Fair Lending: Equal Credit Opportunity
• The bank may not have to notify an applicant of
adverse action if the application was incomplete
and the bank sent the applicant a notice of
incompleteness that met certain
requirements
set forth in section 202.9(c).
Adverse Action Notice (§ 202.9(a)(2))
A notification of adverse action must be in writing
and must contain certain information, including the
name and
address of the bank and the nature of the
action that was taken. In addition, the bank must
provide an ECOA notice that includes the identity of
the federal agency
responsible for enforcing com-
pliance with the act for that bank. This notice is
generally included on the notification of adverse
action. The bank must also either provide the
applicant with the specific principal
reason for the
action taken or disclose that the applicant has the
right to
request the reason(s) for denial within sixty
days of
receipt of the bank’s notification, along with
the name,
address, and telephone number of the
person who can provide the specific
reason(s) for
the adverse action. The
reason may be given orally
if the bank also advises the applicant of the right to
obtain the
reason in writing upon request.
Incomplete Applications (§ 202.9(c))
When a bank receives an incomplete application, it
may send one of two alternative notifications to the
applicant. One is a notice of adverse action; the
other is a notice of incompleteness. The notice of
incompleteness must be in writing and must
specify the information the bank needs if it is to
consider the application; it must also provide a
reasonable period of time for the applicant to
furnish the missing information.
Applications Submitted
through a
Third Party (§ 202.9(g))
When more than one bank is involved in a
transaction and adverse action is taken with
respect to the application for credit by all the banks
involved, each bank that took such action must
provide a notice of action taken. The notification
may be given by a
third party; however, the notice
must disclose the identity of each bank on whose
behalf the notice is given. If one of the banks
approves the application, the banks that took
adverse action need not provide notification.
Notification to Business Credit
Applicants (§ 202.9(a)(3))
The notification requirements for business credit
applicants
are different from those for consumer
credit applicants and are more extensive if the
4 (1/06) • Reg. B Consumer Compliance Handbook
business had gross revenues of $1,000,000 or less
in the
preceding fiscal year. Extensions of trade
credit, credit incident to a factoring agreement, and
similar types of
credit are subject to the same rules
as those that apply to businesses that had gross
revenues of more than $1,000,000.
Generally, a bank must comply with the same
notification
requirements for business credit appli-
cants with gross
revenues of $1,000,000 or less as
it does for consumer
credit applicants. However,
the bank has
more options when dealing with these
business
credit applicants. First, the bank may tell
the business
credit applicant orally of the action
taken. Second, if the bank chooses to provide a
notice informing the business
credit applicant of
the right to
request the reason for action taken, it
may, rather than disclose the reason itself, provide
the notice at the time of application. If the bank
chooses to inform the applicant of the right to
request a reason, however, it must provide a
disclosure with an ECOA notice that is in retainable
form and that gives the applicant the same
information that must be provided to consumer
credit applicants when this option is used (see
section 202.9(a)2)(ii)).
Finally, if the application was
made
entirely over the phone, the bank may
provide an oral statement of action taken and of the
applicant’s right to a statement of
reasons for
adverse action.
The notification requirements for business credit
applicants with gross
revenues of more than
$1,000,000
are relatively simple. The bank must
notify the applicant of the action taken within a
reasonable time period. The notice may be oral or
in writing; a written statement of the
reasons for
adverse action and the ECOA notice need be
provided only if the applicant makes a written
request within sixty days of the bank’s notification
of the action taken.
Designation of Accounts—
Section 202.10(a)
A creditor that furnishes credit information to a
consumer
reporting agency must designate
• Any new account to reflect the participation of
both spouses if the applicant’s spouse is
permit-
ted to use or is contractually liable on the
account
• Any existing account to reflect the participation
of both spouses within ninety days after
receiv-
ing a written
request to do so from one of the
spouses
If a creditor furnishes credit information to a
consumer
reporting agency, the creditor must
furnish the information in the name of the spouse
about whom the information was
requested.