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AA on Loan Application - 2 SARs Filed on Customer

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Can the bank take an adverse action on a consumer mortgage loan application if the bank has previously filed two SARs on the consumer's account activity? If the bank can take an adverse action, how does it give a reason when it can't disclose the SARs? If the bank can't take an adverse action, isn't it exposed to liability for potentially providing funds which it has reason to believe may further a criminal enterprise?

You are always free to say "no" to anyone you want, as long as it is not based on a protected class. I had a similar discussion with a FRB examiner one time about a "known" drug dealer that applied for a loan. The loan officer indicated that the applicant had actually offered drugs to the loan officers daughter. The loan officer not only wanted to deny the applicant, he wanted to kill the applicant!

The FRB examiner indicated the loan officer should use "undesirable character" (or similar language) on the AAN. Further, the loan officer should document, on the bank's copy, the rest of the story.

I would encourage you to do the same if you don't want to make the loan. It may create questions with the applicants, but it should not lead to any regulatory scrutiny.

First published on 5/23/05

First published on 05/23/2005

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