While evaluating an application for a small business loan our bank will often pull a credit reoprt on the owner of the business. The new business application adverse action notice that our bank just puchased does not include the FCRA notice.

My question is: If we deny the loan based on the owner's credit report are we also required to send the owner the Fair Credit Reporting Act notice?

First, do you get the owner's signature to authorize pulling the credit report. According to FTC interpretations of FCRA, the business applying for the loan does not, in itself, give you a permissible purpose for pulling the owner's credit report.

To answer your question, though, in my opinion you would be required to give the owner the FCRA notice if your denial is based in whole or in part on the owner's credit report information.

You may want to review the Tatelbaum2 letter regarding pulling consumer reports for business purposes.

IMHO - Since you are not denying the consumer - an FCRA AAN would not be required.

We do have the owner sign a statment that they authorize us to pull their credit report because in most cases they personally guarantee the loan. While researching this on my own I found several places that indicated we would be required to send the FCRA notice (most of the information that I found was pretty old).

Under Banker's Tool for REG B there is a " Cheat Sheet for Adverse Action Notices ." At the bottom of this form it indicates that the FCRA notice would not be required in this situation because "it was recently clarified..." Do you think that was in reference to the Tatelbaum2 letter?

I am just learning the compliance game so I like to have things well documented whenever possible. Thanks for your help

It was clarified in the Stinneford Letter. Look toward the second to last paragraph.

I stand corrected. You would not have to have the FCRA notice. See, that's what happens when you answer questions while sitting in a hospital room without benefit of all your files and reference manuals.

I'm reviving this thread as I just need some clarification. We have a business loan request in the name of an individual. He is wanting $3 million for the refinancing of a hotel and the loan would be in his personal name. It's my understanding that even though we pulled a credit bureau on this individual and denied the loan request because of derogatory information in the credit bureau, that we do not have to provide the FCRA disclosure since it is business purpose. Am I correct???? We did prepare an adverse action notice in accordance with Reg B, but again, we excluded the FCRA notice.

Technically, section 615(a) of the FCRA applies to consumers. The definition of "consumer" is pretty vague. Section 603(c) states "the term consumer means an individual."

You have an individual, although he may not have been acting in a "consumer capacity" as we typically define that in TIL, RESPA, etc.

I believe you should provide the applicant with a FCRA notice. He is not a guarantor, he is the applicant/borrower (if he was approved). The Stinneford letter (see link in rlcarey's post above) said that you don't have to provide a FCRA notice to guarantors of business loans.

Further, Section 604(a)(F)(i) indicates when you have permission to pull a consumer's credit report. It states:
". . . in connection with a business transaction that is initiated by the consumer. . . " (emphasis added)

Notice that the term "consumer" is used when discussing a business purpose loan. This seems to fit your situation. You have the right to pull the consumer's credit report in a business transaction, but he is still a consumer (not a guarantor) and therefore, is entitled to the FCRA disclosure.

My rule of thumb is this:

If applicant is a natural person, the FCRA notices applies no matter what the purpose of the loan. **

If the applicant is not a natural person, then the FCRA notice does not apply even if you have a natural person offering to guaranty.

This may get a little sticky when you have a family trust for a consumer purpose loan, since typically a consumer does not start out applying for the loan in the name of his/her trust. In this instance, I would err on the side of caution and act like the applicant was a natural person if the application is declined.


**Other special note - sole proprietorships are natural persons.