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#1571152 - 06/29/11 12:48 AM Adverse Action Notice: Credit Score Disclosure
BankonComp Offline
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Reading the federal register regarding the new credit score disclosure requirement added by 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act, it states that "In some cases, the Bank who is required to provide an adverse action notice under the FCRA may use a consumer report, but not a credit score, in taking the adverse action. Under section 1100F of the Dodd-Frank Act, the Bank is not required to disclose a credit score and related information if a credit score is not used in taking the adverse action."

In our case, although the credit score (number) is included in our Equifax reports, we do not specifically use the credit score (number) as a reason for declining a credit request, only other reasons obtained from the credit report (i.e. delinquency, no credit history, excessive obligations, etc.). Therefore my understanding would be, based on the federal register, that our Bank will not be required to provide this new requirement on or with our adverse action notice. Does any agree or does someone have a different understanding, believing that we should?

Any input and guidance is greatly appreciated.

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#1571163 - 06/29/11 03:24 AM Re: Adverse Action Notice: Credit Score Disclosure BankonComp
rlcarey Offline
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If you don't use the score, have then removed from the report. Once you see the reaction of the loan officers, you might have a better understanding of the use within your organization. You are going to have a hard time having a score on the report and then claim that it has absolutely no influence on your credit decisions. My suggestion is to either provide the disclosure or remove the scores.
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#1571164 - 06/29/11 03:30 AM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Kathleen O. Blanchard Offline

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I agree. It has always been hard to say a score is not part of the decision when it is right there in the file. This issue is not new, just this disclosure is new.
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#1574344 - 07/06/11 05:00 PM Re: Adverse Action Notice: Credit Score Disclosure Kathleen O. Blanchard
Queen Mum Offline
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Since we use the Exception Notice and provide that anytime we pull a credit report, are we still required to type in all this information again to have it print in the AA Notice?

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#1574355 - 07/06/11 05:15 PM Re: Adverse Action Notice: Credit Score Disclosure Queen Mum
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So QM, you are currently providing the Exception Notice when giving an AAN?
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#1574362 - 07/06/11 05:22 PM Re: Adverse Action Notice: Credit Score Disclosure HRH Okie Banker
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If we pull a credit report, we provide the Exception Notice to the customer regardless of whether the loan is approved, denied or withdrawn.

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#1574364 - 07/06/11 05:25 PM Re: Adverse Action Notice: Credit Score Disclosure HRH Okie Banker
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If we pull a credit report, we provide the Exception Notice to the customer regardless of whether the loan is approved, denied or withdrawn.

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#1574402 - 07/06/11 05:47 PM Re: Adverse Action Notice: Credit Score Disclosure Queen Mum
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Got it. We have only been providing the Exception Notice for approved loans and not with AANs.
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#1574436 - 07/06/11 06:16 PM Re: Adverse Action Notice: Credit Score Disclosure HRH Okie Banker
ahkcompliance Offline
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We provide the exception notice with both approved and denied loans. From what I hear, some vendors are incorporating the exception notice language with the AAN. If your vendor is doing this, you can just give the AAN to satisfy the requirements, but if teh vendor only updates the AAN requirements, you will still have to provide both notices.

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#1578706 - 07/15/11 04:31 PM Re: Adverse Action Notice: Credit Score Disclosure Kathleen O. Blanchard
Carolina Blue Offline
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Lost in a regulatory fog
Randy or Kathleen,
To play devil's advocate, if there is no written policy stating all loans under XXX credit score must be denied, then how is a loan being denied for credit score? The loan may be denied for a factor affecting the credit score, but not the score itself. So if we pulled credit with a score and denied the loan for bankrupcty are we required to give them their credit score? (And we do not want to remove the score because we are using it for pricing the loan.) Any thoughts?

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#1578870 - 07/15/11 07:10 PM Re: Adverse Action Notice: Credit Score Disclosure Carolina Blue
Oursisnottoreasonwhy Offline
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As explained in the proposed rule, the Board recognizes that a key factor(s) that adversely affected the consumerís credit score may be the same as a specific reason(s) for denying credit or taking other adverse action.

However, some specific reasons for taking adverse action may be unrelated to a consumerís credit score, such as reasons related to the consumerís income, employment, or residency.

Therefore, the Board continues to believe the disclosure of both the key factors that adversely affected the consumerís credit score and the specific reasons for denying credit or taking other adverse action is necessary to fulfill the separate requirements of the ECOA and the FCRA. The Board believes providing separate lists, and thus distinguishing factors that adversely affected the credit score from reasons for the adverse action determination, will be more useful and clearer for consumers.

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#1578986 - 07/15/11 08:59 PM Re: Adverse Action Notice: Credit Score Disclosure Oursisnottoreasonwhy
Rubaiyat Offline
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All this has my brain muddled and I'm questioning what we had already been doing.

For HE loans and HELOCs we have not been providing the RBPN or Exception Notice because the rates for these products are set and do not vary, i.e., no risk-based pricing. So, the new Reg V changes also would not apply for these products. However, we have updated our AANs for ALL denials to include the credit score and 4/5 credit score reasons, since credit reports for all products include a credit score.

Does this sound right?
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#1578996 - 07/15/11 09:07 PM Re: Adverse Action Notice: Credit Score Disclosure Rubaiyat
Dan Persfull Offline
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Quote:
For HE loans and HELOCs we have not been providing the RBPN or Exception Notice because the rates for these products are set and do not vary, i.e., no risk-based pricing.


If you have not been providing the H-3 exception notice then I hope you have continued to provide the credit score and notice to home applicant disclosures required by section 609(g) of the FCRA.
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#1579075 - 07/16/11 05:54 AM Re: Adverse Action Notice: Credit Score Disclosure Carolina Blue
rlcarey Offline
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Originally Posted By: Carolina Blue
Randy or Kathleen,
To play devil's advocate, if there is no written policy stating all loans under XXX credit score must be denied, then how is a loan being denied for credit score?


Then why get them? If the score does not influence the credit decision in anyway - delete them from the report and you won't have to deal with any of this. Conversing, how are you going to prove that it had no impact when the number is staring the underwriter in the face?
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#1579103 - 07/18/11 01:35 AM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Sheldon Hendrix Offline
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I would recommend a practical application of this - if you denied based on credit and would normally check the box that says "we denied your request based either in whole or in part..", that the knee jerk reaction should be to include the new score disclosure as well. That is of course if you use credit scores.

We primarily use credit scores for pricing purposes only (retail division anyways), so I could argue that the new disclosure isn't needed most of the time, but why not just keep it simple and not even go there. As Randy stated, it would be hard to defend that the score didn't have weight on your decision.

If anyone sees any holes in this approach, I'd be very appreciative if they were brought to my attention before I do training on Wednesday. smile
Last edited by Compliance Rules; 07/18/11 01:36 AM.
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#1579104 - 07/18/11 01:39 AM Re: Adverse Action Notice: Credit Score Disclosure Sheldon Hendrix
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Also, is anyone interpreting the new rule to basically mean that each consumer gets their own segregated AAN due to privacy reasons since it will include their personal credit score? That's my takeaway, and what was suggested in ABA's recently Staff Analysis.

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#1579107 - 07/18/11 02:02 AM Re: Adverse Action Notice: Credit Score Disclosure Sheldon Hendrix
Kathleen O. Blanchard Offline

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Yes, that is what the Fed indicated it expects to see in the discussion of the reg.
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#1579182 - 07/18/11 02:08 PM Re: Adverse Action Notice: Credit Score Disclosure Kathleen O. Blanchard
rlcarey Offline
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However, it has nothing to do with privacy. The FCRA requires that separate disclosures be sent. The Fed addressed the privacy issue in the joint intent release in 2003 - saying that if you apply jointly with another person - privacy is out the window.
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#1579188 - 07/18/11 02:13 PM Re: Adverse Action Notice: Credit Score Disclosure Dan Persfull
Rubaiyat Offline
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Yes, we have been providing the credit score and notice to applicant disclosures. So, other than that, in this situation, we don't need to do anything else other than use the updated AAN, correct?
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#1579267 - 07/18/11 03:58 PM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Queen Mum Offline
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Originally Posted By: rlcarey
Originally Posted By: Carolina Blue
Randy or Kathleen,
To play devil's advocate, if there is no written policy stating all loans under XXX credit score must be denied, then how is a loan being denied for credit score?


Then why get them? If the score does not influence the credit decision in anyway - delete them from the report and you won't have to deal with any of this. Conversing, how are you going to prove that it had no impact when the number is staring the underwriter in the face?


We also pull credit reports for loans to sell on the secondary market. They require the credit score. There isn't a way to check and uncheck whether to receive it is there? It's either on or off?

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#1579301 - 07/18/11 04:35 PM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Kathleen O. Blanchard Offline

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My comment is based upon this FRB remark re the adverse action/credit score notice in the section discussing co-applicants:

"Section 202.9(f) of Regulation B permits a creditor to provide an adverse action notice to only one applicant, and requires a creditor to provide an adverse action notice to the primary applicant, when a primary applicant is readily apparent. In contrast, section 615(a) of the FCRA requires a creditor to provide the disclosures mandated by that section to "any consumer" against whom adverse action is taken, if the adverse action is based in whole or in part on information from a consumer report. The FCRAís reference to "any consumer" would seem to include co-applicants. Given privacy and customer relations concerns, the Board expects that creditors would generally provide separate FCRA adverse action notices to each applicant with only the individualís credit score on each notice."
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#1579320 - 07/18/11 04:49 PM Re: Adverse Action Notice: Credit Score Disclosure Kathleen O. Blanchard
rlcarey Offline
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Then they have sort of changed thier tune from 2003.

Many commenters were concerned about the co-applicantís or guarantorís privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared. Accordingly, the rule has been adopted as proposed.
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#1579376 - 07/18/11 05:54 PM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Kathleen O. Blanchard Offline

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I agree. I recall the comment from 2003. Perhaps they have decided to more be "consumer friendly/consumer protective" in this post-meltdown environment, where privacy also gets extra attention.
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HMDA/CRA Training/Consulting/Mapping
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#1579422 - 07/18/11 06:40 PM Re: Adverse Action Notice: Credit Score Disclosure rlcarey
Sheldon Hendrix Offline
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Originally Posted By: rlcarey
However, it has nothing to do with privacy. The FCRA requires that separate disclosures be sent. The Fed addressed the privacy issue in the joint intent release in 2003 - saying that if you apply jointly with another person - privacy is out the window.


I picked up on a reference to that in reading the final rule this morning.

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#1579432 - 07/18/11 06:48 PM Re: Adverse Action Notice: Credit Score Disclosure Kathleen O. Blanchard
Dan Persfull Offline
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Quote:
the Board expects that creditors would generally provide separate FCRA adverse action notices to each applicant with only the individualís credit score on each notice."


They are referencing the FCRA AAN and not the ECOA AAN. For specific reasons required under the ECOA (Reg B) I think I would still follow the 2003 guidance for specific reasons to the applicant.

If you read the rule one way it implies you disclose the co-applicant's score to the applicant if it was used for the denial but in the discussion for guarantors and co-signers it states the rule does not expect a guarantor's or co-signer's score be disclosed to the applicant. So I guess it comes down to which fork of the tongue you want to follow until some additional clarification is released. This is just another example of a knee jerk reaction to meet time lines of the Dodd Frank Act.
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