Adverse action – quintessentially concerns to the denial of credit, assurance, employment or other benefits. An adverse action is reported to an individual or business (Federal Trade Commission 1989, page 7).
Reason for adverse action
Reason for adverse action; procedure applicable; adverse action defined
- Within thirty days (or such longer reasonable time as specified in regulations of the Board for any class of credit dealing) after receipt of a completed application for credit, a lender shall advise the proponent of its action on the application.
- Each petitioner against whom adverse action is taken shall be entitled to an announcement of reasons for such action from the lender. A creditor satisfies this responsibility by:
- providing announcement of reasons in writing as a matter of course to requesters against whom adverse action is taken; or
- giving written notification of adverse action which reveals the petitioner's right to a statement of reasons within thirty days after receipt by the trade creditors of an application made within sixty days following such notification, and the identity of the person or office from which such statement may be obtained. Such statement may be given by parol if the written notification advises the applicant of his right to have the statement of reasons confirmed in writing on written instantiation.
- A statement of reasons meets the prerequisite of this section only when it inholds the particular cause for the adverse action taken.
- Where a lender has been required by a third party to make a concrete extension of credit directly or indirectly to a petitioner, the notification and statement of reasons required by this subsection may be made direct by such lender, or indirectly through the third party, provided in either case that the identity of the creditor is revealed (United States 1994, page 1148).
The adverse action notices
The Federal Trade Commission administers compliance with adverse action notices and other prerequisites of the ECOA (Equal Credit Opportunity Act) with respect to most non-bank lenders. For instance, retail and department stores, loan and finance companies, mail order companies, oil and gas companies, travel and entertainment credit card issuers, mortgage companies and state-chartered credit unions, utility company, are amongst the lenders that are within the commission's jurisdiction (Federal Trade Commission 1989, page 7).
The regulation also excepts some sorts of credit (such as securities credit) from some mandatory requirements and provides model forms for optional use by lenders (E.F. Mannino 2019, chapter 14).
- Federal Trade Commission (1989) How to Write Adverse Action Notices: A Federal Trade Commission Manual for Creditors, Federal Trade Commission
- Sandler A.L., Klubes B.B. (2001), Consumer Financial Services, Law Journal Press, New York
- Sandler A.L.,Klubes B.B. (2019), Lender Liability and Banking Litigation, Law Journal Press, New York
- United States (1994), United States Code, Office of the Law Revision Counsel of the House of Representatives, Washington
- United States. Congress. House. Committee on Banking and Financial Services. Subcommittee on Financial Institutions and Consumer Credit (2001)H.R. 2856--Fair Credit Full Disclosure Act: Hearing Before the Subcommittee on Financial Institutions and Consumer Credit of the Committee on Banking and Financial Services, U.S. House of Representatives, One Hundred Sixth Congress, Second Session, September 21, 2000, U.S. Government Printing Office, Washington
- Winn F. (2012), How to Make Your Credit Card Rights Work for You: Save Money, Xlibris Corporation, U.S.A
Author: Edyta Pach