumstances, therefore, notification to the applicant is all that is required.

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#14881 - 04/10/02 05:04 PM Re: Tatlebaum decision
Anonymous
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I have a new angle on the FCRA discussion. Here is the situation:

A corporation applies for a loan. The corporation is owned by a husband and wife team. The loan application has both parties' information but only the husband's signature. Credit reports are pulled for both the husband and wife and the credit(to the corporation) is decline based on the information in both credit reports. First, was it legal to pull the wife's credit report without the signature and second, is it OK to only sent the adverse action to the corporation?

Any help would be most appreciated.

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#14882 - 04/10/02 09:52 PM Re: Tatlebaum decision
Andy_Z Offline
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I thought after the last round of Tatlebaum that a consumer report was OK if they were to be personally liable on the debt. That means if the wife wouldn't be on the debt, her CB should not be accessed.

If the denial is due to husband's CB, he should get the FCRA notice, the Corp. is only told the deal wouldn't work with those obligors.
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