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#2004842 - 03/27/15 09:34 PM PreQual - Permissible Purpose for Credit Report?
Tarhe Offline
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Joined: Nov 2006
Posts: 1,243
California
Does a request for a mortgage prequalification letter give the bank a "permissible purpose" to run a credit report?

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Lending Compliance
#2004938 - 03/30/15 03:08 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
Truffle Royale Offline

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yes.

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#2065211 - 02/22/16 02:44 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Although a bank is allowed to pull credit for a permissible purpose via a verbal request, shouldn't this be documented in the file if the bank is not providing a prequalification letter?

We have instances where the LO is pulling credit prior to application but nothing is noted in the file about a prequalification request and then we run into "findings" due to the CR dated earlier than the application.

The lending area is pushing back as their reason is the prequalification letter wouldn't have the customers signature so what's the difference? Just thought I'd see what others are dealing with. Our comment back is the file must be documented to justify the reason for the credit pull. Does anyone else run into this?

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#2065216 - 02/22/16 03:04 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,762
Bloomington, IN
Although a bank is allowed to pull credit for a permissible purpose via a verbal request, shouldn't this be documented in the file

Yes. Without the documentation then no permissible purpose exists regardless what fantasy land the lending department is operating in.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2065231 - 02/22/16 03:33 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Thanks Dan!! Our sentiments exactly.

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#2066444 - 02/27/16 02:03 PM Re: PreQual - Permissible Purpose for Credit Report? Dan Persfull
MBTCompliance Offline
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Joined: Apr 2015
Posts: 339
I am looking for examples if you all don't mind sharing.

What exactly constitutes a pre-qualification request?

How do you document permissible purpose for telephone pre-qualifications and/or applications where there is no signature on an application?

The norm around our shop is no permissible purpose without a signature (especially for a prospective customer with no existing relationship) because if a customer were to come back on us and say they did not give us permission to pull their credit, how can we justify without having their signature?

Thanks!

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#2066450 - 02/27/16 02:57 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
rlcarey Offline
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rlcarey
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Posts: 79,239
Galveston, TX
A pre-qualification request is an application for credit under Regulation B. Most banks have adopted procedures in which they do not accept oral applications for any credit and require a written application.

Problem solved.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2066495 - 02/29/16 02:35 PM Re: PreQual - Permissible Purpose for Credit Report? Tarhe
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,762
Bloomington, IN
What exactly constitutes a pre-qualification request?

Review the Commentary to Reg. B, 1002.2. It discusses what is and is not an application. Basically a pre-qualification is the consumer saying I'm thinking about doing this so about how much money can I borrower. I know that's an over simplification. Your FI should have an application process in place.

How do you document permissible purpose for telephone pre-qualifications and/or applications where there is no signature on an application?

That is an internal decision but IMO the best practice is to have a short "telephone app" the LO is required to complete with the name of the consumer spoken to, the purpose of the inquiry and the date of the inquiry.

The norm around our shop is no permissible purpose without a signature (especially for a prospective customer with no existing relationship) because if a customer were to come back on us and say they did not give us permission to pull their credit, how can we justify without having their signature?

If this is your norm then you best be requiring it for all applicants and not leave it to the LO's discretion. Otherwise you are facing fair lending issues for treating applicants differently.

Unless state law requires a signature the FCRA does not require one for you to have a permissible purpose. You just need to be able to demonstrate through you application process that you only obtain a consumer report when a consumer has requested credit.
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The opinions expressed are mine and they are not to be taken as legal advice.

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