If we decline a loan because of an unacceptable appraisal or an unacceptable hydrology report, would we check the box on the AAN that our credit decision was based on information from an outside source? The FCRA seems to require that box be checked when one of the "7 characteristics" is impacted by a third party report - but it would seem to then not apply to an appraisal (or that type of report?) Are we interpreting this correctly? We have auditors saying we should check the box in these cases.

2.Adverse action based on non-CRA information. If the decision to deny or increase a charge for consumer-purpose credit is based entirely or in part on information (i) received from a third-party source other than a consumer reporting agency and (ii) bears upon the consumer’s seven characteristics, the creditor must disclose that the consumer has the right to request the nature of the information obtained from the third-party source that led to the adverse action. The consumer must make this request within 60 days of the consumer learning of the creditor’s adverse action. The creditor must disclose this right to the consumer at the time it informs the consumer of the adverse action and, if the consumer timely requests it, the nature of the information within a reasonable period of time from the consumer’s request. FCRA Section 615(b)(1).

FCRA Section 615 requires certain disclosures to consumers whenever adverse action is taken based, even in part, on: (i) a consumer report from a credit reporting agency; or (ii) information that (a) bears upon the “seven characteristics” (a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living) and (b) is from a non-credit reporting agency (non-CRA) third party or the creditor’s affiliate.

The decline reason has to do with the collateral, not anything covered by FCRA. An example of non-CRA information could be a landlord providing information on the applicant's record of paying rent, which is something that bears on the 7 characteristics.

A hydrology report does not relate to the 7 characteristics.

Thank you!