I guess I'm just needing a refresher on the simple things, but when is a notice of action required and not required for a commercial loan denial?

From ECOA 1002.9 https://www.bankersonline.com/regulations/12-1002-009


(3) Notification to business credit applicants. For business credit, a creditor shall comply with the notification requirements of this section in the following manner:

(i) With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), a creditor shall comply with paragraphs (a)(1) and (2) of this section, except that:

(A) The statement of the action taken may be given orally or in writing, when adverse action is taken;

(B) Disclosure of an applicant's right to a statement of reasons may be given at the time of application, instead of when adverse action is taken, provided the disclosure contains the information required by paragraph (a)(2)(ii) of this section and the ECOA notice specified in paragraph (b)(1) of this section;

(C) For an application made entirely by telephone, a creditor satisfies the requirements of paragraph (a)(3)(i) of this section by an oral statement of the action taken and of the applicant's right to a statement of reasons for adverse action.

(ii) With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, a creditor shall:

(A) Notify the applicant, within a reasonable time, orally or in writing, of the action taken; and

(B) Provide a written statement of the reasons for adverse action and the ECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor's notification.

Note: The reg identifies the above for "Business Credit". The words commercial loan have nothing to do with the "PURPOSE" of the loan. If it is a consumer purpose loan written in the commercial loan (or any other) department, the creditor needs to comply with the consumer purpose regulations. If it is a BUSINESS purpose loan, the above describes compliance, no matter what department the bank processes the app.

So $1 million or less in gross revenues: statement can be given orally or writing and disclosure of right to reasons may be given at app or adverse action

$1 million or more: notify the applicant orally or writing and we provide the reasons if they make a request for them within 60 days of notification.

Just making sure I'm understanding this correctly cause I think we have misunderstood something in process here.

Thank you.

Yes - (right to the statement of reasons)

Just make sure the <=$1MM that the notice is in a form the applicant can keep. i.e., don't have it as part of the application if they have to turn in the entire application.

The easy breezy method.....provide a written notice for every business denial.....doesn't have to be as complex as the consumer denial. That way, the lender doesn't have to make any determinations about gross revenues, the bank doesn't have to worry about the "right to the reasons" disclosure or when (and to whom) to provide it, and there is no 60 days to monitor for requests for the reasons. The whole thing is a logistical nightmare for lenders actually getting it right. AND, the file will have nice written documentation about the denial.

.....just my opinion.

Thanks for that. I was wondering about doing that to make it easier.

That worked for us with very little push back from the lenders. For consumer denials, the lenders (or their assistants) have to go into our tedious non-user-friendly doc prep software to prepare the combined ECOA/FCRA AAN. But for business denials, they use a "word" document (converted to fillable .pdf) where all they have to do is fill in the applicant name and address and check one or more of about 6 basic reasons for which business loans are usually declined......ECOA notice is on the form.