FCRA - Yes or No - Disclose use of a Credit Repor

Greetings!

I received direction from peers and consultants in the past that if a Credit Report is pulled and a denial is issued you should disclose the credit report information on the denial; score, range etc. Even though the lender is saying he/she did not use the credit report in whole or in part. I would concurr that if credit is pulled how can we say we did not use the credit report in whole or in part. We pulled it didn't we? We over disclose to ensure compliance. NOW after years of doing just this, today I read about FRB TOP VIOLATIONS; "Knowing when to disclose or not disclose use of a credit report on an adverse action notice. For example, if the reason(s) for the credit decision were not based in whole or in part on information contained in a consumer report (such as insufficient value of type of collaterasl), then such disclosure should NOT be provided on the adverse action notice, even if a credit report is pulled in the process." And what is the opinion of all my fine compliance associates out there??? Now I don't know what to do.

Thanks!!!

I agree with the Fed. If the denial has nothing to do with credit, how could the credit report influence the decision?

If have been doing this for many years and I have seen any number of banks cited for violations involving over disclosure when it comes to FCRA AANs. This is not a new revelation.

rlcarey...thanks for the response. So you have seen banks cited for over disclosing or in this case disclosing when we can clearly see within the file that the credit report was NOT used in whole or in part? Thanks!

Yes - banks have been cited for violations of this for years. Over disclosure under the FCRA is misleading. You are telling the consumer that there is something wrong with the consumer's credit report in error and also giving them rights under the law (free credit report, etc.) to which they are not entitled.

I would concurr that if credit is pulled how can we say we did not use the credit report in whole or in part. We pulled it didn't we?

that the credit report was NOT used in whole or in part?

The "whole or in part" is often taken out of context. You only check the box if the consumer report was used in the adverse decision. Even with the presence of a consumer report there are other reasons to take adverse action without the information in the consumer report affecting that decision.

From the FCRA:

(I) that adverse action has been taken based in whole or in part on a consumer report received from a consumer reporting agency;

Perhaps I am misinterpreting this thread. What if the AAN is for a sole proprietor husband/wife and the adverse action was due to their income/cash flow to service debt as being insufficient. We pull credit on husband/wife, but ultimately deny for income. Would we need to include the credit score/report notice simply based on the fact that it was pulled period?

Would we need to include the credit score/report notice simply based on the fact that it was pulled period?

Absolutely not. You have to have used the credit report in your decision. However, if you used the credit report to determine debts in order to develop your DTI, you used it and you owe them an AAN.

today I read about FRB TOP VIOLATIONS; "Knowing when to disclose or not disclose use of a credit report on an adverse action notice. For example, if the reason(s) for the credit decision were not based in whole or in part on information contained in a consumer report (such as insufficient value of type of collaterasl), then such disclosure should NOT be provided on the adverse action notice, even if a credit report is pulled in the process."

Where do I find the the top FRB Violations? I did a google search with no results. If the denial is based only on income - do we need to disclose the credit score and key factors? The denial was not based on the credit score. We do however mark the FCRA section.

No. If your denial is not credit-based, then you do not mark or give that information.

I think on income, it depends. If it's a DTI issue, my staff would be dislcosing since they would be getting the debt payments primarily from the credit report.

If we pull a credit report, we have been listing the key factors on the denial unless the denial reason is not credit based. However, say we only use the credit report to gather additional information to obtain DTI. Credit score is good but it is determined DTI is not sufficient.
Should we be disclosing key factors? We did use the credit report (gathering info for DTI which is the reason for the denial).

Max DTI allowed 40%

Applicant's DTI 46%

Applicant's credit score 832

Would the credit score be a mitigating factor in making a DTI exception?

Applicant's credit score 643

Would the credit score be a mitigating factor in NOT making a DTI exception?

Only you can determine if the credit score is used in your underwriting decision or not.

If we can legitimately argue that our credit score is not used in underwriting, then we should not disclose key factors, correct?

Is providing the FCRA adverse action notice, not the exception notice or risk based pricing notice, applicable to an "Individual" applying for a commercial loan for commercial purpose?

We use the combined ECOA/FCRA adverse action notice and want to know if we should be providing the credit score and the factors when it is commercial purpose loan to an individual. or should it be "Disclosure inapplicable"?