On an adverse action notice what type of situations would trigger the requirement to check the box "information obtained from a third party other than a consumer reporting agency"?

Thank you.

One example would be if you received information from their landlord regarding their history of paying rent.

Third parties that trigger this could be an employer, landlord or other creditors that don't report to a CRA. The information received from these sources must reflect upon the consumer’s credit worthiness, credit standing, capacity, character, general reputation, personal characteristics, or mode of living.

Would you check this box if the reason for the denial is value or type of collateral is not sufficient and this was based on the NADA we pulled to get the value?

Collateral values do not reflect on a consumer’s credit worthiness, credit standing, capacity, character, general reputation, personal characteristics, or mode of living.

So the answer would be no.

So if we deny an application due to insufficient collateral the adverse action would be blank on pages 2-3? And even though we pulled the credit that was not the denial reason, would we even check the CRA box at the top of page 2?

I have no idea what your AAN looks like so I cannot opine on pages. But if your sole reason to deny the credit is collateral, you do not owe them a FCRA AAN.

For insufficient collateral, no FCRA AAN but you would need a Reg B AAN, correct?

Yes, you always have to send a consumer a Reg. B AAN on a loan denial.

On our AAN, we have two areas that may be selected in regards to the credit report. The first option complies with FCRA 615(b) and is selected when a credit report is obtained (which is almost always).

The second option states we also obtained your credit score and used it in making our credit decision. The applicant's score, range, key factors and contact information for the CRA are provided. Should we be choosing this option if the applicant is denied based on information in the credit report or only when they are denied based on a low credit score? For example, they may be denied for excessive obligations (DTI), which was verified in the credit report, but the score itself was acceptable.

Am I overthinking this??

You should be providing it:

If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall

(1) provide oral, written, or electronic notice of the adverse action to the consumer;

(2) provide to the consumer written or electronic disclosure

(A) of a numerical credit score as defined in section 609(f)(2)(A) used by such per- son in taking any adverse action based in whole or in part on any information in a consumer report;

Thanks rlcarey!

In the reg, the model notice (C-1) lists "credit application incomplete" as a reason for denial. For incomplete apps, we use the combined NOI that gives the applicant a due date to provide the missing information or the app will be considered withdrawn. I really don't want people selecting this reason.....can I remove it?

Is there a requirement for who in the bank signs the Adverse Action Notice? I guess I would think that the LO the customer is dealing with but could it be someone else?

There is no requirement for a signature. That would be up to the bank.

Thanks very much!

I'm going to piggy back my question on to this thread from last year. I understand, as explained by RLCarey, that a credit score is required if ANY information in the credit report was used in deciding to deny the loan. In the event a bank uses a tri-merge report and consequently has 3 different scores available to provide, what determines which score to include on the AAN?

Our bank uses tri-merge credit reports, but we have no specific credit score guidelines established in making the decision on the loan. The information in the reports is utilized, such as bankruptcies, garnishments and determining DTI, etc., but the score specifically is not. Are we able to just select whichever score we want to include on the AAN, or since we received one from all three...disclose all three?

https://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17585.pdf
Page 41597
See: Multiple Scores

Thanks, rlcarey!! I appreciate the reference and the help!

Question about completing the FCRA portion of the AAN - What if the denial reason had to do with both the credit report (in part) AND information obtained from another source? For example: We pulled a credit report and used credit to confirm debts. Then we ordered a VOE. The VOE came in lower than expected, causing the debts to now be greater than the income would support. Both the credit report and information from another outside source ultimately led to the denial - would we check both boxes? (We use the model form)

The outside source section would not be marked. That section is used when the consumer's payment habits are verified through a 3rd party such as a landlord, utility company, an in store account, etc.

Appraisals, deposit verification, employment verifications etc. are not part of that section.

If outside source is checked on FCRA in error for appraisal issue, would this be considered a regulatory violation? I understand it's for landlords (etc.) just trying to figure out if it a regulatory issue if marked in error?

As with anything else, an erroneous disclosure does not comply with the regulation. Not sure how you can classify something that does not comply with the regulation as not a violation???

While I agree with Randy that it is what I call a "technical" violation, if it is an inadvertent, one-time error, it would be considered lower risk IMHO.

Yes, it's a violation. It's an opportunity to train the person that completed the form. If it's not a systematic issue, don't lose sleep over it.

I'm also going to piggy back on this thread, since this was discussed above. If we have a consumer credit application that was denied due to insufficient collateral, outside of our trade area, or the term requested exceeds bank policy, and information in the credit report was not the reason for the decline (i.e. customer's credit score was above min cutoff and all other credit information met our standards), would we be in violation if we sent a combined FCRA/Reg. B adverse action notice to the customer, when only the Reg. B AAN was required?

If your form follows Model Form C-1 in appendix C of Regulation B, you will be in compliance. The combined notice includes a checkbox to indicate that the credit decision was based in whole or in part on the credit report. You simply skip checking that box, and don't provide the name and address and phone number of the credit reporting agency when it doesn't apply.

John is right but to be more direct: you should NOT mark the FCRA box when the credit report has no bearing on the reasons for denial. Overkill (over disclosing) is not okay in this case. You're wrongly alerting the customer that there is something wrong with their credit report, when there isn't.