Legal Memorandum: Adverse Action Notice Requirements

Issue: What notice of an adverse action is a lender required to give to an applicant for credit?

The Equal Credit Opportunity Act gives creditors at least thirty days from the receipt of an application to notify the applicant of their decision on the application.  15 U.S.C. § 1691(d)(1).  Section 1691(d)(1) does not include a requirement that this notification be in writing.  The statute further provides: “Each applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor.”  Id. § 1691(d)(2).  Generally, a creditor may satisfy this obligation by (A) providing statements of reasons in writing as a matter of course to applicants against whom adverse action is taken; or (B) giving the applicant written notification of the adverse action, which discloses the applicant’s right to a statement of reasons within thirty days after receipt by the creditor of a request, made within sixty days after such notification.  Id. § 1691(d)(2)(A), (B).  The statement of reasons referenced in clause (B) may be given orally if the written notification advises the applicant of his right to have the reasons confirmed in writing upon written request.  Id. § 1691(d)(2)(B).  In fact, all of the requirements of § 1691(d)(2) may be satisfied by “verbal” statements or notifications in the case of any creditor who did not act on more than 150 applications during the calendar year preceding the calendar year in which the adverse action was taken.  Id. § 1691(d)(5). 

For the purposes of § 1691(d), “adverse action” is defined as “a denial or revocation of credit, a change in […]