Compliance Q&A: Adverse Action Notices

Understand Reg B's adverse action definition when terminating credit accounts.

January 26, 2011

Q Is a credit union required to send an adverse action notice when it terminates a member’s delinquent credit card account?

A No. The definition of “adverse action” in Regulation B (Equal Credit Opportunity Act or ECOA), doesn’t include terminating an account "in connection with inactivity, default, or delinquency as to that account."

In addition, the Fair Credit Reporting Act (FCRA) defers to the Reg B definition of adverse action when credit is involved.

So, the credit union wouldn’t have to send either the ECOA or FCRA adverse action notice for credit cancellations due to the above reasons. But the credit union should still notify the member that the credit card account has been terminated. (See Section 202.2(c)(2)(ii) of Reg B.)