Pub. 13 2018-2019 Issue 5

NEBRASKA BANKERS ASSOCIATION 21 always has a permissible purpose to ob- tain a consumer report if the individual authorizes this in writing. (For reference, the full list of permissible purposes can be found in § 604(a) of the FCRA). Besides permissible purpose ques- tions, the other common question we get on theHotline iswhether anadverse action notice has to be provided in a commercial context. The general rule in the FCRA is that if the bank obtains a consumer report and takes adverse action based (in whole or in part) on any information in the re- port, itmust give the consumer an adverse action notice. The catch here is how the FCRA defines an “adverse action.” The definition is based on Regulation B’s (12 CFR § 1002) definition of “adverse action,” which does not include guarantors: …Under section 701(d)(6) of the ECOA and § [1002.2(c)] of Regulation B, only an applicant can experience adverse action. Further, a guarantor or co-signer is not deemedanapplicant under § [1002.2(e)].… Luckily, the FTC clarifies this in the “Stinneford Opinion.” If the consumer is Victoria E. Stephen, CRCM, serves as Associate General Counsel for Compliance Alliance and was recently appointed as the supervising attorney of Hotline. Victoria heads the team of hotline attorneys who assist members with the spectrum of regulatory compliance questions on a daily basis and serves as Editor of Compliance Alliance's monthly Access Magazine. only a guarantor (or acting in a similar capacity inwhich she or he is only second- arily liable on the business-purpose loan), then an adverse action notice would not be required to be provided to the guaran- tor. This is true even if the application is being denied based on information from the consumer report of the guarantor. On the other hand, if the individual is a co- borrower (or acting in a similar capacity in which she or he is primarily liable on the loan), then a FCRA adverse action notice would be required. If trying to figure out the difference between the two sounds likeway toomuch work, the bank is welcome to provide an adverse action notice in both cases. Note, however, that any time the bank provides multiple FCRA adverse action notices, each individual should receive a separate adverse action notice with the credit score disclosures associated with just her or his own report. In other words, the individual should never receive the credit score infor- mation of another co-applicant. Although the focus of this article is the FCRA, we always get a follow-up question regarding whether a Reg. B adverse action notice is required, even if a FCRA adverse action is not. According toReg. B, the bank may provide the adverse action notice only to the primary applicant, if there is one, but it also does not prohibit the bank from providing a notice to each applicant if it chooses. As always, Compliance Alliance and TBA members are welcome to contact us with any other questions by email at hotline@compliancealliance.com , or by calling 888 -353-3933, or chatting on the website. Non-members should direct inquiries to the Membership Team at info@compliancealliance.com.  Since 1857, Cline Williams has devoted attention to the unique needs of the banking and nancial services industries. Since then, we have provided our clients with the resources they need in the areas that are most important to them – from lending and collections, to regulatory compliance, to mergers and acquisitions, and so much more. We’re more than a law rm. We’re a partner for your bank. | | | | |