I know that you should only mark that info from a credit report led to a denial if it actually did and not just because you pulled a credit report, but I'm not sure where I can find that in FCRA. I need to be able to back up my understanding to a coworker, could someone point me to where I can find this in FCRA?

Thanks

Good question. Refer to §615(a) of the Consumer Credit Protection Act. Also, this is addressed in Reg B (see the italics where I quote from the Commentary to 202.9 at the end of this post). Here's how we address this in our Advanced Lending Manual:
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Adverse Action Notices:
The Fair Credit Reporting Act (FCRA) requires notification of the use of a consumer credit report when adverse action is taken in whole or in part on an existing or new application for a loan, deposit account or other products or services. If any condition is imposed, without which the application (credit, deposit, etc.) would not be extended and it is imposed because of information in the consumer report, there is a “denial” which would require disclosure.

In the case of a credit decision, a denial would include cases where a larger down payment, a shorter maturity, a co-signer, guarantor or additional collateral is required as a condition of extending credit. If a consumer applies, for example, for a credit card limit of $1,500 and only $1,000 is approved because of information in a consumer report, a “denial” has occurred.
Additionally, if a deposit account is closed, a check is returned or any other adverse action (that is based on any information contained in a consumer report) an adverse action notice would need to be sent to the consumer [§615(a) – page 6610.26].

Contents of Adverse Action Notice If The Bank Uses a Credit Report: If adverse action is taken based on information from a credit bureau, the bank must provide the consumer with:
1. The name, address and telephone number of the credit bureau (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the bank;
2. A statement that the credit bureau did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and
3. A notice of the consumer’s right:
a) to obtain a free credit report within 60 days of the adverse action; and
b) to dispute the accuracy or completeness of any information in the consumer report with the credit bureau.

If adverse action is taken but the decision to deny the applicant is not on the basis of information in a consumer credit report, banks should not comply with these rules (do not report that a credit report was pulled). This has historically been a confusing issue because many regulators have wrongly stated that financial institutions are required to disclose the use of the consumer credit report whenever a credit report is obtained. Such a position is not supported by the FCRA, which states such disclosure is required only when such action is made on the basis, partially or wholly, of information from a consumer reporting agency.

The Equal Credit Opportunity Act (ECOA) requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit. The Fair Credit Reporting Act (FCRA) requires a creditor to disclose when it has based its decision in whole or in part on information from a source other than the applicant or from its own files. Disclosing that a credit report was obtained and used in the denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant’s credit history reveals delinquent credit obligations and the application is denied for that reason, to satisfy Section 202.9(b)(2) [reasons for denial] the creditor must disclose that the application was denied because of the applicant’s delinquent credit obligations. To satisfy the FCRA requirement, the creditor must also disclose that a credit report was obtained and used in the denial of the application. [Commentary to §202.9(b)(2) #9 - page 7264.01].

There must be a correlation between the FCRA box and reason for denial, such as:

• Excessive obligations in relation to income
• No credit file
• Limited credit experience
• Delinquent . . . with others
• Garnishment . . . collection action or judgment
• Bankruptcy
• Slow or past due in trade or loan payments
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Hope this helps.

Thank you, Mr. Dickinson. Much appreciated.