By Leslie Callaway, CRCM, CAFP, and Terry L. Hollinger, CRCM
Q/ Are refinances and renewals of loans reportable under the Community Reinvestment Act?
Answers are provided by Leslie , CRCM, CAFP, senior director, compliance outreach and development at ABA and by , CRCM, senior analyst, compliance at ABA.
A/ Yes, both refinances and renewals for small business, small farm and community development loans are reportable. To help banks understand what is covered, the Interagency FAQs explain that a refinancing generally occurs when the existing loan obligation or note is satisfied and a new note is written, and a renewal refers to an extension of the term of a loan. However, the loans are not labeled or identified as a refinancing or renewal when reported.
Note that an institution may generally only report one origination (including a renewal or refinancing) per loan per year, unless an increase in the loan amount is granted during the same year, in which case only the new money would be reported. A demand loan that is merely reviewed annually is not reported as a renewal because the term of the loan has not been extended. (Interagency Q&A, § __.42(a) — 5)
Consumer loan data and other optional loan data that are not reported but may be considered in a CRA exam follow the same general criteria. (Answer provided February 2025.)
Q/ While doing an internal compliance review, I noticed that the bank is not disclosing credit score information (score, score date, range and key factors) on its denial notices for realestate secured loans. The bank employee in charge of these notices stated that she did believe the bank needed to include this information on the denial because it provides the credit score exception disclosure under Regulation V that contains the same information.
My understanding is that there are three separate credit score notice requirements:
(1) The adverse action notice of the Fair Credit Reporting Act (FCRA)’s §615(a)(2)
(2) The credit score exception notices of §1022.74(d)(1) and (e)(1) of Regulation V (which implements the FCRA) required when risk-based pricing is used for mortgage loans and non-mortgage consumer loans respectively
(3) The credit score notice, “Notice to Home Loan Applicant,” that mortgage lenders must provide if they use a credit score as required by FCRA’s §609(g).
Thus, the bank must provide credit score information in a risk-based pricing exception notice, an adverse action notice, and a Notice to Home Loan Applicant when it uses a credit score. Is my understanding correct?
A/ Not quite, and it appears the bank employee got it backwards. If the credit score information is provided in an adverse action notice, the bank need not provide a risk-based pricing notice, not the other way around.
Section 1022.74 of Regulation V discusses the exceptions for when a risk-based pricing notice is not required. Specifically:
- Section 1022.74(b) provides an exception “if the person provides an adverse action notice to the consumer under section 615(a) of the FCRA.”
- Sections 1022.74(d) (mortgage loans) and (e) (nonmortgage loans) allow a credit score notice to be provided in lieu of the risk-based pricing notice when it is provided “as soon as reasonably practicable after a credit score has been obtained” but not later than loan consummation for closed-end credit or the first transaction for open-end credit.
Since a risk-based pricing notice is not required in these cases, a credit score exception notice is not required. Indeed, the Federal Reserve Board clarified in its “Consumer Compliance Outlook” of 2012 in Q&A 1 that a risk-based pricing notice is not required if an adverse action notice is provided:
Q/ Must risk-based pricing notices be provided to denied applicants?
A/ Section 1022.72(a) of Regulation V (12 C.F.R. Part 1022 ) specifies when a creditor must provide a risk-based pricing notice to a consumer applying for credit, subject to the exceptions in §1022.74. If an application is denied and an adverse action notice is provided, a risk-based pricing or exception notice is not required. See §1022.74(b).
Please see: https://www.consumercomplianceoutlook.org/2012/first-quarter/risk-based-pricingnotice-requirements/ However, while the bank may forgo the exception notice if it provides an adverse action notice, it does not work in the reverse. That is, it may not forgo including credit score information in the adverse action notice because it has provided a credit score risk-based pricing exception notice.
With regard to the Notice to Home Loan Applicant, that notice is required even if an adverse action notice is provided with credit score information. However, as noted, if the bank provides this notice, it does not have to provide the credit score risk-based pricing exception notice. (Answers provided January 2025.)
