The Dodd-Frank Wall Street Reform and Consumer Protection Act amended Section 615(a) of the Fair Credit Reporting Act (FCRA) to require credit unions to disclose on adverse action notices a credit score used in taking any adverse action and information relating to that score (e.g., range of scores, key factors that adversely affected the score, etc.). Credit score disclosures also were added to the FCRA risk-based pricing notices when a creditor uses a score to price a loan.
Along with these changes came a flood of questions from credit unions on the adverse action notice provisions. Questions focused on the old and new requirements. So, here’s a refresher course on adverse action notifications.
ECOA & FCRA requirements
Section 701(d) of the Equal Credit Opportunity Act (ECOA) requires a credit union to notify a credit applicant when it has taken adverse action against that applicant. Section 615(a) of FCRA also requires a credit union to provide a notice when it takes an adverse action against a consumer based in whole or in part on information in a consumer report. Regulation B implements ECOA adverse action provisions. There are no implementing regula-tions for the adverse action requirements of Section 615(a) of the FCRA.
What’s ‘adverse action’?
Reg B defines adverse action as:
Adverse action doesn’t include:
FCRA tracks Reg B’s definition of adverse action in the context of a credit application. Further, the FCRA’s definition of “adverse action” includes business, credit, and employment actions affecting consumers that can be considered to have a negative impact, such as denying or canceling credit or insurance, or denying employment or promotion based on information in a consumer report.
Next: Combined notices