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Providing Adverse Action Notice on Spot

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Question: 
Adverse Action Webinar - June 21, 2017 - David Dickinson I wanted to confirm​. ​​David Dickinson said ​in a recent webinar ​that if a consumer comes into the​ bank to inquire about a loan and we know from the initial conversation they​ will not qualify and after explaining our basic underwriting guidelines we​ can provide them with an adverse action notice on the spot. We would no have​ pulled credit. We would not have discouraged them from applying. Would we use form C-1​ to provide the notice?​ We would of course keep any documentation with the notice for retention and Fair Lending audits and risk assessments. We would also provide training to our LO's and provide them basic scripts. Am I on the right track?
Answer: 

You are correct. They did apply (orally) and you made a decision to deny their request. Therefore, you've received an application and an Adverse Action Notice is triggered.

The definition of an application is “...any oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested.” [§1002.2(f)] It's not a piece of paper.

Reg B also states in the Commentary to §1002.2(f) #3:
"A creditor is encouraged to provide consumers with information about loan terms. However, if in giving information to the consumer the creditor also evaluates information about the consumer, decides to decline the request, and communicates this to the consumer, the creditor has treated the inquiry or prequalification request as an application and must then comply with the [adverse action] notification requirements under Section 1002.9. Whether the inquiry or prequalification request becomes an application depends on how the creditor responds to the consumer, not on what the consumer says or asks."

This example clearly demonstrates that an inquiry could lead to an application and a denial is triggered - as I mentioned in the webinar.

First published on 10/01/2017

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