We are researching the need to provide separate Adverse Action Notices for multiple applicants for consumer loans. Per ECOA:

Multiple Applicants — 12 CFR § 1002.9(e) When an application involves more than one applicant, notification need only be given to one of them but must be given to the primary applicant where one is readily apparent.

Statement of Specific Reasons — 12 CFR § 1002.9(b)(2) The statement of reasons for adverse action required must be specific and indicate the principal reason(s) for the adverse action. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor's credit scoring system are insufficient. Note: According to the staff commentary, a creditor must disclose the principal reasons for denying an application or taking other adverse action. The regulation does not mandate that a specific number of reasons be disclosed, but disclosure of more than four reasons is not likely to be helpful to the applicant.

but under FCRA if the credit report was used:

§615. Requirements on users of consumer reports
(a) DUTIES OF USERS TAKING ADVERSE ACTIONS ON THE BASIS OF INFORMATION CONTAINED IN CONSUMER REPORTS.--If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall--
(1) provide oral, written, or electronic notice of the adverse action to the consumer;
(2) provide to the consumer written or electronic disclosure--
(A) of a numerical credit score as defined in section 609(f)(2)(A) used by such person in taking any adverse action based in whole or in part on any information in a consumer report; and
609 (f)(2)(A) CREDIT SCORE.--The term "credit score"--
(i) means a numerical value or a categorization derived from a statistical tool or modeling system used by a person who makes or arranges a loan to predict the likelihood of certain credit behaviors, including default (and the numerical value or the categorization derived from such analysis may also be referred to as a "risk predictor" or "risk score"); and
(ii) does not include--
(I) any mortgage score or rating of an automated underwriting system that considers one or more factors in addition to credit information, including the loan to value ratio, the amount of down payment, or the financial assets of a consumer; or
(II) any other elements of the underwriting process or underwriting decision.
(B) KEY FACTORS.--The term "key factors" means all relevant elements or reasons adversely affecting the credit score for the particular individual, listed in the order of their importance based on their effect on the credit score.

609 (f)(1)
IN GENERAL.--Upon the request of a consumer for a credit score, a consumer reporting agency shall supply to the consumer a statement indicating that the information and credit scoring model may be different than the credit score that may be used by the lender, and a notice which shall include--
(A) the current credit score of the consumer or the most recent credit score of the consumer that was previously calculated by the credit reporting agency for a purpose related to the extension of credit;
(B) the range of possible credit scores under the model used;
(C) all of the key factors that adversely affected the credit score of the consumer in the model used, the total number of which shall not exceed 4, subject to paragraph (9);
(D) the date on which the credit score was created; and
(E) the name of the person or entity that provided the credit score or credit file upon which the credit score was created.


(B) of the information set forth in subparagraphs (B) through (E) of section 609(f)(1);
(3) provide to the consumer orally, in writing, or electronically--
(A) the name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the person; and
(B) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and
(4) provide to the consumer an oral, written, or electronic notice of the consumer's right--
(A) to obtain under section 612, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (3), which notice shall include an indication of the 60-day period under that section for obtaining such a copy; and
(B) to dispute, under section 611, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency.

So, if the credit report was used, then we need to provide notices to all applicants. I am trying to confirm that the reasons for denial provided under ECOA section of the combined notice can be the same on all the notices. We would not need to segregate these reasons for each applicant. Just change the FCRA section of the notice for each applicant.

Any references would be wonderful.

Thanks

I am trying to confirm that the reasons for denial provided under ECOA section of the combined notice can be the same on all the notices.

Yes the reason you denied the loan does not change based on the individual applicant - you can do as planned or just send one of them the FCRA info.

Thanks.

I will add that to our new LOS. Reasons for denial can be the same, but the FCRA info should be specific to the borrower.

I agree with Randy. To add references, the regulations you cited are the main ones, but the preamble to the final rules adds additional support.

The pre-amble to the 2003 ruling (FR 3/18/03 Vol 68 No 52 P 1351) states the following:

Many commenters were concerned about the co-applicant’s or guarantor’s privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared. Accordingly, the rule has been adopted as proposed."

And the 2011 ruling on the FCRA requirements (FR Vol 76, No 136, 7/15/11) says this:

"Section 202.9(f) of Regulation B permits a creditor to provide an adverse action notice to only one applicant, and requires a creditor to provide an adverse action notice to the primary applicant, when a primary applicant is readily apparent. In contrast, section 615(a) of the FCRA requires a creditor to provide the disclosures mandated by that section to ``any consumer'' against whom adverse action is taken, if the adverse action is based in whole or in part on information from a consumer report. The FCRA's reference to ``any consumer'' would seem to include co-applicants. Given privacy and customer relations concerns, the Board expects that creditors would generally provide separate FCRA adverse action notices to each applicant with only the individual's credit score on each notice.

As discussed above, several commenters recommended adding language to the model forms to indicate that for co-applicants, the adverse action decision may be based on either or both of the applicants' credit information. The Board believes that providing this additional language on the model forms would complicate the disclosures without providing a substantial benefit to consumers. An applicant with strong credit who receives an adverse action notice will likely understand that the adverse action decision was based on the co-applicant's credit information or will contact the creditor to inquire."

Thank you. That adds weight to my supporting documentation.

Adam is right. The following is from our Denials training manual. It follows our training on Reg B and the FCRA and combines them together. I thought it might help you.

D. Multiple Applicant Examples:
In the case of joint applicants where credit report information is used in the decision to deny credit, the following situations may arise (assume Applicant A is the primary applicant and a separate notice is sent to each applicant in examples 1-4):

1. Primary Applicant A and Co-applicant B are denied credit. Applicant A has poor credit history, which led to the denial. Applicant B has good credit history.
a. Applicant A:
ECOA Denial Reasons (pertaining to both Applicant A and B), FCRA Statement and FCRA Credit Score Information (If a score was used)
b. Applicant B:
FCRA Statement and FCRA Credit Score Information (If a score was used).

2. Primary Applicant A and Co-applicant B are denied credit. Applicant A has good credit history, but has other reasons that led to the denial. Applicant B has poor credit history, which led to the denial.
a. Applicant A:
ECOA Denial Reasons (pertaining to both Applicant A and B), FCRA Statement and FCRA Credit Score Information (If a score was used)
b. Applicant B:
ECOA Denial Reasons (pertaining to Applicant B only), FCRA Statement and FCRA Credit Score Information (If a score was used).

3. Primary Applicant A and Co-applicant B are denied credit. Applicant A and Applicant B both have poor credit history (different content), which led to the denial.
a. Applicant A:
ECOA Denial Reasons (pertaining to both Applicant A and B), FCRA Statement and FCRA Credit Score Information (If a score was used)
b. Applicant B:
ECOA Denial Reasons (pertaining to Applicant B only), FCRA Statement and FCRA Credit Score Information (If a score was used).

4. Primary Applicant A and Co-applicant B are denied credit. Applicant A and Applicant B live at the same address and have exactly the same poor credit history, which led to the denial (typical husband/wife scenario).
a. Applicant A:
ECOA Denial Reasons (pertaining to both Applicant A and B), FCRA Statement and FCRA Credit Score Information (If a score was used)
b. Applicant B:
ECOA Denial Reasons (pertaining to Applicant B only), FCRA Statement and FCRA Credit Score Information (If a score was used).

5. Primary Applicant A and Co-applicant B are denied credit. Applicant A and Applicant B live at the same address and both have the same good credit history, but have other reasons which led to the denial.
One Adverse Action Notice will be sent to both applicants stating the ECOA reasons for denial. No FCRA statement or credit score information shall be disclosed.

David, curiously, your description for the co-borrower and Randy's contradict each other. I've of the opinion if you [for example] deny for 4 credit-related reasons and 2 of those are the borrower and 2 are the co-borrower, you can send those 4 reasons to both borrowers along with the FCRA info...You seem to differ from that. Please help me understand why applicant B would only get their 2 reasons.

Not David, but David's way works fine too because ECOA only requires that one applicant receive an AA notice. In David's examples, the primary applicant is receiving all reasons for denial - which is the minimum requirement of ECOA (see below). That said, giving all reasons to both applicants is also acceptable, based on Randy and I's previous comments.

From Reg B:
"(f) Multiple applicants. When an application involves more than one applicant, notification need only be given to one of them but must be given to the primary applicant where one is readily apparent."

I know that a lot of institutions do what you are saying (give all reasons to all applicants) but I've never agreed that it was right. IOW, it may be the industry practice, but I don't think it's correct. Admittedly, I don't see examiners citing this, but I think it's correct. Here's why:

All reasons for denial must be given to the primary applicant:
When an application involves more than one applicant, notification need only be given to one of them, but must be given to the primary applicant where one is readily apparent [§1002.9(f)].

Is it okay to give the co-applicant ALL reasons? If so, where does Reg B say this?

Next, the Reg B amendments that took affect in 2004 were announced in the Federal Register on 3/18/03, Vol. 68 No 52 Page 13151. They state:
The statement of reasons for adverse action must be specific and indicate the principal reason(s) for the adverse action. General statements that the adverse action was based on the creditor’s internal standards or policies or that the applicant failed to achieve the qualifying score on the creditor’s credit scoring system are insufficient. Consider the following example:

Joint applicants A and B are denied credit due to applicant B’s poor credit history. A general statement saying, “applicant B did not meet the creditor’s standards of creditworthiness” would be insufficient. A more specific reason such as “applicant B has delinquent past or present credit obligations with others” would be required.

Notice the example doesn't just say give Applicant A all reasons. It specifically says you are to identify what reasons belong to Applicant B. This tells me you should identify what reasons belong to what applicant. I don't see most creditors doing this (although we have some clients that do).

When there are two applicants, a creditor must provide an adverse action notice to both applicants if the application is denied, even in part, based on information in a co-applicant’s consumer report. [2011 FTC Staff Interpretations page 83] An applicant with strong credit who receives an adverse action notice will likely understand that the adverse action decision was based on the co-applicant’s credit information or will contact the creditor to inquire. [Federal Register/Vol. 76, No. 136/7-15-11/Rules and Regulations – Page 41596]
If you're sending an AAN to the co-applicant (as the FCRA requires) wouldn't this logically mean you should tell Applicant B their reasons for denial? Do you have the right to tell them all reasons (even Applicant A's) although Applicant B is not the primary applicant?

Again, I don't see most creditors doing this and we don't cite it in our reviews, but I think it's the correct way to put Reg B and FCRA together. I'm interested in others thoughts on this.

One loan application has specific reasons for denial. Those reasons do not change based on the applicant you are communicating too.

If you choose to send a Reg. B adverse action notice to both applicants, you better be listing the exact same reasons for denial regardless of who they belong too. For example, you tell applicant B one thing and you tell applicant A something different, and applicant B fixes their problem and you are still unable to make the loan because you failed to tell applicant B all the reasons that belonged to applicant A. Where does that leave you?

Great points, David. My main thought on this is that Regulation B only requires that the denial reasons be provided to the primary applicant if one is "readily apparent." If one is not readily apparent, then notification only needs to be given to one of them.

"(f) Multiple applicants. When an application involves more than one applicant, notification need only be given to one of them but must be given to the primary applicant where one is readily apparent."

To further explain, let's look at your example 4 where applicants live at the same address and have the same credit history. Let's also assume that the application listed husband first (applicant A) and wife second (applicant B) because the husband handles the finances and likes to be listed first on the application - and they always apply jointly for everything because that is what they do. The application is for a car for the wife who works and could support the debt by herself. In this case, is there a readily apparent primary applicant? While the husband is listed as the first applicant (because he happened to fill out the joint application first), the loan was for a car for the wife (who had income to support the loan). In this case, I would think that Regulation B only requires the reasons for denial to be provided to either of them as this was a joint application and I would argue that a primary applicant was not "readily apparent" (though I could see where one may actually argue that the wife was the primary applicant).

That said, I don't think that your example is wrong (as I would personally have a hard time saying that it is readily apparent that the wife is the primary applicant), but I also don't think that giving both reasons to both applicants is wrong either due to the fact that you can choose who you give it to if a primary applicant isn't readily apparent.

I also understand that you don't cite this as a violation and this is just a discussion to try to understand the rules as fully as possible - which I appreciate. I too will be interested to see what others think.