Violations w/Regs B&C and UDAAP? Denial Reasons

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Question:

Are there possible compliance violations with Regulations B & C and UDAAP if denial reasons are different on the HMDA LAR than what was on the Notice of Adverse Action? For example: at the time of decline, the denial reason listed on the NOAA was "Other", but when the file was reviewed for HMDA data validation, the true denial reason should've been a Collateral decline.

Answer:

It's possible to have a Reg B or C violation, but that doesn't mean it's a UDAAP issue. If you purposely deceived an applicant by not telling them why the application was denied, I suppose someone could say that's unfair or deceptive, but I've never heard of it and it seems like a stretch.

For Reg B: If you were clear in why the application was denied, it doesn't matter (for Reg B) whether you used the "Other" space and spelled out the specific reason or used a denial reason already listed on your AAN. You don't have to use the model from in Appendix C of Reg B. If you disclosed something other than the real reason, I think you are in violation of Reg B.

For Reg C: You are required to report the principal reason(s) you denied the application. If you correctly report this on the LAR, it ins't a Reg C violation, but it would easily identify the Reg B violation (they don't match).