Q. Does the Fair Credit Reporting Act (FCRA) require credit unions to provide adverse action notices when they exclude members from credit card solicitations based on credit report information?
A. No. Failure to include a consumer in a solicitation for credit does not qualify as adverse action under the Equal Credit Opportunity Act (ECOA) and, therefore, does not constitute adverse action as defined by Section 603(k) of the FCRA.
Section 603(k) of the FCRA provides that, with respect to actions involving credit, the term “adverse action” has the same meaning as the term is defined under the ECOA. Under the ECOA and Regulation B, adverse action must involve an application by the consumer, a termination of the consumer’s account, or an unfavorable change in the terms of that account that doesn’t affect all or a substantial portion of the creditor’s accounts within that class. Therefore, it’s not considered an “adverse action” under the FCRA for a credit union to exclude a consumer who didn’t meet the institution’s criteria for the prescreened credit solicitation.
Q. Are credit unions permitted to include mandatory arbitration clauses in their HELOC agreements?
A. No. Regulation Z, Section 1026.36(h)(1) prohibits creditors from including terms that require arbitration or any other nonjudicial procedure to resolve any controversy or settle any claims arising out of a contract or other agreement for both closed-end consumer credit transactions secured by a dwelling (except for certain timeshare plans) and for HELOCs (home equity lines of credit) secured by the consumer’s principal dwelling.
Agreements in connection with dwelling- secured loans also may not limit a consumer from bringing a claim in court, an arbitration procedure, or other nonjudicial procedure for damages or any other relief in connection with an alleged violation of federal law.
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