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In reply to: TRID – SSN to pull credit
We have several issues to unravel.
First, the Fair Credit Reporting Act does not allow you to order a credit report unless you have a permissible purpose. The law provides several different permissible purposes. Obtaining consent from the consumer is one permissible purpose. If the consumer applies for credit, that is a permissible purpose. So, if the consumer applies for credit you have a permissible purpose, even without consumer consent.
For purposes of TRID, once the consumer has submitted the six pieces of information you must deliver the loan estimate in a timely fashion. Submission of the social security number is sufficient; consent is not required.
In reply to: OD fee on day Bank is closed
The CFPB has raised recent concerns about ODP programs. This is a link to a press release in January: https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-initiative-to-save-americans-billions-in-junk-fees/
The OCC also spoke about ODP concerns and POSSIBLE reforms at this link: https://www.occ.treas.gov/news-issuances/news-releases/2021/nr-occ-2021-129.html
This is a link to the basic ODP requirements: https://www.consumerfinance.gov/rules-policy/regulations/1005/17/#c-1
My best suggestion is to check directly with YOUR primary regulator regarding this question. The FDIC has additional requirements, for example.
Generally speaking, regulators have cited enforcement actions for ODP that focused on UDAAP, unfair, deceptive, and abusive acts and practices. These actions are issued when the deposit agreement and ODP agreement aren’t sufficiently clear for a consumer to anticipate how fees are assessed.
As this regulatory shift plays out, industry watchers say that it is probable that at least five limitations are likely:
(1) restrictions on the total dollar amount of fees per day regardless of the number of overdrafts or the amount of account shortage;
(2) allowance of only one fee per overdraft even if the payee re-submits the transaction;
(3) a ban of return check fees (NSFs) when a separate overdraft fee is charged;
(4) prohibition of interest charges on overdraft fees that remain unpaid; and
(5) disallowance of an institution closing an account based solely on repeated overdraft experiences.
In addition to the above, other possible modifications include such things as:
•restrictions on marketing of ODPs and the changes to the prior practices — such as a Pew Trust industry-style-explanatory warning box on monthly account statements;
•regulatory examination of overdrafts as extensions of credit and requiring TILA, ECOA compliance;
•formalized regulatory examination of ODP practices which may include required reporting of fee waivers and refunds in the Call Reports of banks larger than $1 billion in assets (not a current requirement);
•special protections for customers/communities of color which bear the most impact from such fees. Indeed, a recent Financial Health Network study has estimated that Hispanic households paid $3.1 billion in fees in 2020 and Black households paid $1.4 billion;4 and
•discontinuance of immediate recapture in full of ODP fees upon the first deposit made to the accounts and possible repayment periods of 3 months for these fees.
The Bureau’s comment period for new rules closes March 31, 2022. The identified timetable for action is considered to be mid-2022, and many of the larger financial institutions have decided to get ahead on this issue and to voluntarily make changes.In reply to: Business Adverse Action Credit Score Information
Sandy,
You have asked a very reasonable question, but the answer gets complicated.
The information about the credit score is contained in Part II of the adverse action form. That section is governed by the Fair Credit Reporting Act (FCRA). The first checkbox in Part II is required by Section 615(a)(1) if a credit report is obtained and if the credit decision is based in whole or in part on information obtained in the report. According to the information you provided Section 615 (a)(1) is not needed since the credit decision was not based on the information in the report.
In reply to: FCRA – Joint Deposit Account Applicant Skipped
Section 615a of the Fair Credit Reporting Act states, “If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall
(1) provide oral, written, or electronic notice of the adverse action to the consumer;”The notice is not required for a consumer for a consumer report was not obtained.
Our consumer loan application has a “Notice of Less Favorable Terms” section on it that says the following: The terms upon which we have approved your credit application may be materially less favorable than most favorable terms available to a substantial proportion of consumers making similar application to us. The terms offered to you based in whole or in part on information obtained from the consumer-reporting agency listed below. You have the right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer-reporting agency. You also have a right to a free copy of your report from the reporting agency. If you request it no later than 60 days after you receive this notice. (This language is followed by a listing of TransUnion, Experian, and Equifax with a checkbox preceding each.)
We have always provided the Credit Score Disclosure Exception (Model Form H-3/H-4/H-5) so I’m confused as to why the above language is on the application. I am planning to have it removed, but just wanted to confirm that this is an appropriate action.
In reply to: Adverse-Action Reasons
I agree. Disclosing the key factors that adversely affected the consumer’s credit score does not satisfy the ECOA requirement to disclose specific reasons for denying or taking other adverse action on an application or extension of credit. See comment 1002.9(b)(2)-9 below (I bolded a couple of sentences for emphasis.)
9. Combined ECOA–FCRA disclosures. The ECOA requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit. The Fair Credit Reporting Act (FCRA) requires a creditor to disclose when it has based its decision in whole or in part on information from a source other than the applicant or its own files. Disclosing that a credit report was obtained and used in the denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant’s credit history reveals delinquent credit obligations and the application is denied for that reason, to satisfy §1002.9(b)(2) the creditor must disclose that the application was denied because of the applicant’s delinquent credit obligations. The FCRA also requires a creditor to disclose, as applicable, a credit score it used in taking adverse action along with related information, including up to four key factors that adversely affected the consumer’s credit score (or up to five factors if the number of inquiries made with respect to that consumer report is a key factor). Disclosing the key factors that adversely affected the consumer’s credit score does not satisfy the ECOA requirement to disclose specific reasons for denying or taking other adverse action on an application or extension of credit. Sample forms C–1 through C–5 of Appendix C of the regulation provide for both the ECOA and FCRA disclosures. See also comment 9(b)(2)–1.
Also, it is always a good idea to stick to the model forms when possible. If you look at the HMDA Getting it Right Guide (p. 23-24) it explains which HMDA codes correlate to the reasons on the AAN model form.
In reply to: FCRA Notice – Credit Scores
Under section 1100F of the Dodd-Frank Act, a person is not required to disclose a credit score and related information if a credit score is not used in taking the adverse action. (Note, if this is the case it must be clearly apparent/documented in the file that the score did not contribute to the denial in any way. – e.g. excellent score, but perhaps collateral is insufficient. Otherwise, it will be difficult to make a case that a credit score was not used as part of adverse action.)
A creditor that obtains a credit score and takes adverse action is required to disclose that score, unless the credit score played no role in the adverse action determination. (Again, the file should clearly show how the credit score did not affect the decision.)
If the credit score was a factor in the adverse action decision, even if it was not a significant factor, the creditor will have used the credit score for purposes of section 1100F of the Dodd-Frank Act. Therefore, if the score in any way contributes to the deicision it must be included.
From the FTC’s “Forty Years of with the FCRA“:
Section 615(a) provides that any party who “takes any adverse action with
respect to any consumer that is based in whole or in part on any information
contained in a consumer report” shall provide to the consumer orally, in writing,
or electronically: notice of the adverse action; the name, address, and telephone
number of the CRA (toll-free telephone number, in the case of a nationwide
CRA); a statement that the CRA “did not make the decision to take the adverse
action” and is unable to provide specific reasons for the action; and notice of the
consumer’s right to obtain a free file disclosure from the CRA, and to dispute with
a CRA the accuracy or completeness of any information in a consumer report
furnished by the CRA. Effective July 21, 2011, the party taking the adverse action
must also disclose any numerical credit score that contributed to the adverse
action, along with certain related information.In reply to: FCRA – Business Applicants
Take a look at the “Who Must Receive” section of this article: https://consumercomplianceoutlook.org/2013/second-quarter/adverse-action-notice-requirements-under-ecoa-fcra/.
And from the FTC FCRA Summary:https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf
PRIMARY CREDIT APPLICANT, CO-APPLICANT, AND GUARANTOR
Because the FCRA adopts the definition of “adverse action” from the ECOA, only an “applicant”
experiences “adverse action” in the context of a credit transaction. See 12 CFR § 202.2(c)(1).
A co-applicant is an “applicant” but a guarantor is not. 12 CFR. § 202.2(e). Therefore, where a
creditor denies an application, both the primary applicant and any co-applicant have suffered an
“adverse action,” but any guarantor has not. See comment 615(a)-2B.78In reply to: Credit Report Question
I could write a small book in response to this wide open question. Let me make a few suggestions to get you started.
1. Yes, a policy and procedures that establish the standards for using risk-based pricing should be adopted. In a strict risk-based system the score/rate guidelines should be formalized (i.e.; if your score is X then your rate is Y.) Will the system allow exceptions or overrides when the lender is not comfortable with the resulting rate? If so, the P & P should explain when exceptions or overides are allowed and establish a process for tracking exceptions/overrides over time. How frequent are the exceptions/overrides? What is the range of exceptions/overrides? What are the characteristics of borrowers receiving exceptions/overrides? What loan officers are making exceptions/overrides?
2.The Fair Credit Reporting Act and Regulation V, Section 1022.70, require risk-based pricing notices. There are options for providing such disclosures. One option uses a tier-pricinng approach to determine who needs to recieve the risk-based pricing notice. The exceptions in Section 1022.74 allow the lender to use an appropriate credit score notice in lieu of providing the risk-based pricing notice.
3.The disclosures required in an advertiseement are determined by the details included in the advertisement. If simply stating that a new small loan product is being offered, then not much specific informtion is required. If you are trying to disclose a rate, things get complicated. One option to simplify the process is to use a representative example. “If your credit score is X then the interest rate is Y.” Truth in Lending and Regulation Z require advertsing disclosures. The disclosures required for open-end credit are explaining Section 1026.16 and the requirements for closed-end credit are explaained in Section 1026.24. Don’t forget about UDAP concerns. Explaining complicated pricing mechanisms can become confusing and result in charges of “unfair” or “deceptive” practices.
In reply to: Adverse Action Key Factors
You would provide the credit score information on the AAN if it impacted your credit decision. If the applicant’s credit score was excellent then the credit score probably didn’t impact the credit decision. The purpose is to give the customer information they need to correct issues/make themselves a better candidate for credit in the future. From Model form C-1:
This section should be completed if the credit decision was based in whole or in part on information that has been obtained from an outside source.
__Our credit decision was based in whole or in part on information obtained in a report from the consumer reporting agency listed below. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency.
In reply to: No Annual Notice
If you’re not required to provide an GLBA/Reg P opt-out and your policy hasn’t changed that is correct. See excerpt from Reg P 1016.5(e) below:
Exception to annual privacy notice requirement. (1) When exception available. You are not required to deliver an annual privacy notice if you:
(i) Provide nonpublic personal information to nonaffiliated third parties only in accordance with the provisions of § 1016.13, § 1016.14, or § 1016.15; and
(ii) Have not changed your policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice provided pursuant to this part.
You would still need to consider opt-out disclosures required under the Fair Credit Reporting Act (FCRA) – see Regulation V, 1022 subpart C. I believe this can generally be satisfied with the initial privacy notice you provide to consumers (not required annually), but if there is a change or the opt-out expires you would need to provide that option again.
In reply to: Authorization Form
You will need to consider restrictions and requirements under Fair Credit Reporting Act and Telephone Consumer Protection Act.
Topic: incomplete
We are having our HMDA review done and during this review the auditor is stating that we should be using the sample notice for our incomplete C6. We have been using the standard adverse action form and putting in what we need from the customer, and marking the box credit application incomplete. what they are stating is that by doing our incompletes this way that an examiner may not like that we have marked the LAR as a 5 incomplete application and make us put them as denied. I wanted to get another opinion.
NOTICE OF ACTION TAKEN
02/01/2017
Description of Account, Transaction, or Requested Credit:
Application for Credit requested by you.Description of Action Taken:
We regret we are unable to approve your application.Principal Reasons For Adverse Action Taken.
0Credit application incomplete
0Temporary or irregular employment
0Unable to verify employment
0Length of employment
0Income insufficient for amount of credit requested
0Excessive obligations in relation to income
0Unable to verify income
0Length of residence
0Temporary residence
0Unable to verify residence
0No credit file
0Limited credit experience
0Poor credit performance with us
0Delinquent past or present credit obligations with others
0Collection action or judgment
0Garnishment or attachment
0Foreclosure or repossession
0Bankruptcy
0Number of recent inquiries on credit bureau report
0Value or type of collateral not sufficient
0Other, specify:Disclosure of Use of Information Obtained From an Outside Source
This section should be completed if the credit decision was based in whole or in part on information that has been obtained from an outside source.
0Our credit decision was based in whole or in part on information obtained in a report from the consumer reporting agency listed below. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency.
TransUnion
2 Baldwin Place, P.O. Box 1000
Chester, PA 19022
800-888-4213
http://www.transunion.com/myoptionsEquifax
PO Box 740241
Atlanta, GA 30374-0241
800-685-1111
http://www.equifax.comExperian
701 Experian Parkway
Allen, TX 75013
888-397-3742
http://www.experian.comWe also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your credit report. Your credit score can change, depending on how the information in your credit report changes.
Your Equifax credit score:
SCORE DATE:
Equifax scores range from a low of 334 to a high of 818.
Key factors that adversely affected your credit score:0Our credit decision was based in whole or in part on information obtained from an affiliate or from an outside source other than a consumer reporting agency. Under the Fair Credit Reporting Act, you have the right to make a written request, no later than 60 days after you receive this notice, for disclosure of the nature of this information.
Lender’s Contact.
If you have any questions regarding this notice, you should contact:
Lending Officer’s Name:
Lender’s Name: Farmers State Bank
Address: 220 S Detroit Street, Lagrange, IN 46761
Phone:Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is FDIC CONSUMER RESPONSE CENTER 1100 WALNUT STREET, BOX #11, KANSAS CITY, MISSOURI 64106.
In reply to: Credit Bureau Reporting requirements
Credit reporting is optional. The Fair Credit Reporting Act does not require you to report any loan, but establishes rules for reporting, if you decide to report a particular loan.
The Equal Credit Opportunity Act requires credit history that may be reported to reflect the participation of both spouses if the applicant’s spouse is permitted to use or is contractually liable on the account.
In reply to: Accuracy and Integrity Rules
If you receive the dispute from the CRA, then they received the dispute from the customer and have the responsibility of notification. Take a look at section 611 of the FCRA: https://www.ftc.gov/os/statutes/031224fcra.pdf
