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#2141335 - 08/09/17 02:15 PM Re: Loan Denial Reason Anonymous
Truffle Royale Offline

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Maybe not, raitchjay, but that is exactly the point David is making. Your prudent and ethical may be different than mine and if we each run a bank, we can each decide what businesses fit that description.

:rant warning:
The notion of regulating subjective decisions is bugnuts. We can say we don't agree with the OP's bank's stance on who they will or won't lend to but that's the end of it. They get to decide and they have to live with that decision. They may even end up defending their stance in court in this over litigious society we live in where everyone is positive they're entitled to everything they want but again, that's the OP's bank's choice.

Now we return you to the question of what denial reason to show on the AAN.

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#2141337 - 08/09/17 02:18 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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Obviously, every bank has to make their own decisions and live with them. Carrying that to the extreme, there would be no reason for anyone to ever ask a question on this board......

All anyone has said is that we believe there ARE reasons to be concerned about what many of us believe to be superfluous, 'big brother' ideas about credit decisions.
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#2141339 - 08/09/17 02:27 PM Re: Loan Denial Reason Anonymous
Truffle Royale Offline

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I don't understand 'superfluous 'big brother' ideas about credit decisions.'
We're debating whether the bank can decide who they want to lend to based on where they work.
The answer is that as long as they're not denying a protected class, yes they can.
Banks do it every day, whether it's where the person works, what kind of property they have for collateral, whatever.
Again, we don't have to like or agree with their criteria but they're not breaking any laws or violating any regulations.

And all the OP asked was what denial reason he should use, not whether we agreed with his bank's criteria.

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#2141344 - 08/09/17 02:30 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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Whether they're 'breaking any laws' would ultimately be for a court to decide. I think disparate treatment, disparate impact, and UDAAP concerns have been raised. Obviously, some disagree that any of those are an issue, and every bank is free to make whatever decisions they want to about anything.
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#2141395 - 08/09/17 05:01 PM Re: Loan Denial Reason Anonymous
RR Joker Offline
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I think a carte blanc "thou shall not lend to anyone at [pick one] legal occupation" is an extremely outdated and unfair policy. Proven income over a realistic period of time should overrule any of that.

But again, I don't work for the OP's bank, so my opinion is just that...mine.

Beyond that, I think RRBecca hit a big nail on the head in her post above.
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#2141437 - 08/09/17 08:40 PM Re: Loan Denial Reason Anonymous
David Dickinson Offline
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David, i just don't think everyone agrees on what is "prudent and ethical behavior". Is being a bartender at a strip joint "unethical"....but being a bartender at the local watering hole "ethical"?
As Truffle already stated, my point is not to inject my (or your) definition of prudent and ethical behavior". The point is that NO REGULATION prohibits you from denying anyone for anything, unless it is illegal discrimination. Yes, it may be "unfair" to deny someone, but the lender has that right. It's not a right to demand a loan. Don't all denied applicants believe it was unfair?

If my LTV or DTI is too high for your bank, is that "unfair"? Sure, from my perspective. But it's prudent that you don't make me a loan AND YOU get to decide what level the LTV and DTI can be to be acceptable or unacceptable. Is that unfair? Is that a UDAP issue?

As I said earlier, you can deny people because they are ugly. Unfair? Sure! Illegal? No. This isn't a UDAP or UDAAP issue and it's not a a Reg B, HMDA or FHA issue. That's my point.

I'm not trying to pick a fight. I'm trying to say "don't make up rules that don't exist."

What's crazy to me is that anyone would say this is unfair. Saying I must accept/tolerate everyone and everything they do is an unfair policy, in my opinion. I'm also trying to bring to light what many Board and Sr. Mgt have discussed with me: the "push" to make people loans because of the regulatory pressure.
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#2141440 - 08/09/17 08:43 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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How can it be "unfair" yet not be a UDAAP issue?
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#2141441 - 08/09/17 08:43 PM Re: Loan Denial Reason Anonymous
David Dickinson Offline
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Quote:
I don't understand 'superfluous 'big brother' ideas about credit decisions.'
We're debating whether the bank can decide who they want to lend to based on where they work.
The answer is that as long as they're not denying a protected class, yes they can.
Banks do it every day, whether it's where the person works, what kind of property they have for collateral, whatever.
Again, we don't have to like or agree with their criteria but they're not breaking any laws or violating any regulations.

And all the OP asked was what denial reason he should use, not whether we agreed with his bank's criteria.

Exactly! I got involved in this because the consensus of the group was that the OP's bank was doing something illegal. No they aren't - as long as they are not illegally discriminating - which I defined from Reg B.

As Truffle said "we don't have to like or agree with their criteria but they're not breaking any laws or violating any regulations."
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#2141442 - 08/09/17 08:45 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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And no one is saying you must accept/tolerate everyone and everything they do.........but short of someone getting their income from an illegal source, why would you care where it came from? What is unfair about telling a bank "you are not the morality or ethics police....your job is to make good loans"?
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#2141445 - 08/09/17 08:53 PM Re: Loan Denial Reason raitchjay
rlcarey Offline
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Originally Posted By raitchjay
How can it be "unfair" yet not be a UDAAP issue?


Might want to review this and then tell us which specific element of a UDAAP you are referring too that denying a loan would trigger:

https://s3.amazonaws.com/files.consumerf..._procedures.pdf
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#2141448 - 08/09/17 09:02 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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Ya'll seem to be saying there's no litigation risk (at least, no risk of actually losing the lawsuit) for having a policy of "we don't lend to people who work at strip joints in any capacity". Just not sure i agree with that.
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#2141449 - 08/09/17 09:08 PM Re: Loan Denial Reason Anonymous
rlcarey Offline
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Marijuana related, strip club related - what is the difference?
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#2141450 - 08/09/17 09:10 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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Isn't one illegal (federally), and the other not?
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#2141458 - 08/09/17 10:07 PM Re: Loan Denial Reason raitchjay
Peach Offline
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I have made a couple of stripper loans, paid well both of them. I am just glad I am not the teller accepting the cash for the payments..

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#2141459 - 08/09/17 10:09 PM Re: Loan Denial Reason Peach
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sick
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#2141488 - 08/10/17 12:52 PM Re: Loan Denial Reason Anonymous
RR Joker Offline
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laugh!
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#2141492 - 08/10/17 01:31 PM Re: Loan Denial Reason Anonymous
David Dickinson Offline
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Quote:
And no one is saying you must accept/tolerate everyone and everything they do.........but short of someone getting their income from an illegal source, why would you care where it came from? What is unfair about telling a bank "you are not the morality or ethics police....your job is to make good loans"?

I work with primarily small banks. Many are the only bank in town or one of 2 or 3 in a small town. The reason these towns are still around is because the local bank pumps the economy - helping small businesses, advising businesses owners, etc. (CRA at it's best). Most of the owners/Presidents of these banks are THE economic development center of the community.

They often make loans to risky small business owners that aren't prudent, but they know it will help the community. Similarly, if they make loans to "unethical" businesses, they can get great backlash from the community. You might say "That's a Privacy issue. No one should know where the business got their loan". If the business owner would tell someone, there's PR issues for the bank. Or Board members may put pressure on the bank not to allow these businesses. You can stick your head in the sand and say "that isn't right", but it's reality.

Also, these owners/Presidents feel an obligation to keep their community "healthy" and may not want those types of businesses in their town. Whether the business can repay the loan is not a factor. Character still matters.
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#2141495 - 08/10/17 01:34 PM Re: Loan Denial Reason Anonymous
David Dickinson Offline
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quote]Ya'll seem to be saying there's no litigation risk (at least, no risk of actually losing the lawsuit) for having a policy of "we don't lend to people who work at strip joints in any capacity". Just not sure i agree with that.[/quote]
How is not making you a loan a legal risk? You're going to sue me because I must make you a loan? Again, I can decide your LTV or DTI it too high. Is that unfair? You probably think so or you wouldn't have applied. Can you sue me for that. Sure. Would you win? Probably not.

The entire point of my getting involved in this discussion is many of you are making up rules that don't exist. If you're a naysayer, you're not working for the betterment of your bank. We can disagree on what's "ethical", but there should be no argument that this is not illegal or a UDAAP issue.
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#2141500 - 08/10/17 02:03 PM Re: Loan Denial Reason Anonymous
swiggles Offline
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But for fair lending....if you don't lend to certain businesses or occupations, that better be in your loan policy and there better not be exceptions.....just a thought for discussion.

Fair Lending isn't a regulation in itself. It's more of a concept....seems examiners can twist it any way they want to.
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#2141508 - 08/10/17 02:11 PM Re: Loan Denial Reason Anonymous
raitchjay Offline
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Not making me a loan because my DTI blows and not making me a loan because you don't like my legal profession are two entirely different things.
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#2141510 - 08/10/17 02:16 PM Re: Loan Denial Reason swiggles
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Sure examiners can twist it. They twist things every day. But unless they can support their twist with regulations and laws, they can't even slap you on the wrist.

We can debate all day if a certain lending criteria meets each of our individual ethical and moral guidelines but it won't get us to any conclusion.
We've gone off on a tangent that isn't anywhere near the question the OP asked.
The poor guy just wanted a suggestion on what denial code to use.
For myself, I apologize that I cannot give you a clear answer, OP.
Looking at this I'm inclined to go with 'unacceptable type of credit references provided'.
Document the file to the nth degree and be ready to have someone explain it to the borrower.
Good luck!

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#2141512 - 08/10/17 02:28 PM Re: Loan Denial Reason Anonymous
RR Becca Offline
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out of the frying pan...
I'm not trying to say the bank *can't* have a policy that says "we don't lend to these types of people" as long as it isn't about a prohibited basis. All I'm saying is that if you have such a policy, own it and be honest about your reason to deny. If your bank has that policy and you are too embarrassed to quote it directly as the denial reason, maybe it's time to take a hard look at the policy in question.
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#2141525 - 08/10/17 02:55 PM Re: Loan Denial Reason Anonymous
Darth HMDA, CRCM, CAMS Offline
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This thread is fascinating smile
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#2141536 - 08/10/17 03:12 PM Re: Loan Denial Reason Anonymous
Richard Insley Offline
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Sorry I'm joining this party late (but I have a good excuse!)

This has been a lively discussion of a topic that rarely boils down to a simple Y/N answer. Nevertheless, the answers to the OP's two questions are NO and NO--"income derived from prohibited industry" is insufficient.

Section 1002.9(b)(2) is clear: "Statements that the adverse action was based on the creditor's internal standards or policies...are insufficient." This section comes up more often in the context of credit scoring...where it is unquestionably insufficient to take adverse action and list as the reason "credit score too low." The same principle applies here.

Yes, you can base credit decisions on scores, and yes David is right to say that Reg. B doesn't force you to make any particular loan, and yes RR Becca is spot-on to advise "...if you are too embarrassed to type "because you work at a strip club" on the NOAA as the reason for denial, when that is in fact the reason for denial, you might want to rethink why you are denying the loan."

Like AANs for low-score denials, decisions based on internal policy require you to disclose the elements of the policy that most contributed (the "more than 4" standard is as reasonable here as in low-score denials) to the adverse decision. The institution's biggest challenge is to craft a policy that has bright line tests. Although the regulation doesn't say it in so many words, the overarching goal of the AAN process is to educate consumers who can then take steps to improve their qualifications and eventually obtain credit.

The OP stated that his/her institution has a policy. It had better be in writing if lenders need to cite it as a reason for AA. Also, it can't be mushy--it will need to include a list of the industries that are "prohibited". Since we're talking about company policy, then the list must be approved by the BOD--not the lenders. If the BOD can't agree that the stockholders' interest is best served by refusing loans based on occupations or industries that offends the sensibilities of some element of the local community, then management and lenders are placing their company at risk if they decide to impose some arbitrary standard.

Banks should exercise extreme caution if they insist on blacklisting certain industries or occupations. Listen to Ken: "...whenever a credit decision is made on a an illogical basis, the door is opened to the possibility that it was made on a prohibited basis."

In order for a policy to be fair and effective, it must be applied equally, That means all credit applicants must be asked to identify the industry with sufficient clarity for the lenders to apply the disqualification policy. Obviously, this won't be as easy as "are you under 18 or over 18?" and other pre-screening questions.

By this point (if you didn't already bail out of this post) you've probably decided that occupation/industry prescreening is more trouble than it's worth. I'll leave the light on for you.
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#2141560 - 08/10/17 04:45 PM Re: Loan Denial Reason Anonymous
RR Joker Offline
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Hear, Hear

::applauds:: So very well said.
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