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#1614254 - 10/10/11 09:23 PM Incomplete Online Application
Funky Falcon Offline
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If a customer starts an application for a new deposit account online, but doesn't complete it, do we have to send them an adverse action notice for incomplete application or does that only apply to loan applicants?

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eBanking / Technology
#1614267 - 10/11/11 02:37 AM Re: Incomplete Online Application Funky Falcon
Richard Insley Offline
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A partially completed form--paper or electronic--that is never submitted can't be considered an application for anything.
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#1616192 - 10/14/11 09:29 PM Re: Incomplete Online Application Richard Insley
Andy_Z Offline
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Adding to Richard's point, you never took adverse action. And for new accounts, that would be due if you used 3rd party info like ChexSystems in your decision process.

If the application was incomplete, but you had enough info to make a decision and used ChexSystems, then you had an app, made a decision and a disclosure would be needed.
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#1616216 - 10/15/11 01:53 AM Re: Incomplete Online Application Andy_Z
Richard Insley Offline
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I've always seen the "Submit" button as the bright line between doodling and applying. It doesn't matter how much stuff someone compiles on a paper form or e-form. All of that could change--again and again and again before the customer decides to click the button that presents the data to the bank. Or, the customer could decide to abandon a partially completed form and go across the street to do business.

I have a problem with the practice of pulling any form of credit score or report until the customer clicks the Submit button. That would be comparable to pulling credit on every branch visitor who casually picks up a product brochure containing an application form.
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#1616273 - 10/17/11 01:42 PM Re: Incomplete Online Application Richard Insley
Amos Offline
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What if the online application is for a mortgage loan, and after obtaining the applicant's authorization but before they submit the application, you pull credit to provide an accurate rate/fees quote, and/or to determine if they are eligible for an onine approval, and/or to prepopulate their liabilities?

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#1616279 - 10/17/11 01:46 PM Re: Incomplete Online Application Amos
rlcarey Offline
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I think that you are in dangerous territory when pulling credit prior to the submit button being pressed. What is your permissiable purpose? I know the system that you are using and I have warned clients that this is going to eventually be an issue.
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#1616494 - 10/17/11 06:32 PM Re: Incomplete Online Application rlcarey
Andy_Z Offline
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Sounds like what you want is a prequal. You should consider setting that up instead of trying to make the rules fit your program, if I understand you correctly.
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#1616541 - 10/17/11 07:37 PM Re: Incomplete Online Application rlcarey
Amos Offline
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Originally Posted By: rlcarey
I think that you are in dangerous territory when pulling credit prior to the submit button being pressed. What is your permissiable purpose? I know the system that you are using and I have warned clients that this is going to eventually be an issue.

We were advised by legal counsel that we had a permissible purpose because the consumer initiated the loan application.

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#1616590 - 10/17/11 08:53 PM Re: Incomplete Online Application Amos
rlcarey Offline
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How did they initiate an application or a request for financing without hitting the submit button? I would equate someone starting a mortgage loan application on the internet without hitting the submit button to the FTC staff opinion on permissible purposes for car dealers:

The 1998 staff opinion letter concluded that this language meant that this section applies only to situations where the consumer clearly understands that he or she is initiating the purchase of a vehicle. The dealer would thus have a permissible purpose to obtain a credit report on a consumer who offers to pay for an automobile with a personal check or asks about credit options to finance a specific purchase. However, this section would not allow the salesperson to obtain a report on “window shoppers” for bargaining purposes, deciding whether to spend time with consumers, or to respond to general questions about available products or financing, because there is no “transaction … initiated by the consumer” in those scenarios. For the same reason, a consumer’s request to “test drive” a vehicle, where he or she has not demonstrated an intent to initiate the purchase or lease of a vehicle, does not give rise to a permissible purpose under this section.
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#1617186 - 10/18/11 08:42 PM Re: Incomplete Online Application rlcarey
Andy_Z Offline
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Without a Submit, how do you even have any data? And are there "required fields" to complete in order to Submit?
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#1617242 - 10/18/11 09:30 PM Re: Incomplete Online Application Andy_Z
Amos Offline
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This is all handled within the software. The software pulls the credit report after the applicant has provided some application information (including name and SSN) and has authorized us to pull credit. There are additional pages on the web site that the applicant needs to complete before they can submit their application. And yes, they must complete all required fields before they can submit the application.

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#1617319 - 10/19/11 12:21 PM Re: Incomplete Online Application Amos
ahou Offline
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ahou
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Amos, is it correct that the software pulls cr to determine whether the product selected by the applicant can be done online vs needing further review by a loan officer and that the credit rept is used to populate the debts on the application? Some online vendors run info thru DU to see if the application/upfront disclosures can be done online. (all this would be done after the submit button I assume - thus no cr decision is made prior to hitting submit)
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#1617338 - 10/19/11 01:10 PM Re: Incomplete Online Application ahou
Amos Offline
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Yes, you can use the credit report to determine whether or not to send the application to DU or LP for an online approval. You can also determine by product whether to send to DU or LP. And yes, you have the option to use the credit report to prepopulate liabilities on the online application.

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#1618186 - 10/20/11 05:02 PM Re: Incomplete Online Application Amos
Princess Romeo Offline

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What do you do with people like me how are simply "exploring" their options and don't put in a real SSN because I don't want to give my real info until I am sure I want to go through with it?

Or - I am testing your website for compliance and want to see if the proper disclosures are being provided?

However, in answer to your question, what you should consider is sending out an "Incomplete Application" notice with a deadline to submit the rest of the information needed. If the consumer does not submit, code it on your LAR as "Incomplete Application" and move on.

But don't forget to send out the Credit Score Disclosure required for consumer real estate loans, and IF the loan would have been a decline because of bad credit, instead of sending an Incomplete Notice, send a decline and add another Credit Score disclosure on the Adverse Action Notice.

Then - get a Users Group together to talk to your vendor about the issues they are jamming down your throat.
Last edited by Princess Romeo; 10/20/11 05:07 PM.
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#1618285 - 10/20/11 06:26 PM Re: Incomplete Online Application Princess Romeo
Richard Insley Offline
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Originally Posted By: Princess Romeo
code it on your LAR as "Incomplete Application"

Do you really think the types of situations you mentioned above rise to the level of an "application"?

Section 203.2(b)(1) states that-
In general. Application means an oral or written request for a home purchase loan, a home improvement loan, or a refinancing that is made in accordance with procedures used by a financial institution for the type of credit requested.

If the customer has not clicked the "Submit" button, how can electronic doodling constitute a "request."
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#1618337 - 10/20/11 07:32 PM Re: Incomplete Online Application Richard Insley
Princess Romeo Offline

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Originally Posted By: Richard Insley
Originally Posted By: Princess Romeo
code it on your LAR as "Incomplete Application"

Do you really think the types of situations you mentioned above rise to the level of an "application"?

Section 203.2(b)(1) states that-
In general. Application means an oral or written request for a home purchase loan, a home improvement loan, or a refinancing that is made in accordance with procedures used by a financial institution for the type of credit requested.

If the customer has not clicked the "Submit" button, how can electronic doodling constitute a "request."


It depends on what the automated system is doing. If it pulls a credit report and then it gets sent to DU to generate an initial decision, or even if the decision is made not to submit to DU because of what's on the credit report, it's hard to argue that the institution does not have an application.

If on the other hand the system simply records the initial "doodle" but does nothing with it, then the entry can be coded as a non-submission and nothing further needs to be done.

The problem is that these on-line mortgage system vendors are setting these up with an eye on automation and the ability to maximize opportunities, and the compliance side gets a bit of short shrift - well...... with the exception of the 50 bazillion disclosure pieces these things generate.
Last edited by Princess Romeo; 10/20/11 07:36 PM.
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#1618395 - 10/20/11 09:11 PM Re: Incomplete Online Application Princess Romeo
Amos Offline
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USA
Originally Posted By: Princess Romeo
Originally Posted By: Richard Insley
Originally Posted By: Princess Romeo
code it on your LAR as "Incomplete Application"

Do you really think the types of situations you mentioned above rise to the level of an "application"?

Section 203.2(b)(1) states that-
In general. Application means an oral or written request for a home purchase loan, a home improvement loan, or a refinancing that is made in accordance with procedures used by a financial institution for the type of credit requested.

If the customer has not clicked the "Submit" button, how can electronic doodling constitute a "request."


It depends on what the automated system is doing. If it pulls a credit report and then it gets sent to DU to generate an initial decision, or even if the decision is made not to submit to DU because of what's on the credit report, it's hard to argue that the institution does not have an application.

If on the other hand the system simply records the initial "doodle" but does nothing with it, then the entry can be coded as a non-submission and nothing further needs to be done.

The problem is that these on-line mortgage system vendors are setting these up with an eye on automation and the ability to maximize opportunities, and the compliance side gets a bit of short shrift - well...... with the exception of the 50 bazillion disclosure pieces these things generate.


Our online system does not send to LP or DU unless the applicant has clicked the "submit application" button and indicated their intent to proceed with the application.

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#1618409 - 10/20/11 09:35 PM Re: Incomplete Online Application Princess Romeo
Richard Insley Offline
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I'm thinking that LAR entries for Bugs Bunny and Elmer Fudd with SSNs of 999-99-9999 and 888-88-8888 are going to be a waste of everyone's time. If, however, the online forms are smart and contain error traps to force valid responses, they will collect valid information which the back end system can use to make a preliminary decision. Just because valid information has been entered, that doesn't mean it's MY information until I click a Submit button certifying the accuracy and completeness of my data and requesting a credit decision.

I hope anyone who uses such sophisticated software provides a full explanation up front so applicants know that CB info will be pulled and a preliminary credit decision rendered before the application is completed and submitted. Also, there's an opportunity for prescreening and steering--which could expose the lender to charges of discrimination. Smart forms coupled with back end logic can manipulate the sequence of questions, change the way they're asked, increase or decrease the number of items requested, and otherwise stack or unstack the deck based on who knows what!
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#1618411 - 10/20/11 09:38 PM Re: Incomplete Online Application Amos
Richard Insley Offline
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Originally Posted By: Amos
Our online system does not send to LP or DU unless the applicant has clicked the "submit application" button

That's good. You've created a bright line (the "Submit" button) dividing casual doodling from applying.
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#1618544 - 10/21/11 02:08 PM Re: Incomplete Online Application Amos
Amos Offline
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Originally Posted By: Amos
Originally Posted By: rlcarey
I think that you are in dangerous territory when pulling credit prior to the submit button being pressed. What is your permissiable purpose? I know the system that you are using and I have warned clients that this is going to eventually be an issue.

We were advised by legal counsel that we had a permissible purpose because the consumer initiated the loan application.


Also, we do obtain written consent from the applicants to pull their credit report, which gives us a permissible purpose under section 604(a)(2).

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#1618563 - 10/21/11 02:41 PM Re: Incomplete Online Application Amos
Andy_Z Offline
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Written consent isn't required. The app, or oral request is your permissible purpose. Being written you have an audit trail and that is good.
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#1618576 - 10/21/11 02:56 PM Re: Incomplete Online Application Andy_Z
Amos Offline
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Originally Posted By: Andy Z
Written consent isn't required. The app, or oral request is your permissible purpose. Being written you have an audit trail and that is good.


My post about obtaining written consent was in response to rlcarey's post above where were we discussing the situation where a consumer started an application online, we pulled credit to present an accurate rate/fee quote and the consumer never hit the "submit application" button.

Unless I am misunderstanding his post, rlcarey was saying I did't have a permissible purpose to pull credit because the consumer hadn't submitted the application.

I was trying to justify that I did have a permissible purpose because I obtained the consumer's written authorization.

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