Last year, we wrote briefly about the basic obligations under the Equal Credit Opportunity Act (“ECOA”). See that blog by clicking here:
In that blog, we introduced the fact that there is an entire body of federal law and regulation that governs the extension of credit—basically requiring nondiscrimination. However, the ECOA goes into great detail as to treatment of applications, extending credit, notification, record retention, and self-testing, among other subjects. This blog addresses that part of the law and regulation that contains specific requirements with respect to how and when a creditor must respond to a request by a consumer for credit.
A creditor must notify an applicant of action taken on an application within:
- 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to or adverse action on the application;
- 30 days after taking adverse action on an incomplete application, unless notice is provided to the applicant of the incomplete nature of the application and specifying the information needed before the application will be given further consideration;
- 30 days after taking adverse action on an existing account; or
- 90 days after notifying an applicant of a counteroffer if the applicant does not expressly use or accept the credit offered.
The notice must be in writing and contain a statement of the action taken, the name and address of the creditor, the ECOA notice, and either:
- a statement of the specific reasons for the action taken; or
- a disclosure of the applicant's right to such a statement.
There is an exception to this notice for applications made entirely by telephone.
There are many more details involved in the notification process that require further understanding—such as the meaning of an “incomplete application,” a “withdrawn application” and a “third party application.”
Practice Pointer: Now is a good time to test whether your CSRs are following your policies and procedures addressing compliance with the ECOA's notification requirements.