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#557 - 01/25/01 06:37 PM HE Lines and Adverse Action
Bear Collector, CRCM Offline
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Bear Collector, CRCM
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District of Columbia
Many of our Home Equity Lines have reached the end of the 10-year draw period, and are going into repayment. We are reviewing these lines as they come to the end of the draw period, and pulling credit reports for each loan to determine if we want to offer to extend the draw period for another 10 years. Those who pass our underwriting criteria are sent a letter offering the option to extend. Those who do not, are simply allowed to go into repayment according to the terms of their Equity Line Contract. A letter is sent informing them that their draw perid has expired, and they must now repay the loan according to the terms of the original agreement.
Some folks in the bank are arguing that because we pulled credit reports,and are relying on them to make this decison, we should be sending adverse action letters. My feeling is that these people did not "apply" for credit, and are not subject to any adverse action; they are just paying as agreed. I agree that if we terminated the line early because of delinquencies or credit problems, an AA letter would be required, but I do not feel we need to do so in these cases. Am I correct? What about FCRA notices? I think all that would just be confusing to someone who never applied in the first place!
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General Discussion
#558 - 01/25/01 10:12 PM Re: HE Lines and Adverse Action
Andy_Z Offline
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We do not offer Home Equity Lines so I can't speak to that, but based on your description I'd say:
1) you may access a credit report for a business reason and you likely have authorization in your files to this based on the existing relationship.You have a legitimate need.604(a)(3)(F)(ii)
2) as you noted, they didn't apply and further, you took no adverse action, you just didn't offer them new terms.
3) I'd question more whether the intended purpose here is a pre-screening effect and what implications could be caused by that.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

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AndyZ CRCM
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#559 - 01/25/01 10:54 PM Re: HE Lines and Adverse Action
Bear Collector, CRCM Offline
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Bear Collector, CRCM
Joined: Nov 2000
Posts: 1,830
District of Columbia
Andy,
According to my research, FCRA states that pre-screening applies to "credit or insurance transaction that is not initiated by the customer." The term does not include the use of a consumer report by a person with whom the consumer has an account or insurance policy for the...purpose (of) reviewing the account. Since we are actually only reviewing the account, and then determining to allow the account to proceed as originally agreed, I still do not think this action would fall under pre-screening or necessitate adverse action on our part.
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#560 - 01/26/01 04:04 AM Re: HE Lines and Adverse Action
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,502
On the Net
It isn't prescreening in the traditional sense because it isn't a credit bureau screening it to any criteria.

You might call it prescreening internally, but I agree with you, that shouldn't pose a problem.

------------------
Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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