Over the past few months I have had a couple of adverse action questions cross my desk so I thought I would take this opportunity to provide a little refresher on the topic.
Remember adverse action requirements for credit are found in Regulation B. (Sometimes finding the rule is half the battle!) Under the Dodd-Frank Act, Regulation B was one of the many consumer protection laws that was transferred to the CFPB so you definitely want to make sure that your policies and procedures regarding adverse action have been updated and include the correct citation, 12 CFR Chapter X Part 1002.
Once you find the rule, the rest is pretty simple. Regulation B, Part 1002.9 spells out the adverse action notification requirements for credit. In the rule, it states that a creditor shall notify an applicant of action taken within:
- 30 days after receiving a completed application concerning the creditor’s approval of, counteroffer to, or adverse action on the application;
- 30 days after taking adverse action on an incomplete application, unless a notice of incompleteness is provided;
- 30 days after taking adverse action on an existing account; or
- 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered.
So, if it has been awhile since your credit union has taken a look at Regulation B, I strongly encourage a refresher session. You may be surprised to find out how much or how little your staff really knows about the adverse action rules. Also don’t forget Section 615(a) of the FCRA requires that a consumer be provided specified information in circumstances where adverse action with respect to that consumer is taken “based in whole or in part on any information contained in a consumer report,” but we can save that discussion for another time.