Recently I was told that an application for which we do not offer the type or terms of credit applied for is not a denial. It's nothing. What is it if it's not a denial? My argument is that the bank took action to not grant credit, so it's denied. What say all of you?

(c) Adverse action.
(2) The term does not include:
(v) A refusal to extend credit because the creditor does not offer the type of credit or credit plan requested.

Paragraph 2(c)(2)(v).
1. Terms of credit versus type of credit offered. When an applicant applies for credit and the creditor does not offer the credit terms requested by the applicant (for example, the interest rate, length of maturity, collateral, or amount of downpayment), a denial of the application for that reason is adverse action (unless the creditor makes a counteroffer that is accepted by the applicant) and the applicant is entitled to notification under §1002.9.

You didn't take action to deny credit anyway.
You just told them you can't consider their request because you don't offer the product they want.
That is not a statement of creditworthiness.

Take note of how Reg B differentiates between type of credit and terms of credit.



I think the OP would need to provide us more detail on why they couldn't make the loan (type vs. term) before we can determine whether or not adverse action occurred.

HMDA, many seasoned CO's have the question which usually turns out to be terms rather than products.

Example - Someone comes into the bank looking for a 10 year car loan for a used VW at 0.0% interest at 200% LTV. Some would argue that the bank does not make loans like that, and they would be correct - HOWEVER they make car loans, just not with those terms.

TR had the reason "That is not a statement of creditworthiness."

TR had the reason "That is not a statement of creditworthiness."

But if that statement is in relation to the terms requested it is adverse action.

If I ask for the terms Rocky P outlined in his example and the LO makes the "can't consider your request because we don't offer the product you want" then that is denying my request based on the terms requested.

Adverse action is not solely related to creditworthiness.

We do not make vacation loans (nor unsecured loans). If someone requests a loan to go on vacation, we do not offer that loan product, no adverse action is provided.

However, if the loan officer launches into application mode & pulls a credit report before determining the purpose of the loan request (Yep, it happens), we send an adverse action notice - just as a precaution, even though we do not offer that loan product.

A vacation and unsecured loan is a personal loan. Your bank does not offer personal loans for any reason?

You'd be wise to revisit that practice immediately. If an examiner looks through your loans to preferred customers (private banking, CEO's personal clients, etc.) and finds a single exception, you could face an enforcement order to provide AA notices to all those applicants who didn't get one.