Compliance Q&A: Loan Denials and Adverse Action Notices

Q: If a bank has three applicants who are denied a loan and the reasons for the denial are different for each, does each borrower need to get an adverse action notice, stating the specific reason for denial for that applicant, or can one adverse action be provided with all reasons to all applicants?

A: The Federal Reserve clarified that Regulation B requires creditors to provide an adverse action notice to each applicant with the specific reasons pertaining to each applicant.

The requirements are different for multiple applicants. According to Regulation B, if multiple applicants submit an application, notice need only be given to the primary applicant if the primary applicant is readily apparent.6 In the case of multiple applicants under the FCRA, the statute has been interpreted to require notice to all consumers against whom adverse action is taken if the action taken was based on information in a consumer report.7 If the applicants’ credit scores were used in taking adverse action, each individual should receive a separate adverse action notice with the credit score and related disclosures associated with his or her individual consumer report; however, an applicant should not receive credit score information about an applicant. Regulation B does not prohibit delivery of an adverse action notice to each applicant.’

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