Adverse Action notice
Print and send the Adverse Action notice when you are
not accepting the applicant’s request for credit on the terms requested.. Some examples are:
- When you submit a deal through AppOne Risk Mitigation Services (RMS) and RMS denies the application.
- When the filters prevent you from submitting the deal to a lender.
If you submit a deal to a non-RMS lender and that lender denies the application, you do not need to send the Adverse Action Notice.
Generally, within 30 days of receiving a completed application, a creditor must notify the applicant of its approval, counteroffer or adverse action on the application. “Adverse action” means the creditor is refusing to grant credit in substantially the amount or on substantially the terms requested in the application. This can be a flat denial or it can be a denial on terms requested with a new offer on less favorable terms. As an example, it includes pulling a credit report on a customer and not submitting the application to any lenders for a response. It also applies when an application does not meet the criteria for a lender’s program so the application is not submitted to any lenders for consideration.
Risk-Based Pricing notice
Different types of Risk-Based Pricing Notices are allowed, depending on how you do business. If you use the model exception form (model H-4 “Model form for credit score disclosure exception for loans not secured by residential real property”), then print and provide the notice to all consumer applicants. If you are using one of the other model notices, print the applicable Risk-Based Pricing notice and give it to the consumer in circumstances that apply to that applicant. For example, print model form H-5 when there is no credit score available on the applicant or other model forms when the terms offered are less favorable in whole or in part because of information in a consumer credit report. Generally, the appropriate notice must be provided after a credit score has been obtained but before the credit agreement is signed.
Adverse Action, Risk-Based Pricing, and Federal Law
Providing Adverse Action and Risk-Based Pricing notices is required to comply with federal law. There may be additional situations and timing requirements when you need to send an Adverse Action and/or Risk-Based Pricing notice. You should consult your attorney for guidance.
