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#1571152 - 06/29/11 12:48 AM
Adverse Action Notice: Credit Score Disclosure
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Member
Joined: Aug 2008
Posts: 81
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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
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10K Club
Joined: Jul 2001
Posts: 84,332
Galveston, TX
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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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1574355 - 07/06/11 05:15 PM
Re: Adverse Action Notice: Credit Score Disclosure
Queen Mum
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Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
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So QM, you are currently providing the Exception Notice when giving an AAN?
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#1574402 - 07/06/11 05:47 PM
Re: Adverse Action Notice: Credit Score Disclosure
Queen Mum
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Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
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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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Just working here until I get my letter from Hogwarts.
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#1574436 - 07/06/11 06:16 PM
Re: Adverse Action Notice: Credit Score Disclosure
HRH Okie Banker
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Diamond Poster
Joined: Sep 2008
Posts: 2,481
Midwest
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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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#1578986 - 07/15/11 08:59 PM
Re: Adverse Action Notice: Credit Score Disclosure
Oursisnottoreasonwhy
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Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
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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
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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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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The opinions expressed are mine and they are not to be taken as legal advice.
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#1579075 - 07/16/11 05:54 AM
Re: Adverse Action Notice: Credit Score Disclosure
Carolina Blue
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10K Club
Joined: Jul 2001
Posts: 84,332
Galveston, TX
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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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1579103 - 07/18/11 01:35 AM
Re: Adverse Action Notice: Credit Score Disclosure
rlcarey
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Diamond Poster
Joined: Jun 2006
Posts: 1,194
South
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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.
Last edited by Compliance Rules; 07/18/11 01:36 AM.
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#1579182 - 07/18/11 02:08 PM
Re: Adverse Action Notice: Credit Score Disclosure
Kathleen O. Blanchard
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10K Club
Joined: Jul 2001
Posts: 84,332
Galveston, TX
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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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1579188 - 07/18/11 02:13 PM
Re: Adverse Action Notice: Credit Score Disclosure
Dan Persfull
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Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
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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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--A bad day at sea is better than a good day at work.
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#1579267 - 07/18/11 03:58 PM
Re: Adverse Action Notice: Credit Score Disclosure
rlcarey
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Power Poster
Joined: Mar 2001
Posts: 3,920
OK
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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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#1579320 - 07/18/11 04:49 PM
Re: Adverse Action Notice: Credit Score Disclosure
Kathleen O. Blanchard
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10K Club
Joined: Jul 2001
Posts: 84,332
Galveston, TX
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Then they have sort of changed thier tune from 2003.
Many commenters were concerned about the co-applicant’s or guarantor’s 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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1579422 - 07/18/11 06:40 PM
Re: Adverse Action Notice: Credit Score Disclosure
rlcarey
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Diamond Poster
Joined: Jun 2006
Posts: 1,194
South
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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. 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
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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the Board expects that creditors would generally provide separate FCRA adverse action notices to each applicant with only the individual’s 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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The opinions expressed are mine and they are not to be taken as legal advice.
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