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#2173488 - 04/13/18 07:04 PM HELOC Annual Review
terpsfan Offline
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Given the limited amount of changes that are allowed to be made to a HELOC is there a permissible purpose to pull a credit report for review of a HELOC?

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#2173757 - 04/17/18 12:27 PM Re: HELOC Annual Review terpsfan
Dan Persfull Offline
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Sec. 604. Permissible purposes of consumer reports

(a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(3) To a person which it has reason to believe

(F) otherwise has a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.[FTC Note 1]
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2173766 - 04/17/18 12:53 PM Re: HELOC Annual Review terpsfan
terpsfan Offline
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With the restrictions on what you can change on a HELOC would it fit since the permissible purpose is limited to an account review for the purpose of deciding whether to retain or modify current account terms? I am not sure regardless of what shows up on a credit report we would be able to change account terms. Maybe I am over thinking it.

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#2173770 - 04/17/18 12:59 PM Re: HELOC Annual Review terpsfan
rlcarey Online
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Since you can freeze the account under the following provision, I believe a review of a credit report would help the bank determine if that condition exists:

The creditor reasonably believes that the consumer will be unable to fulfill the repayment obligations under the plan because of a material change in the consumer's financial circumstances
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#2173773 - 04/17/18 01:14 PM Re: HELOC Annual Review terpsfan
Dan Persfull Offline
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I am not sure regardless of what shows up on a credit report we would be able to change account terms.

The borrower has opened 5 new credit card accounts and has the limits maxed out.

They have a new mortgage which indicates they may have vacated your collateral.

They bought a new luxury vehicle with high payments.

They are delinquent on accounts other than your HLEOC.

There are others that could be listed but I think you can see what infomation would be available.


As Randy stated the credit report can be a good supporting document for termination or suspension under the HELOC terms.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2173936 - 04/17/18 11:22 PM Re: HELOC Annual Review terpsfan
terpsfan Offline
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In the commentary it states that past due on other debts alone does not satisfy this part. There has to be a material change in income as well.

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#2173949 - 04/18/18 11:36 AM Re: HELOC Annual Review terpsfan
rlcarey Online
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Where? It says "such as a significant decrease in the consumer's income". But that is just an example. If the consumer has taken on another $250,000 in debt without a substantial increase in income, that is just as much of a problem. Can you suspend solely on the credit report - probably not, but it is the first stepping stone.

7. Material change in financial circumstances. Two conditions must be met for §1026.40(f)(3)(vi)(B) to apply. First, there must be a “material change” in the consumer's financial circumstances, such as a significant decrease in the consumer's income. Second, as a result of this change, the creditor must have a reasonable belief that the consumer will be unable to fulfill the payment obligations of the plan. A creditor may, but does not have to, rely on specific evidence (such as the failure to pay other debts) in concluding that the second part of the test has been met. A creditor may prohibit further advances or reduce the credit limit under this section if a consumer files for or is placed in bankruptcy.
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#2173955 - 04/18/18 11:58 AM Re: HELOC Annual Review terpsfan
terpsfan Offline
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Failure to pay other debts only meets the second test "A creditor may, but does not have to, rely on specific evidence (such as the failure to pay other debts) in concluding that the second part of the test has been met."

If there is a increase in debt would you and can you require them to provide updated to financials? I have always just been concern with pulling one if you would need more information to actually take action.
Last edited by terpsfan; 04/18/18 12:08 PM.
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#2173969 - 04/18/18 01:11 PM Re: HELOC Annual Review terpsfan
rlcarey Online
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So you pull a credit report and it shows $250,000 in new debt. Additionally, the customer has a number account that are now 30-60 past due.

Has there been material change in the consumer's financial circumstances? Yes
Would a reasonable person believe that the consumer will be unable to fulfill the payment obligations of the plan? I would think so.

So you freeze the account. You notify the consumer and then the consumer has the ability at that point to prove their ability to pay and get the freeze lifted.
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#2174393 - 04/20/18 01:39 AM Re: HELOC Annual Review terpsfan
terpsfan Offline
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For close end credit does a blanket authorization stating that they are provided authorization to pull credit at any time on the application allow us to pull credit at anytime?

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#2174400 - 04/20/18 12:07 PM Re: HELOC Annual Review terpsfan
rlcarey Online
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You generally have no permissible purpose to pull credit on a closed-end credit after the fact. Even with a blanket authorization, what are you going to do with the information. If you are going that, I would be sitting down with my legal counsel to explore the legitimacy. Just pulling credit to pull credit and not do anything with it? Even with a blanket authorization I find that not in the spirit of the law, especially if the consumer is not specifically aware what they are signing because it is buried in some mouse print.
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#2174548 - 04/20/18 10:20 PM Re: HELOC Annual Review terpsfan
terpsfan Offline
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We would be pulling it to do internal credit risk ratings

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#2174549 - 04/20/18 10:40 PM Re: HELOC Annual Review terpsfan
rlcarey Online
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You might want to pull out your agreement with the credit reporting agency from which you are pulling the reports. You certify to the CRA that you will only pull reports for those permissible purposes as outlined in the agreement and those are not necessarily all permissible purposes that are included in the FCRA. I have yet to see one that was issued to a bank that allowed the bank to pull reports based on written authorization. If you have that ability to pull based on written authorization, I would still be sitting down with my legal counsel and discuss the effectiveness of a blanket open-ended written permission.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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