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#8610 - 01/08/02 08:47 PM Adverse Action, FCRA and Business-Purpose Loans
elcinoca Offline
Platinum Poster
Joined: Jan 2002
Posts: 537
Elizabeth City, NC
Sorry to beat a dead horse, but if I deny a business-purpose loan because of the individual applicant's credit report, do I need to include the FCRA statement? LaserPro legal staff say NO, and their program will not allow me to include the FCRA statement on business-purpose loans. Our legal counsel and external compliance both say YES, the FCRA notice needs to be included if we provide the Adverse Action! What gives? Any help? Our small community bank elects to provide Adverse Action notices on all consumer- and business-purpose loan denials.

[This message has been edited by elcinoca (edited 01-17-2002).]


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General Discussion
#8611 - 01/08/02 10:51 PM Re: Adverse Action, FCRA and Business-Purpose Loans
Lucy Griffin Offline

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Lucy Griffin
Joined: Nov 2000
Posts: 1,544
If you based the denial in whole or in part on the business owners personal credit report, then you must send the FCRA notice. The FCRA notice requirement is triggered, not by the type of loan under consideration, but by the fact that you used a consumer's credit report to make the decision. I am frankly surprised at Laser Pro's answer. It's simply wrong.

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#8612 - 01/09/02 01:16 AM Re: Adverse Action, FCRA and Business-Purpose Loans
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Ah - but here's the rub...
IF the loan request was from an individual or a sole proprietorship, then the FCRA notice is triggered. But, if the request was from a partnership, corporation, etc., and the credit report was pulled for a person who would be a GUARANTOR for the entity, then the FCRA notice is NOT triggered.

:O (my head hurts....)

_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#8613 - 01/10/02 03:49 PM Re: Adverse Action, FCRA and Business-Purpose Loans
NotALawyer Offline
Gold Star
NotALawyer
Joined: Nov 2001
Posts: 455
Whether or not notice must be provided will depend upon whether the consumer is a co-signer or a guarantor of the obligation. If the consumer is a guarantor, no adverse action notice is required under ECOA or FCRA. FTC Staff Opinion Letter dated July 14, 2000, from Christopher Keller, Attorney, to Ryan Stinneford, Esq. addresses this issue.

This one was new to me until our latest declined commercial applications audit.

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Robert Marx
Opinions stated are not necessarily that of my employer.


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#8614 - 01/10/06 03:59 AM Re: Adverse Action, FCRA and Business-Purpose Loan
chemono Offline
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Joined: Jan 2006
Posts: 1
Would it be safe to say that in all instances that when a consumer credit report is used in the extension of credit for a sole-propriertorship, FCRA notice <b>IS</b> triggered upon denial based in whole or in part?

If I may, below is a response I received (verbatim) <b>after</b> applying for commercial credit in which the company pulled a personal credit report:

"...We don't use personal credit reports to deny credit, but to help establish credit for sole-proprietorships. We only pull personal credit reports when we cannot issue credit based on corporate records ... in this case, you have been denied based on your own personal credit." That was it, no Adverse Action whatsoever.

Because I am always stressing to my own staff of FCRA Policy; does the above verbiage constitute in any way partial or full violation of such?
Last edited by John Burnett; 01/10/06 04:37 PM.
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#8615 - 01/14/06 09:57 PM Re: Adverse Action, FCRA and Business-Purpose Loan
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Well first off - the statement seems contradictory:

"We don't use personal credit reports to deny credit"
"You have been denied based on your own personal credit"

I would say you should have recevied the FCRA disclosure that lets you know the name, address and phone number of the consumer credit reporting agency that provided the credit report.

As for the Adverse Action, it would depend - does your business have gross annual revenues of more then $1Million, or did you receive an "upfront" notice when you applied that told you of your right to receive a written statement of reasons?

If yes to either, then the lender is not obligated to send a written statement of reasons unless you request it in writing.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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