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#2145615 - 09/11/17 10:08 PM Denial Reasons
Compliance Chick Offline
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Joined: Oct 2004
Posts: 192
New Orleans, La.
I am hoping there is a bank out there that has been reporting denial reasons that can assist. If you have 3 denial reasons on the adverse action, 2 are for credit history and 1 is collateral, do you report 3 or 2 denial reasons? Do you report denial reason #1 = credit history, denial reason #2 = credit history and denial reason #3= collateral OR do you only report denial reason #1 = credit history and denial reason #2=collateral?

Also, am I correct in understanding that if an adverse action notice was not provided, you do not report a denial reason of Other?

3. Reason for denial—adverse action model form or similar form. If a financial institution chooses to provide the applicant the reason or reasons it denied the application using the model form contained in appendix C to Regulation B (Form C–1, Sample Notice of Action Taken and Statement of Reasons) or a similar form, § 1003.4(a)(16) requires the financial institution to report the reason or reasons that were specified on the form by the financial institution, which includes reporting the ‘‘Other’’ reason or reasons that were specified on the form by the financial institution, if applicable. If a financial institution chooses to provide a disclosure of the applicant’s right to a statement of specific reasons using the model form contained in appendix C to Regulation B (Form C–5, Sample Disclosure of Right to Request Specific Reasons for Credit Denial) or a similar form, or chooses to provide the denial reason or reasons orally under Regulation B, 12 CFR 1002.9(a)(2)(ii), the financial institution complies with § 1003.4(a)(16) by entering the principal reason or reasons it denied the application.
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#2145734 - 09/12/17 08:35 PM Re: Denial Reasons Compliance Chick
Dan Persfull Offline
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Bloomington, IN
2 are for credit history

If the credit contains collections, delinquent credit, bankruptcy, etc. we only report "credit history" one time since all of those adverse conditions are part of the applicant's credit history..
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#2146044 - 09/14/17 02:56 PM Re: Denial Reasons Compliance Chick
Vander Offline
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Vander
Joined: Jul 2003
Posts: 216
Texas
And if we have an applicant and co-applicant, and both are denied based on credit history, we only report credit history one time?

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#2146085 - 09/14/17 04:22 PM Re: Denial Reasons Compliance Chick
hmdagal Offline
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hmdagal
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Posts: 3,841
Yes. You'll get a validity error (V669) if you use the same denial code more than once.
Last edited by hmdagal; 09/14/17 04:31 PM.
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#2148485 - 10/03/17 07:33 PM Re: Denial Reasons Compliance Chick
trying_to_comply Offline
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Joined: Feb 2011
Posts: 144
I accept the validity error referenced above, as well as the information in the FIG and Small Entity Guide regarding not entering the same code more than once for any covered loan or application, but my reading of the commentary appears to me to indicate that we would have to report multiple 'other' (code 9) reasons if we have indicated as such to the customer on the AAN?


1003.4 (1)(16)
3.Reason for denial—adverse action model form or similar form.

If a financial institution chooses to provide the applicant the reason or reasons it denied the application using the model form contained in appendix C to Regulation B (Form C-1, Sample Notice of Action Taken and Statement of Reasons) or a similar form, § 1003.4(a)(16) requires the financial institution to report the reason or reasons that were specified on the form by the financial institution, which includes reporting the “Other” reason or reasons that were specified on the form by the financial institution, if applicable. If a financial institution chooses to provide a disclosure of the applicant's right to a statement of specific reasons using the model form contained in appendix C to Regulation B (Form C-5, Sample Disclosure of Right to Request Specific Reasons for Credit Denial) or a similar form, or chooses to provide the denial reason or reasons orally under Regulation B, 12 CFR 1002.9(a)(2)(ii), the financial institution complies with § 1003.4(a)(16) by entering the principal reason or reasons it denied the application.

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#2148669 - 10/04/17 06:04 PM Re: Denial Reasons Compliance Chick
Banker K, CRCM Offline
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Joined: Jan 2010
Posts: 293
Oklahoma
@ Trying to Comply, I was thinking of that same question when reading this thread.

I agree, and think you would be allowed to have multiple "other" entries on denial reasons if that was your denial reason.
We don't use "other" often, but have had it come up. However, when I enter this in our LAR's 2018 test environment, it's still giving me a validity error that I can't have denial reasons that are the same.

For the other denial reasons, I agree with the above responses that you would not repeat those denial reasons.

Seems strange. Interested in other thoughts on this as well.
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#2148687 - 10/04/17 06:47 PM Re: Denial Reasons Compliance Chick
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Why would you check "other" multiple times?

Code 9 has a free form field that you can identify the "other" reason or reasons for the denial. IMO there would be no reason to use Code 9 multiple times unless for some reason you would need more than 255 characters.
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#2148728 - 10/04/17 08:41 PM Re: Denial Reasons Compliance Chick
trying_to_comply Offline
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Again, I am only pointing out, in my opinion, a discrepancy between how I read the rule/commentary and the validity edits.

My thinking behind multiple 'Other' denial reasons is that the rule makes clear when denial reasons fall under one type of denial, report only one; which seems logical to me. The difference with the 'Other' designation is that it could reflect a number of reasons that are in no way related. In reporting 1 'other', it implies there was 1 denial reason, when in fact there could be more than one in the free form field. It appears to contradict the spirit of the law and its requirement to report up to 4 denial reasons, when there is no method to discern more information about 'other' denials and simply combine them.

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#2148771 - 10/05/17 11:59 AM Re: Denial Reasons Compliance Chick
burke116 Offline
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Joined: Jun 2014
Posts: 562
Petersburg, VA
Quote:
It appears to contradict the spirit of the law and its requirement to report up to 4 denial reasons

But you can report up to 4 denial reasons- in the free form box. When it comes to using 9, think of it as simply unlocking the free-form for use so that you can give the up-to-4 reasons for denial that are not included in codes 1-8. If someone sees 9-other being used, they're going to go to free-form to read the reason or reasons.

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#2148788 - 10/05/17 02:05 PM Re: Denial Reasons Compliance Chick
Banker K, CRCM Offline
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Joined: Jan 2010
Posts: 293
Oklahoma
Those are good thoughts!

So if you had multiple 'other' denial reasons, you pick 'other' ONE time, then in the text field, enter as many 'other' denial reasons as you have (hopefully not needing to go over the character limit Dan referenced above).

Thanks all!
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All comments are mine & should not be taken as legal advice.

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