Pulling joint credit on non-married borrowers

We have examiners here right now and they are telling us that we should be pulling a joint credit report on anyone who is applying for joint credit. They say that we are being unfair to joint applicants because we don't charge two credit report fees for married borrowers who apply jointly but we do if they are not married. We have always pulled separate credit reports for joint applicants who are not married/registered domestic partners. I never even thought about the fact that I was charging more.
Has anyone else ever run into this?

Wow - you have really nit-picky examiners, but they are right - if you are charging non-married joint applicants more for a credit report than you charge married applicants, you have an issue.

Talk to your credit bureau and see if they can issue joint reports, or eat the extra cost of the second report for the non-married joint applicant.

Also, if you are aggregating and income and debt for married joint applicants (for one combined debt to income ratio)....are you doing the same for nonmarried joint applicants? If you aren't pulling a joint credit report, you may not be aggregating either.

Fair lending is a HOT topic for examiners and they are looking closely at these types of items.

I know - hence the use of the word "nit-picky". I am not saying the examier was wrong to focus on that, but it takes a lot of digging to do so.

If the applicants are not married we have always listed them on separate applications with separate credit reports. Never been cited for doing that. We use the combination of the debts, assests and income for underwriting purposes. Maybe since we document that we are ok?

I dunno, and we have always done it that way as well, but too I have start hearing some anecdotal(sp) incidents more recently as well with that same story.

That is the way we have done it as well. To my knowledge, our credit agency will only do a joint report on married applicants. If the applicants are not married, they will only do two single reports.

They are just saying it is the cost of the credit report, not that we aren't pulling a joint report for non-married borrowers. I think we are going to do everything the same as we always have, but we'll stop charging for two reports if we pull them separately.

Either that or we will increase our doc prep fee by $50 and not charge anyone for credit reports anymore.

Except you can't do that either. If you pull a credit report you must list the cost in Block 3 regardless of who pays for it (lender, borrower, seller, etc). If it is lender paid you then list a credit in Block 2. Read more on this thread http://www.bankersonline.com/forum/ubbth...335#Post1343335

Our credit Bureau double charges us for merged credit reports, does yours not do this? It costs the same for us to pull 2 seperate reports as it does for us to pull 1 merged report. We use Kroll Factual Data.

I had asked the "joint" credit report question to my contact at our credit bureau. This is what she said last July, 2009:

"Each person has their own individual credit report. Many many years ago, (I am so old), there was a price break if the joint report was ordered and joint information was not reprinted on the second file. Now there is no price break and joint information is printed on both files. I think now the joint inquiry just keeps you from duplicating information, like putting in the address twice, etc. As far I know, you can put in unmarried people on a joint inquiry because you will receive 2 completely individual reports."

I just went and checked our paid invoices from the credit burear. A husband and wife entered into the system as joint are being charged, each, the same price as those single entries. There is no price "break" for entering a joint, that I can tell. This is not Kroll or any kind of tri-merge reports I'm referring to. We are using Equifax thru E-port.

Our credit agency charges less for a joint report than for two single reports. But it's not a very large difference, somewhere in the $4 range, I believe.

This is being treated as a potential ECOA violation by examiners, and if found, may be referred to the DOJ. There has been no FIL issued, and the only printed material I could find on this was a compliance update dated October 26, 2009 on the Massachusetts Bankers Association (MBA) website. This is a fair lending violation and is serious. Banks should review how they are pulling credit reports for joint applicants who are married vs unmarried, and more importantly, how/what they are charging.

Just courious - why haven't lenders been cited with this as a violation in the past but are now being told it is?
The OTS will be visiting us next month so I wonder if they will be addressing this.

The Mass Bankers Association compliance update mentioned the FDIC. I do not know what other agencies are doing.

I can confirm that this is just from the FDIC banks and it seems to have started in NE this fall also

ICBA has a good article on this today in their e-mail newsletter - they state

"This raises questions about whether banks should obtain individual or joint credit reports for joint applicants that are parent/child or joint applications from three or more individuals."

This is going to get really complicated before it's over, and I'll bet we'll all be charging credit report fees by the person rather than by the report. Ultimately it will cost customers more because they will be creating more paperwork!

We are regulated by the OTS (visiting us now) and have not heard anything from them about this topic. We will not be changing our procedures and will continue pulling joint reports on married applicants, individual reports on non-married applicants and charges the fees according to the billing amount (which prints on the credit report).

Here is an article you may also find interesting:

http://bankersadvisory.blogspot.com/2009/10/credit-report-fee-discrimination.html

I received an e-mail from a Dallas FDIC examiner a few weeks ago about this issue. This is what he said:

A number of banks have been caught by surprise in recent compliance exams by the FDIC with respect to an alleged violation of the Equal Credit Opportunity Act involving marital status.

It began when an FDIC representative spoke at a Massachusetts Bankers Assoc. event in October and informed the attending banks of the agency's view of the potential ECOA violation. Obviously, this event was directed at Massachusetts banks, but not all were there. Since then, there has been no official guidance from FDIC to other banks, whether located in or out of that state, about this issue. However, FDIC examiners are now citing it as a "significant violation" in compliance exams in Massachusetts and other states, advising that the violation may be referred to the Department of Justice for action and required to be disclosed in a bank's CRA Exam Report (which is available to the public). Although it began in Massachusetts, it appears that the examiners may be looking for this violation nationwide.

The violation focuses on credit reports. Each person has his/her own credit record and credit score. When one person applies for credit, a credit report is pulled, and the customer may be charged for the report (e.g., $15). However, if two people apply together for credit, credit reports for two people can either be pulled as two single reports (i.e., 2 x $15 = $30) or as one joint report on two people (e.g., $18). The FDIC believes that charging two married joint applicants for a single joint credit report, and charging two unmarried joint applicants for two separate single reports, constitutes a marital-status discrimination violation because FDIC has confirmed that the credit bureaus can and will provide joint credit reports on unmarried joint applicants for the same price as married applicants.

The violation relates to the fee that is charged to joint applicants. If unmarried joint applicants are charged more for credit report(s) than married joint applicants are, the FDIC thinks that should be deemed a violation of Regulation B, 12 CFR 202.6(b)(8).

The extent of the violation appears to be small at some recently examined banks - e.g., less than 1 violation per 300 loans or 0.33%. And the discrepancy in fees is only a minor amount ($12 in the example). Yet the FDIC is treating this as very important and threatening downgrades in CRA and compliance ratings.
If banks have committed this alleged violation in the past, they should consider conducting a review of their records, identifying the customers who have overpaid, refunding the overpayment and documenting the corrective action to demonstrate to the FDIC that they have been proactive in addressing the issue. Banks must also ensure that going forward, for loan products where the customers are charged for credit reports, all two-person joint applicants (regardless of marital status) are charged the same fee for credit reports. If a bank's vendor indicates that this is not possible, the FDIC has advised banks to find a new provider that will comply with this requirement.

Thanks for that jl..that had good info in it.

Added: Vander, they didn't mention the fact that, unless something's changed, you can't order a joint report on borrower's at different addresses...this seems to be being overlooked?

The way it was explained to me by the FRB is that the only way to pull a joint report is if they are from "the same economic unit" ie husband/wife, father/child(living at home). Otherwise its a single report. I have been told by other bankers that they just raised their loan doc fee and it is now included in that fee, I am assuming that these are not for mortgage lending, but I can't say. We charge a flat fee for consumer and for commercial/ag. Thats what the board said is the easiest.

The bank does not charge any applicant for a credit report,
so no discrimination issues.
Right?

Just need to do the GFE thing!

According to HUD (via multiple emails) we must disclose a credit report fee in Block 3 and on HUD line 805 regardless of who pays for it. If the lender does not pass the fee on to the borrower the lender can give an offset credit in Block 2 or in the 200 series of the HUD as a lender paid credit. Even though Block 2 states "for the interest rate", HUD told me that Block 2 also includes a credit for any charges in a "no cost" loan. A "no cost" loan could include some or all of the origination charge or third party charges.

We had examiners during the past 2 weeks and they told us the same thing. Apparently some consumer groups are behind this-not something the regulators just came up with.

What if you have a father/son on a loan, would you still charge separtely for the credit reports? The way it reads, All two-person joint applicatns (regardless of martial status) are charged the same fee for credit reports. You would have to run two separate reports in this situation?

We would order two separate reports until our regulators (OTS) tells us otherwise. If you are regulated by the FDIC you might want to pull a joint report and charge the borrower one fee to avoid being cited.

FYI- some agencies won't pull the joint credit and some don't discount if you do. Bottom line is we will now pull separate reports for everyone and if there is an additional charge it will pass on to the consumer.( Just another case where those who try to be the consumer's friend have just cost the majority of consumers more in time and money)

This makes about as much sense as us having to spend hours dissecting a credit report bill to determine what the average charge is by city so we can show the $5 or $6 average fee on the GFE just to back out the fee on the HUD. Again, if we have to go through all that work and then end up using the HUD1 instead of the HUD1-A we may as well start charging the fee to the consumer to pay for all the time it took to put information on the GFE that only confuses the consumer more.