Adverse Action

Posted By: dmk124

Adverse Action - 07/14/21 03:53 PM

Is it wrong to send a denial letter when the applicant clearly decided not to continue with the loan? (email stating I wish to hold off on going any further) We already sent out the LE and the appraisal was conducted. We even charged her for the appraisal and credit report.
Posted By: raitchjay

Re: Adverse Action - 07/14/21 03:54 PM

Sounds like they withdrew, in which case there's no application left to deny.
Posted By: dmk124

Re: Adverse Action - 07/14/21 03:59 PM

Exactly! Is it a violation or just tacky?
Posted By: rlcarey

Re: Adverse Action - 07/14/21 04:20 PM

What reason are you giving them for denying the loan?
Posted By: dmk124

Re: Adverse Action - 07/14/21 04:40 PM

Oh that's the wonderful thing, nothing is listed frown
Posted By: Adam Witmer

Re: Adverse Action - 07/14/21 04:58 PM

Originally Posted by dmk124
Exactly! Is it a violation or just tacky?
It's probably more tacky than a violation, but if you are auditing it, this would be a good training opportunity to bring this up.

Technically, Reg B doesn't say you can't send a Notice of Action Taken when the application is expressly withdrawn. In fact, the commentary says you are "not required" to send the NAT, but doesn't say you can't:

"2. Expressly withdrawn applications. When an applicant expressly withdraws a credit application, the creditor is not required to comply with the notification requirements under ยง1002.9."

That said, you could have a violation if they put something on the NAT (like a denial reason) that wasn't true.

Again, this is probably a good opportunity for training.
Posted By: dmk124

Re: Adverse Action - 07/14/21 06:59 PM

Thank you!!
Posted By: John Burnett

Re: Adverse Action - 07/14/21 09:06 PM

It might be a reasonable practice to send a NAT to acknowledge that the applicant withdrew the application and the bank has placed it on file.
Posted By: rlcarey

Re: Adverse Action - 07/15/21 11:59 AM

I don't disagree and always encouraged my clients to send a letter, but not an adverse action notice. The letter said something like: We received your request to withdraw your application on xx/xx/xx. If this is not correct or you wish to reactivate this application in the future, please contact us at:

This is especially important if your NAT leaves the consumer the impression that the application has been denied. Many consumers think that when you have credit denied, it hurts their credit report. Not a far stretch to a UDAAP by the regulators.