I am denying a client becuase of past criminal act for which he was on probation for two years. Happened 20 years ago and it was theft. I was going to put on the adverse action "Criminal Record" as reason for denial. Sounds kind of awful, but I am not sure what else to put. Any suggetions or possible issues.

If that is your reason then you should put it.

IMO I would not deny a loan just because of that. If he has served his time and can financially afford to pay back the loan, then he should not get denied for the loan. Now if his past criminal act was something to do with past loans and skipping out on the payment or using it for something other than that purpose, then I would deny it.

People can change and if he doesnt have anything recent on his record, then he appears to be rehibilitated which is the goal of the court system.

Also if after checking his credit bureau report, you see that he has had loans he paid back after the criminal act, then he should be denied.

Some people make stupid choices (unfortunitly some are even criminal choices) but luckily they can learn from them, well some of us at least.

I tend to agree with you, but it was the credit committee's decision so..... And it was so long ago, but as long as we are not breaking any regs I really can't say anything.

Do you check for the criminal activity of every applicant that applies with the bank? Is past criminal activity part of your standard underwriting criteria? If not and this person happens to be in a protected class, you may have a classic case of disparate impact or outright discrimination by applying different underwriting critieria.

I agree with Randy. This may be a slippery slope your committee is teetering on.

I agree with Randy, too. Unless your credit committee is pulling the criminal record of every applicant, they are digging a hole here.

How did they know of the conviction?

I bet if you scoured your files and compared them to court records, you'll find convictions for DUI, assault and theft for more customers. One in 100 Americans is in jail or has served time. If this is the first time you've denied a loan for this reason, you may want to reconsider the precedent.

I know this topic is old.. but I am going to bring it back because of the situation we are in.

We have a commercial loan customer who has passed all of our normal underwriting standards, but the lender had a bad feeling and thought his name sounded familiar so he did a google search, and it was found that the applicant was convicted of Money Laundering Conspiracy in 2014 (only serving probation and house arrest for his crimes however).

I know we definitely don't want to have a customer who has a past of money laundering. But I am afraid of just straight up denying them because of that because we don't normally do background checks on all of our loans. What are your thoughts?

Well, I think there is a big difference in this case from the original post. That one happened twenty years ago. This one is recent news and an employee was able to recall it and it most likely directly involved banks. Just deny the loan.

Thank you, rlcarey - I was trying to think of the language to put on the adverse action notice, but I guess being straightforward is the best way to go - "prior money laundering conviction". If he tells us that it is discriminatory and he is part of a protected class, then we will deal with it at that time. Thanks again for your input.

Just send them the generic notice that makes him request the reason in writing - Model C-5. I doubt that he will. If he does, then cross that bridge when you come to it.

I agree with Randy. I recommend "Undesirable Character" if they ask for the reasons - or put that on the Other line of the AAN with the reasons listed. Document the specifics and retain it. No one is ever going to question your reason for denial.