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Adverse Action Notices When Extension is Denied?

Is a large bank required to send adverse action notices when a payment due date change or extension is denied for consumer loan products?

by David Dickinson
Most likely yes. A request of an extension or modification is a request for credit. The FRB wrote a letter addressing this topic in 2009 in reference to HAMP loans. In short, the letter states "The purpose of this letter is to address questions received from consumer compliance examiners regarding whether adverse action notices under Regulation B (Equal Credit Opportunity) are required for mortgage loan modification declinations… Regulation B requires an adverse action notice when a creditor declines an application for an extension of credit from a borrower that is not currently delinquent or in default on that loan."

You can find the entire letter here:

by Jim Bedsole:
I actually got verbal confirmation from CFPB that a request for payment deferral or extension is considered an application for credit subject to Reg B adverse action notice requirements. The one exception CFPB cited for me was if the loan was already delinquent. Also, this is not just for consumer products either. Reg B applies to all credit.

First published on 05/24/2020

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