May I Send Adverse Action Notices to Joint Applicants at the Same Mailing Address—Even if They Reside at Different Addresses?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM

Q:The Fair Credit Reporting Act requires that adverse action notices include any credit score used in taking adverse action on a credit application. My understanding is that for joint applications, the credit score notices must be in separate envelopes. May the credit score notices be sent in separate envelopes to the same mailing address even if the joint applicants reside at different addresses? To illustrate, if applicant A is the primary applicant and lives at address A, and applicant B lives at address B, may the bank provide the credit score notices in separate envelopes to address A, or must the bank send the notice to each applicant at his or her own address?

A: The bank should send the notice to each applicant at his or her address.

For technical reasons related to limitations on rulemaking authority, neither Regulation B (Equal Credit Opportunity Act) nor Regulation V (FCRA) addresses this directly. However, Section 1022.75 of Regulation V offers direction. It addresses “risk-based pricing” notice requirements, which include an option of providing credit scores. Section 1022.75(c) requires sending “a separate notice” if a notice includes a credit score, “whether the consumers have the same address or not.” This suggests that the bank should send separate notices to each consumer at his or her address unless the applicants have otherwise instructed. If the applicants live at the same address, the bank may insert notices into separate envelopes addressed to each applicant and then send them in an envelope mailed to their joint address.

If a credit score is not used and the consumers have the same address, the bank may send a joint notice. The reason for the distinction is that, for whatever reason, credit scores are considered more personal and confidential than the reasons for a loan rejection. (Answer provided December 2020.)

Q:A bank customer who is currently on active duty with the Army opened a real estate investment loan with my bank before he went on active duty, so the Servicemembers Civil Relief Act covers this loan. The customer has requested that the bank lower the interest rate and payments on this loan pursuant to SCRA. One of the bank’s requirements for this type of loan is that the borrower reside within our designated trade area, but the request alerted us to the fact that the service member no longer lives in the area. Would there be any compliance issues if the bank were to require the customer to refinance the loan elsewhere as he is now located outside of the bank’s trade area?

A:Yes, this would likely violate SCRA because the bank is calling the loan before maturity. Section 3937 of the SCRA prohibits the acceleration of principal repayment, which is essentially what the bank would be doing by requiring the service member to refinance the loan. In addition, if the service member refinances while on active duty, he will lose his SCRA interest rate, repayment and foreclosure protections.

In addition, servicemembers are protected from any penalty imposed due solely to their invocation of their SCRA rights. Section 3919 of the SCRA provides that “no stay, postponement, or suspension of any . . . civil obligation or liability applied for, or received by, a person in military service can be the sole basis for . . . a decision by a creditor to deny or to revoke credit; to change the terms of an existing credit arrangement.”

If his request for the interest rate reduction triggered the bank’s request to refinance, it appears that the bank is revoking or changing the terms of the credit. (Answer provided December 2020.)

Q:Does Regulation Z require that a Closing Disclosure be provided within a certain timeframe after the Loan Estimate has been provided?  My bank has an applicant who has received the Loan Estimate but now wants to delay closing for a month.

A:There is no timing requirement for provision of the Closing Disclosure after the Loan Estimate has been issued. Regulation Z requires that the consumer receive the Closing Disclosure no later than three business days before consummation. It would be prudent, however, for the bank to monitor the file in the event an invoice or information about increased or additional fee(s) is received in the interim in which case the bank must reissue the Loan Estimate within the regulatory timeframes to pass the fee(s) on to the consumer. (Answer provided December 2020.)

Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, senior compliance analyst, ABA Regulatory Policy and Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.