I know that this has been debated with respect to the terminology in 1002.14(a)(1) that requires the appraisal notice required under 1002.14(a)(2) to be provided on requests for prequalification ("application [...] to be secured"), but has anyone considered why the "carve out" from the definition of application created under Comment 3 to 1002.2(f) for a prequalification (except for as it applies to 1002.9) does not apply to the requirements of 1002.14 when it's widely accepted to apply to the requirements under 1002.13?

I sent in my inquiry to the CFPB and the respondent stated that since 1002.14 was written after Comment 3 to 1002.2(f), the comment didn't apply to 1002.14. I'm unaware of precedent of applying parts of a regulation based on the time it was implemented. I pressed the respondent for any preamble information that supports this conclusion to which there wasn't any reference provided. The respondent agreed that Reg B was not clear as it related to my question, but to prove my point I needed to become a lawyer and go work for the Bureau....

I don't quite understand why you think it is "except for as it applies to 1002.9". The commentary is just clarifying that 1002.9 applies, it does not say that no other section applies.

The commentary says once the prequalification is declined and therefore treated as an application you "must then comply with the notification requirements under § 1002.9". That is pretty specific... it doesn't say you "must then comply with the requirements under all sections of the regulation."

Regardless of this interpretation, if a prequalification is not an application until it is denied, then why would we have to comply with the notification requirements under 1002.14 upon receipt of the prequalification?

I am sorry, but that is not what it says. It is saying that if you turn an "inquiry" into an application, you have to comply with 1002.9. You need to refer to Comment 5. A request for a prequalification is always an application:

5. Examples of an application. An application for credit includes the following situations:

i. A person asks a financial institution to “preapprove” her for a loan

I appreciate that you disagree, as I disagree since a prequalification is not a "preapproval" since there is no "comprehensive analysis" or "written commitment" as is further stated in Comment 5, but that isn't the heart of my question: if a prequalification is not an application until it is denied (which I think we agree on), then why would we have to comply with the notification requirements under 1002.14 upon receipt of the prequalification?

If you are going to evaluate the consumer, it is not longer an inquiry is my actual point. If it is not an inquiry, then you have an application.

So what you are suggesting is if you tell them no - then you owe them the 1002.14 notice, but if you tell them yes, you do not?

I don't see how it is any different than the GMI collection conundrum - so yes.

But, I really do not believe that a prequalification request is an application until denied and except for the purposes of 1002.9 given Comment 3. eek Even Comment 5 uses the broad language of "for the purposes of the regulation".

Welcome to BOL's discussion forums, ComplianceJunkie.

I admire you for sticking to your guns here, but the notice is such an insignificant and cheap compliance step that it may just be easier to issue the notice than to spend time disputing the need to do so.

Thank you, sir. For an institution that has 6,000+ LAR lines and therefore a suitable number of pre-qualifications, everything becomes a measureable cost. Also, our complaint data is showing consistent trends from consumers being confused by the notice to the point they are angry with our institution as they believe we have actually ordered an appraisal... regardless of our attempts to modify the model notice to tell them otherwise.