Independent Banker - February 2018 - 69

APPRAISAL
MANAGEMENT
SOFTWARE
FOR BANKS OF
ALL SIZES
with the specifi c principal reason(s)
for the action taken or disclose
that the applicant has the right to
request the reason(s) for denial
within 60 days of receipt of the
creditor's notifi cation. The notice
must include the name, address and
telephone number of the person who
can provide the specifi c reason(s)
for the adverse action. The reason
for denying the credit may be given
orally if the creditor also advises the
applicant of the right to obtain the
Must a creditor cite four reasons
for taking adverse action? Not
necessarily, but consider the future
diffi culties that could result from providing
only one or two reasons for an
adverse action when other signifi cant
factors are present.
Disclosing all the principal reasons
upfront helps mitigate the possibility
of back-and-forth with the credit
applicant(s), who may refute some of
the information in their credit record.
Also, Regulation B encourages the
The challenge is to pare down [the reasons
for an adverse action] and give the customers
suffi cient information but not so much that it is
overwhelming to a customer.
reason(s) in writing upon request.
Lenders routinely consider several
reasons for taking adverse action
and strive to obtain and use the best
information available. So, which
reasons are the best reasons, and
how many should be disclosed to
the applicant(s)?
Regulation B requires that the
reasons communicated to the
applicant(s) must be specifi c and
indicate the principal reason(s) for
the adverse action. The creditor
may identify more than four data
points on which an action might be
based, but the commentary to Section
1009 of Regulation B advises,
" The regulation does not mandate
that a specifi c number of reasons be
disclosed, but disclosure of more than
four reasons is not likely to be helpful
to the applicant. "
Federal regulators generally
encourage creditors to disclose the
four best reasons for the action, and
creditors must be sure to document
the credit fi le to clearly support the
reason(s) for denial that are provided
to the applicant(s).
creditor to provide information that
is the most useful to the applicant(s),
meaning that the creditor should
make the applicant(s) aware of the
negative credit information and
fi nancial position to allow them to
make corrections, if possible.
Regulation B Offi cial Staff Interpretations
§209.9(b)(2) provides some
guidance, and full descriptions are
found in the regulation.
1. Number of specifi c reasons. A
creditor must disclose the principal
reasons for denying an application
or taking other adverse action. The
regulation does not mandate that a
specifi c number of reasons be disclosed,
but disclosure of more than
four reasons is not likely to be helpful
to the applicant.
2. Source of specifi c reasons. The
specifi c reasons disclosed [under the
regulation] must relate to and accurately
describe the factors considered
or scored by a creditor.
3. Description of reasons. A creditor
need not describe how or why a
factor adversely affected an applicant.
For example, the notice may say
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Independent Banker - February 2018

Table of Contents for the Digital Edition of Independent Banker - February 2018
