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#2131370 - 05/22/17 06:25 PM Type of Credit Not Offered/Not Licensed in State
Compliance NABW Offline
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I was wondering what is the rule regarding Adverse Action Notices when the lender does not or cannot offer the credit the borrower is applying for. An example would be if a bank does not have a HELOC product and a customer fills out an application and writes in they want a HELOC. Another example is for a mortgage bank that is not licenses in Idaho. What do you do if somebody applies for a property in Idaho?

Does the lender issue a denial because they can't offer the credit, or is it not reported/acted upon because it is not an application under the "procedures used by a creditor for the type of credit requested?"

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#2131418 - 05/22/17 10:54 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
rlcarey Offline
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Galveston, TX
Adverse action in the FCRA is the same meaning as in Reg. B:

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.

Property location would be adverse action, as that is not related to a credit type.

Of course the question would be why would a credit report be pull under those circumstances?.
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#2132054 - 05/26/17 01:12 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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So, location would be a denial if we considered it an application, but HELOC product would not because it is a "type" of credit?

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#2155805 - 12/01/17 09:48 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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Bump^. If a Bank does not offer an education loan for instance, is there no need to issue an AAN because they requested a type of credit not issued by the bank; therefore, there is really no actual "application" in such an instance. Using that same thought process, it seems like the unlicensed mortgage bank situation would not require an AAN either under the exemption in 1002.2(c)(2)(iv) -

*A refusal to extend credit because applicable law prohibits the creditor from extending the credit requested.*

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#2158559 - 12/28/17 02:26 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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Any takers? smile

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#2219003 - 08/02/19 03:41 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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Or, not within our lending area?

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#2219019 - 08/02/19 04:34 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
rlcarey Offline
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Are you saying you don't do mortgage loans? If you are not in Idaho - why do you need a license to lend in Idaho? Are you not a financial institution?
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#2219032 - 08/02/19 05:13 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
Kimo in Idaho Offline
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OP are you a non-depository lender? And more directly, why are you fighting the issue? Issue the letters and move on as apposed to fighting a battle that just increases your risks of missing a required notice. Are you really getting enough "out of state" applications that it makes sense? I would look at how you are marketing if you are getting enough applications to make this a worthy issue. I would be concerned about UDAAP issues if you are marketing in such a way that it drives enough applications that it is costing you that much to just issue an adverse action notice.

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#2219217 - 08/06/19 07:31 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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Just trying to nail down a concept, and, @Kimo, Yes, the particular piece about licensing is more specific to non-depository lenders. But, it could be a product type. Let's say a Bank doesn't do car loans and somebody comes in an applies for a car loan, or asks about car loans and the Bank says, "Sorry, we don't do car loans." Do you issue an AAN, or just rely on the fact that you don't offer such a product?

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#2219228 - 08/06/19 07:57 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
rlcarey Offline
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Collateral is a term of the credit and not a product type and you would owe them a AAN.

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.
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#2219258 - 08/07/19 01:29 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
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Touche . . . okay, pick something that is "type" based. Again, location, unless you also want to try to say that location of the home would be considered under the "collateral" offered by the creditor.

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#2219366 - 08/08/19 05:41 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
Kimo in Idaho Offline
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If we are only talking about location being an issue, I would argue for the following section:

2(c)(2)(iv) A refusal to extend credit because applicable law prohibits the creditor from extending the credit requested; or

as you are not licensed to do business in that state you are therefor prohibited by law from extending the credit.

However, I would still have concerns under UDAAP of why are you getting the applications? Is it due to your marketing? and how are you informing the applicant you can't do the loan?

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#2219370 - 08/08/19 06:07 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
Dan Persfull Offline
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And I would challenge you to provide the specific state statute that requires a federally insured financial institution to be licensed to make loans within that state. Chances are you aren't going to find one.

If the person or property is located outside your market area then your refusal to make the loan would be Adverse Action based on being out of market (location).
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#2219378 - 08/08/19 06:42 PM Re: Type of Credit Not Offered/Not Licensed in State Compliance NABW
Kimo in Idaho Offline
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Dan I would agree with you but the OP I believe is a non-depository lender which is not a federally insured financial institution, OP can certainly clarify.

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#2219830 - 08/16/19 03:32 PM Re: Type of Credit Not Offered/Not Licensed in State Kimo in Idaho
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Yes, the State based stuff will generally apply to an Independent Mortgage Bank. @Dan, there are some who would agree with Kimo in Idaho that it's not an application because of the citation she mentioned.

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