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#2093592 - 08/16/16 08:29 PM Denied Pmt Deferral/AAN requirements
kglasser Offline
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Could someone confirm whether we are required to provide a formal Adverse Action Notice when we receive an oral request from a customer to defer a loan payment and we deny it based on whatever internal parameters we've set (poor loan payment history/poor deposit account history-NOT CBR information).
My interpretation of Reg B say that, yes, we are required to provide a formal AAN as it defines 'credit' as including payment deferrals/loan modifications, but I've heard alternative opinions that these requests are tools to help our members and not actual 'applications' for 'credit'.
Thoughts - what do you do?

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#2093619 - 08/17/16 03:36 AM Re: Denied Pmt Deferral/AAN requirements kglasser
rlcarey Online
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"My interpretation of Reg B say that, yes, we are required to provide a formal AAN as it defines 'credit' as including payment deferrals/loan modifications"

Where?
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#2093650 - 08/17/16 01:15 PM Re: Denied Pmt Deferral/AAN requirements kglasser
kglasser Offline
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1002.2(c) Official Interpretations
2c. Adverse action
Paragraph 2(c)(1)(I )
1. Application for credit. If the applicant applied in accordance with the creditor's procedures, a refusal to refinance or extend the term of a business or other loan is adverse action.
And § 1002.2(j): Credit means the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor.

Also page 2 of the link [http://files.consumerfinance.gov/f/201306_cfpb_laws-and-regulations_ecoa-combined-june-2013.pdf] to the CFPB's Laws and Regulations states that because the ECOA and Regulation B states that the definition of credit includes the right granted by a creditor to an applicant to defer payment of a debt, and a loan modification is itself an extension of credit and subject to ECOA and Regulation B. Examples of loan modifications that are extensions of credit include, but are not limited to, the right to defer payment of a debt by capitalizing accrued interest and certain escrow advances, reducing the interest rate, extending the loan term, and/or providing for principal forbearance.

Am I completely off base here? I am newer to the lending world, so I will not be surprised if I am misunderstanding. Thanks for your help.
Last edited by kglasser; 08/17/16 01:26 PM.
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#2093927 - 08/18/16 01:48 PM Re: Denied Pmt Deferral/AAN requirements kglasser
kglasser Offline
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I am also understanding that the "application" definition doesn't have to be a formal process. It can just be the consumer verbally requesting it to a frontline employee and us obtaining whatever info we obtain to make the decision. I concluded that we should send an AAN when a customer requests (verbally or in writing) to defer their payment and we deny it based on them not meeting our standards for approval...if this is not correct, can someone elaborate to what the definition of credit is referring when it specifies that it includes our right to defer payment of a debt? Is that right assumed when we originally approve the loan? I sincerely want to understand...

1002.2(f) "Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information."

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#2093931 - 08/18/16 01:51 PM Re: Denied Pmt Deferral/AAN requirements kglasser
John Burnett Offline
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The consumer is requesting the deferral. That is an application because credit includes the ability to defer payment.
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#2093936 - 08/18/16 01:59 PM Re: Denied Pmt Deferral/AAN requirements kglasser
kglasser Offline
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Joined: Jun 2016
Posts: 67
Thank you! That confirmation is exactly what I was looking for John!
I will need to coordinate with my team so we can send AAN when we deny these types of requests.
I so appreciate your assistance. Have a great day.
Last edited by kglasser; 08/18/16 02:01 PM.
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#2258056 - 08/11/21 04:03 PM Re: Denied Pmt Deferral/AAN requirements kglasser
MrFantastic Offline
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May I ask what you use as the denial reason? I'm concerned that using something similar to "Does not meet internal guidelines or criteria" does not meet the statement of specific reasons requirement of §1002.9(b)(2).

For reference: (2) Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section 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.

Do we need to specifically state something like "loan delinquent more than 14 days" or "number of deferrals granted for the calendar year has been exceeded" or various other specific guidelines that are used to make the determination?

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#2258068 - 08/11/21 05:53 PM Re: Denied Pmt Deferral/AAN requirements MrFantastic
InFairness, CRCM Offline
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Originally Posted by MrFantastic
May I ask what you use as the denial reason? I'm concerned that using something similar to "Does not meet internal guidelines or criteria" does not meet the statement of specific reasons requirement of §1002.9(b)(2).

For reference: (2) Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section 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.

Do we need to specifically state something like "loan delinquent more than 14 days" or "number of deferrals granted for the calendar year has been exceeded" or various other specific guidelines that are used to make the determination?

MrFantastic, I agree that "Does not meet internal guidelines" is inadequate to comply with with §1002.9(b)(2). The denial reason should be specific to the area of your policies that the applicant does not meet.
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#2258128 - 08/12/21 02:19 PM Re: Denied Pmt Deferral/AAN requirements kglasser
Rocky P Offline
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MrFantastic, another way of looking at an adverse action notice is thinking it's instructional, This is what you need to improve to get a loan from us, Fix it and we'll be glad to make you a loan. (not those words, but the concept behind the AAN.) Other way of saying it - this is what you need to fix to get the loan
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#2258179 - 08/12/21 10:09 PM Re: Denied Pmt Deferral/AAN requirements kglasser
Andy_Z Offline
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This is the second 5 year old thread brought back to life.

And while I agree "does not meet our criteria" was and is insufficient, Rocky, I've been teaching Reg B on and off for years and the way you put is is more succinct that I've ever heard or explained. I'm going to use that explanation if you don't mind. It is why when you're restricting yourself to 4 of the many reasons, I always train that you list the hardest to correct as you don't want them coming back and saying these 4 are fixed, now? Only to get a list of the next 4 reasons.
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#2258184 - 08/13/21 09:46 AM Re: Denied Pmt Deferral/AAN requirements kglasser
Rocky P Offline
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With pleasure Andy!
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