Compliance Q&A: Adverse Action Notifications

Must a credit union’s adverse action notification list all of the reasons for denying a loan application?

February 19, 2013

Q: Must a credit union’s adverse action notification list all of the reasons for denying a loan application?

A: A credit union’s notice must include a statement of the specific reasons for the loan denial, says Section 1002.9(b)(2) of Regulation B (Equal Credit Opportunity). The statement must be specific and the credit union must indicate the “principal reason(s)” for the adverse action. The regulation, however, does not mandate that a specific number of reasons be disclosed. In fact, the Consumer Financial Protection Bureau’s Official Staff Commentary to the rule states that “the disclosure of more than four reasons is not likely to be helpful to the applicant.”
Q: Where in the Fair Credit Reporting Act (FCRA) does it say that debts discharged in bankruptcy must show a zero balance on a credit report?
A: The FCRA does not contain any such language. Section 605(a)(1) of the FCRA only states that the existence of a bankruptcy may be reported for no more than 10 years. The language regarding reporting a zero balance for discharged debts can be found in the Federal Trade Commission’s staff commentary on the FCRA. The Commentary to Section 607(b) on “accuracy of report” states that: “A consumer report may include an account that was discharged in bankruptcy (as well as the bankruptcy itself), as long as it reports a ‘zero balance due’ to reflect the fact that the consumer is no longer liable for the discharged debt.” This information is from the FTC’s 40 Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report with Summary of Interpretations (July 2011).
Q: Is there a dollar limit on transactions that are subject to Office of Foreign Assets Control (OFAC) regulations?
A: No. There is no minimum dollar amount that triggers compliance with OFAC regulations.Credit unions are required to block property and payment of any funds transfers or transactions involving any country, entity, or individual appearing on OFAC’s “Specially Designated Nationals and Blocked Persons” list (“SDN List”). The term “block” means to freeze the OFAC target’s property, such as the funds in an account. When there is no blockable interest involved, however, the prohibited transaction must be rejected.
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