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#2187184 - 07/27/18 08:10 PM Credit Score Exception Notice
TeamComply Offline
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Customer applies for consumer credit online (e.g. auto loan), bank then pulls credit report. Bank uses credit score to determine interest rate on loan. In the event, an online application is denied, should the Credit Score Exception Notice be provided along with the AAN? Thanks.

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#2187205 - 07/27/18 10:33 PM Re: Credit Score Exception Notice TeamComply
rlcarey Online
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rlcarey
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Galveston, TX
1022.74(b) Adverse action notice. A person is not required to provide a risk-based pricing notice to the consumer under §1022.72(a), (c), or (d) if the person provides an adverse action notice to the consumer under section 615(a) of the FCRA.

However, the exception notice is covered under 1022.74 and there is no further such exemption.
Last edited by rlcarey; 07/27/18 10:37 PM.
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#2187437 - 07/31/18 02:52 PM Re: Credit Score Exception Notice rlcarey
TeamComply Offline
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Randy,
I'm not sure I completely understand your response. So a risk-based pricing notice is not required if an AAN is provided, but an credit score exception notice would be required with an AAN?

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#2187441 - 07/31/18 03:10 PM Re: Credit Score Exception Notice TeamComply
rlcarey Online
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rlcarey
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Galveston, TX
That is correct. The exception notice has to be provided within a reasonable time after you pull credit. A risk based pricing notice, only has to be provided before the loan is consummated.
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#2187502 - 07/31/18 07:31 PM Re: Credit Score Exception Notice TeamComply
Adam Witmer Offline
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Originally Posted By TeamComply
Customer applies for consumer credit online (e.g. auto loan), bank then pulls credit report. Bank uses credit score to determine interest rate on loan. In the event, an online application is denied, should the Credit Score Exception Notice be provided along with the AAN? Thanks.


As Randy implied, it is just easier to give the notice as there are a few quirks in not providing it. For non-RE applications, the exception notice isn't technically required, IMHO. While the exception notice is supposed to be provided to "all" applicants, the preamble explains that not every applicant needs the exception notice:

""One commenter believed that the Agencies’ statement that a creditor must provide a credit score disclosure exception notice to ‘‘all’’ consumers was too broad, noting that some consumers may not be entitled to receive any type of notice under the rules. The Agencies agree that some consumers would not receive an exception notice... Creditors also do not need to provide an exception notice to a consumer if one of the other exceptions applies. For example, consumers who apply for and receive a specific rate or who receive an adverse action notice pursuant to the exceptions under §ll.74(a) and §ll.74(b), respectively, are not entitled to a notice."

That said, it becomes dangerous territory to categorically say the exception notice isn't required due to the timing requirement differences in the AA Notice rules and the RBP rules. Basically, the RBP/Exception notice must be provided as soon as reasonably practical while the AA notice can be provided up to 30 days. If the exception notice isn't provided and the AA notice isn't delivered until close to 30 days, you have a problem. The preamble also explains this.

"The Agencies note, however, that reliance on the other exceptions may not be possible in certain cases because the timing rules require the credit score disclosure exception notices to be provided to the consumer as soon as reasonably practicable after the credit score is obtained. For example, a mortgage lender may obtain a consumer’s credit score and, in order to meet the timing requirements, provide an exception notice to the consumer within several days. However, the lender may ultimately determine after a more lengthy credit underwriting process, that it will not extend credit to the consumer and therefore provide an adverse action notice to the consumer. The Agencies note that for purposes of providing credit score disclosure exception notices to a consumer as soon as reasonably practicable after a credit score is obtained, what is a reasonably practicable time period may be different depending on the circumstances of the transaction and the type of credit. For example, while it may be reasonably practicable to provide a notice to a consumer in several days in the mortgage lending context, what is reasonably practicable in other forms of credit may be a shorter or longer time period."

Based on the timing rule, the bottom line is this: While the exception notice isn't technically required in some cases where an AA notice is provided, the best (management) practice is to provide the exception notice every time, even if an AA notice is provided.
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Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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