Pub. 15 2018 Issue 4

20 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Thisway, the bank can rely on that written authorization as valid permissible purpose to pull the consumer report, rather than having to justify that one of the other permissible purposes apply. As a caveat, however, these opinions are only informal guidance that are not binding on the FTC, and further, inter- pretive authority for the FCRA technically transferred to the Consumer Financial Protection Bureau (CFPB) pursuant to the Dodd-Frank Act. While plenty of banks do rely on them, we would still recommend getting written authorization from the individual to pull credit. In fact, we’d recommend this in every case, for any consumer report pulled. This way, the bank can rely on that written authorization as valid permis- sible purpose to pull the consumer report, rather than having to justify that one of the other permissible purposes apply. Said another way, the bank always has a permissible purpose to obtain a consumer report if the individual authorizes this in writing. (For reference, the full list of permissible purpos- es can be found in § 604(a) of the FCRA). Besides permissible purpose questions, the other common question we get on the hotline is whether an adverse action notice has to be provided in a commercial context. The gener- al 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 report, it must give the consumer an adverse action notice. The catch here is how the FCRA de- fines an “adverse action.” The definition is based on Regula - tion 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 deemed an applicant under § [1002.2(e)]. … Luckily, the FTC clarifies this in the “Stinneford Opin- ion.” If the consumer is only a guarantor (or acting in a similar capacity in which she or he is only secondarily liable on the business-purpose loan), then an adverse action notice would not be required to be provided to the guarantor. 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 like way too much 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 n FCRA continued from page 19 separate adverse action notice with the credit score disclo- sures associated with just her or his own report. In other words, the individual should never receive the credit score information 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 to Reg. 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. n 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 in on the website. Non- members should direct inquiries to the membership team at info@ compliancealliance.com .