We would like to freeze/close an unsecured overdraft line of credit (reg. Z) attached to a checking account due to default of another loan. What notifications (reg. Z and AA) need to be sent. (If you have the reg. reference that would be very helpful).

A Reg. B adverse action notice.

I have been informed that the note contains a Termination clause that says that either party can terminate the line by giving written notice to the other. If we just send the written notice terminating the line - as per the termination clause - is that considered AA? - Thanks.

Sec. 202.9 Notifications


(a) Notification of action taken, ECOA notice, and statement of specific reasons —(1) When notification is required. A creditor shall notify an applicant of action taken within:

(iii) 30 days after taking adverse action on an existing account; or

Yes. You're contract language can't change or substitute for the definition of adverse action found in 202.2.

And you cannot rely on not having to send the AAN because of delinquency. From your post the account you are taking adverse action on is not delinquent.

Resurrecting this discussion, as it's the closest thing I can find to my situation when doing a search ...

Here's my situation: On a Non-RE LOC (an overdraft line that's under Reg Z), we offer a lower interest rate and a higher line amount to employees. When the employee leaves our employment, we increase the rate and decrease the line amount to what we typically assign to non-employees.

In this situation, an addendum to the LOC agreement is in place indicating that special terms apply because the person is an employee and when they leave employment the rate will increase to "x" and the limit will decrease to "y".

So, when the employment relationship changes, is an AAN under Reg B required, a 45-day advance Change In Terms from the Credit Card Act changes, or something else? Or is there no notification required because it was all clearly spelled out in the original LOC Addendum?

Bump

Since the changes are part of the original contract, this is not adverse action and no 45 days notice would be required as this is not a credit card.

I would question the credit limit issue - are you saying you grant a higher limit to employees than you do for the general public under the same circumstances? I see this issue totally different than giving them a rate break. If that is the case, make sure your EOs and Directors do not get that benefit and you should look to make sure this cannot be considered insider abuse.

Very helpful - thank you!