In an adverse action, if the reason for denial is value of collateral, is it wrong to check of the box that talks about credit simply because we pulled a credit report. Would it be a violation?

You should only disclose the specific reason for the AAN-if the only reason was the collateral being insufficient-that is all that should be disclosed.

If I understand your question, you are asking if you need to disclose that a credit report was used in the credit decision if the primary reason for denial was insufficient collateral. In my opinion, no. The denial reason had nothing to do with information contained in the credit report. Do not check the box.

Hope that answers your question.

I agree that the credit bureau shouldn't be disclosed in this case. Many years ago, employees had problems with this issue because examiners erroneously said the credit bureau had to be disclosed if there was a credit report. Yet another case of good intentions ....

Ditto the above. The question is, did this report influence your decision? Did it show "hidden" debts, excessive limits, bad credit, etc.? Yes, it contributed and if there is an error, the consumer needs to know so they can verify and correct as needed.

If you denied it for unrelated reasons, collateral, income, etc. then it shouldn't need any correction and you don't want to mislead them into believing that if they get some error there corrected, they may qualify.