My bank is requesting guidance regarding Regulation B (Equal Credit Opportunity Act) adverse action notifications.
The bank received a completed application and, based on the information submitted, determined that the applicant had insufficient income to qualify for the requested credit. However, the bank did not send the adverse action notice until 34 days after receiving the completed application. The loan officer delayed sending the notice because the officer hoped the applicant would submit additional information demonstrating an ability to repay the requested credit amount.
Q Does the possibility that the applicant might provide additional favorable information affect when the application is considered complete, or was the adverse action notice untimely based on Regulation B’s 30-day deadline?
A Assuming the bank had all the information it normally considers in making a credit decision, the application was complete, and the adverse action notice was untimely. Once an application is complete, the possibility that an applicant may provide additional information demonstrating an improved financial condition does not extend the 30-day notification period.
Regulation B requires a creditor to notify an applicant of its approval of, counteroffer to, or adverse action on a completed application within 30 days of receiving the application. 12 C.F.R. § 1002.9(a)(1)(i). Comment 9(a)(1)-1 explains that an application is considered complete once “a creditor has obtained all the information it normally considers in making a credit decision.”
Here, the loan officer reviewed the applicant’s information, determined that the applicant’s income and cash flow were insufficient to support the credit request, and ultimately denied the application for that reason. Thus, the bank was required to provide an adverse action notice within 30 days. The fact that the loan officer “hoped” the applicant could provide additional information demonstrating an improved financial condition would not, by itself, transform a completed application into an incomplete one or extend the 30-day notification period.
The analysis would differ if the bank needed additional information from the applicant that it normally considers in making its credit decision. In that case, the application would have been incomplete. Where an application is incomplete with respect to information the applicant can provide, § 1002.9(c) permits a creditor to, within 30 days, either take action on the application or provide a notice of incompleteness specifying the information needed and giving the applicant a reasonable period to provide it. Regardless of which approach the creditor takes, it must notify the applicant within 30 days.
One additional consideration is whether the request involved business credit rather than consumer credit. For business applicants with gross revenues of $1 million or less in the preceding fiscal year, the 30-day notification requirement generally applies. For business applicants with gross revenues exceeding $1 million, Regulation B permits notice of adverse action, either orally or in writing, within a reasonable time rather than within the strict 30-day timeframe. § 1002.9(a)(3).
For more information, contact ABA’s Leslie’s Callaway.
Please note that this section is not a substitute for professional legal advice.
