[rcooper]

Taking you back to 2011 on this question. I think I know the answer, but I can’t locate it in the Reg to make me feel confident. We give the Credit Score Disclosure Exception Notice to all applicants rather than giving the Risk Based Pricing Notice. If we decline a loan and give an Adverse Action, must we still give the Credit Score Disclosure Exception Notice? I realize the credit score information is required to be part of the Adverse Action Notice. But must we still also give the H-4 form?

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[rcooper]

You remember correctly. If you use the exceptions to the risk based pricing requirement, an exception notice must be provided to all consumers (individuals who request credit), regardless if the loan is consummated. 1022.74(d)(1)(i), (e)(1)(i) and (f)(1)(i) is where you’ll find language that states:

(1) In general. A person is not required to provide a risk-based pricing notice to a consumer under §1022.72(a) or (c) if:

(i) The consumer requests from the person an extension of credit…and

(ii) The person provides to each consumer described in paragraph (d)(1)(i) of this section a notice

There are three model exception forms (H-3, H-4, H-5). You’ll need to use the one that best suits the credit request.

[rcooper]

Just to clarify:
My response above is the safe approach, but not the only one. If you are relying on the AAN exception ensure that the Notice to Home Loan Applicant is provided to applicants when applicable. Also, when relying on the AAN exception keep in mind, the credit score disclosure exception notice is required to be given as soon as reasonably practicable or no later than consummation or first transaction for open end credit. If you deny the loan before you would normally provide the exception notice I think the adverse action would be fine. If you deny it 25 days after you pull the credit report, you probably should’ve complied with the credit score exception notice (I’m assuming you give it as soon as reasonably practicable which, in my example above, would be before the AAN) and then still give the AAN when the application is denied.

These are two good resources:
https://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/2013/second-quarter/adverse-action-notice-requirements-under-ecoa-fcra.cfm

https://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/2012/first-quarter/risk-based-pricing-notice-requirements.cfm

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