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Providing Notice for HELOC s with Adverse Credit

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If we are freezing all HELOC accounts that have adverse credit, what notice has to be provided to the customer and when? We disclosed the bank's ability to do so in the initial disclosure.

You would use an Adverse Action notice that is compliant with both ECOA and FCRA (since the action is based on information obtained from a credit reporting agency). Under both regs, I believe you are required to provide the notice within thirty days of taking the adverse action on existing accounts.

I would advise that you seek legal counsel involvement in the decision process on this. Reg Z has very strict requirements on when you can prohibit additional extensions of credit or reduce credit limits. These are spelled out at 226.5b(f)(3)(vi). Your plan to restrict all lines that have adverse credit may be too general for these restrictions.

First published on 9/20/10

First published on 09/20/2010

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