Adverse Action Letters

Posted By: Anonymous

Adverse Action Letters - 05/06/03 08:03 PM

We use a vendor (loan decisioning system) for providing adverse action letters for consumer loans. During an internal review of this process, our testing showed that the vendor did not provide the letters for the review in a timely manner (over 30 days from the initial request)and since the letters requested for review are not an exact duplicate but instead are redone by the vendor we found some errors with the dates, denial reasons, etc. Are these same issues being encountered by other banks that use vendors for adverse action letters? Any suggestions on how to handle.
Posted By: rlcarey

Re: Adverse Action Letters - 05/07/03 12:57 PM

I don't think that relying on a vendor to produce adverse action notices is a very common practice. Especially if they are sight unseen by the bank before going to the customer. I would recommend that you review with the vendor the Reg B requirements, require that they can reproduce adverse action notices exactly as provided to the customer, test them yourself, and change your procedures or vendor if this doesn't improve. A review of your current contract with the vendor may also be in order, including an indemnification by the vendor to cover regulatory fines or the cost of renotification to customers or file searches if the regulator finds deficiecies in the process. The regulators will hold you responsible for compliance with the adverse action requirements.