AANs on joint applicants

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Question:

Joint application is received by the bank with one applicant having excellent credit and the other having terrible credit. For AAN purposes, if we provide the specific reasons for turndown to the terrible applicant such as repossession, delinquent past/present credit obligations with others, etc. and then provide an AAN to the excellent applicant, we should re-state repossession, delinquent credit obligations, etc. on the excellent applicant’s AAN as well - even though these reasons don't specifically apply to the excellent applicant himself, but are the primary reasons for the turndown. Correct?

Answer:

That is the specific reason for denial and is what must be stated. The bank has the option of providing the Reg B AAN to the main applicant if one may be identified or could provide the Reg B AAN to each. The reason for the denial is the same for both, the negative information cited. Referring to Federal Register 3/18/03, Vol. 68 No 52 Page 13151, there is no privacy between co-applicants. “Many commenters were concerned about the co-applicant’s or guarantor’s privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared.”

A separate requirement exists under the FCRA (15 USC 1681a) and while it uses Reg B’s definition of adverse action, the disclosure requirements differ. If you deny credit or a service (so this includes deposit accounts and check cashing) for personal, family or household purposes based in whole or in part off third party information this must be disclosed to the applicants. Disclosure rules differ based on a product or a service. If you’re not familiar with the FCRA rules you should review them and understand the interaction with Reg B.

Under the FCRA, when there are two or more applicants, you must provide an adverse action notice to each applicant if the application is denied, even in part, based on information in a co-applicant’s consumer report. An applicant with strong credit who receives an adverse action notice will likely understand that the adverse action decision was based on the co-applicant’s credit information or will contact the creditor to inquire.