Compliance Blog

Joint Applicants and Adverse Action Notices; Upcoming January Webinars

Written by Elizabeth M. Young LaBerge, Senior Regulatory Compliance Counsel, NAFCU


As we discussed on Wednesday, NCUA’s supervisory priorities for 2019 have been released.  Included this year is a focus on adverse action notices under Regulation B. With that in mind, some credit unions are taking a look at adverse action notice procedures and identifying some of the stickier questions. For example, who gets what notices when you have joint applicants for credit?


Paragraph 9(f) of Regulation B addresses situations with multiple applicants: “When an application involves more than one applicant, notification need only be given to one of them but must be given to the primary applicant where one is readily apparent.”


Regarding the reasons for denial, the commentary states that the reasons “must relate to and accurately describe the factors actually considered” by the credit union. 12 C.F.R. Part 1002, Supp. I, comment 9(b)(2)-2. In other words, the reasons listed should encompass the application as a whole. While members occasionally raise privacy information in this context, it is important to note that reasons can be categorical, rather than specific. For example, the commentary states that a notice may say “length of residence” as opposed to “too short a period of residence.” 12 C.F.R. Part 1002, Supp. I, comment 9(b)(2)-3.


Of course, if that were the end of the story, I wouldn’t be blogging about it. Adverse action notices can also be required under sections 615(a) and (b) of the Fair Credit Reporting Act. That provision states that if adverse action is taken with respect to “any consumer” based in whole or in party on information contained in “a consumer report,” and adverse action notice must be provided to that consumer. This would appear to mean that an adverse action notice would be required for a co-applicant when a negative credit decision is made due to another co-applicant’s credit report.


Where an adverse action notice is required under the FCRA, if a credit score was used by the credit union in making a decision, the credit union must provide a numerical credit score used by the credit union in taking the adverse action and key factors that adversely affected that score. See, FCRA, §§ 615(a)(2)(A), 609(f). However, providing an applicant’s credit score and factors affecting the credit score to a co-applicant could be a violation of the Gramm-Leach-Bliley Act and Regulation P.


In the preamble to the 2011 changes to Regulation B, the Federal Reserve Board discussed this difference between Regulation B and the FCRA and stated “Given privacy and customer relations concerns, the Board expects that creditors would generally provide separate FCRA adverse action notices to each applicant with only the individual’s credit score on each notice.” See, 76 Fed. Reg. 41596.


Regulation B does not prohibit delivery of an adverse action notice to each applicant, so use of Regulation B’s model forms to meet FCRA requirements may be permissible, as long as the individual’s information is used for each notice. Where a credit score did not contribute to the adverse action, but other information in the consumer report did, the Federal Reserve’s Consumer Compliance Outlook indicates that a combined notice to all applicants may be possible.


Don’t miss out on these upcoming January compliance webinars!

January 17: Regulatory Compliance Semi-Annual Update

January 22: NACHA 2019 Update

January 29: Elder Financial Exploitation: Information and Resources from the BCFP

About the Author

Elizabeth M. Young LaBerge, NCCO, NCRM, CIPP/US, Senior Regulatory Compliance Counsel, NAFCU

Elizabeth M. Young LaBerge, NCCO, NCRM, CIPP/US, Senior Regulatory Compliance CounselElizabeth M. Young LaBerge, NCCO, NCRM, CIPP/US,  joined NAFCU as regulatory compliance counsel in July 2015 and was named Senior Regulatory Compliance Counsel in July 2016.

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