You need to review 1002.9(a)(3). You can notify them orally of the denial but you still have to comply with (a)(1)&(2). IOWs you have to give them a written notice, either at the time of application or when you deny them of their right to obtain the specific reasons for denial within 60 days of notification along with the other information required by (a)(2)(ii).
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The opinions expressed are mine and they are not to be taken as legal advice.