Adverse Action Notice / Denial Letter Policy

Transcription

1 Adverse Action Notice / Denial Letter Policy The following policy & procedures should be regular practice in every store location. This section of the manual outlines the company Adverse Action / Denial Letter Policy. The purpose of this policy is to ensure users are aware of what the Company deems as proper use of the Adverse Action Notice / Denial Letter. The contents of this document are subject to change. Notification of changes made to operations and procedures will be announced prior to effective dates in most cases. EC Holdings Corporation reserves the right to make changes at their own discretion. 1 rev

2 Adverse Action Notice / Denial Letter Explanation The Federal Trade Commission is the agency that administers compliance under the ECOA where as, an Adverse Action Notice or Denial Letter must be used to inform a consumer why the company is unable to grant their loan request. Information listed on an Adverse Action Notice / Denial Letter can be used by the consumer to make inquiries with the agencies used in the consumer s loan eligibility with the company to correct any oversights reported during the company s loan prequalification process. It is company policy that all adverse action notices are to be given to the consumer at the time of denial. A copy of the completed notice is to be made before it is presented to the consumer for our records. If a consumer refuses an adverse action notice, or leaves your location prior to completion, mail the original notice to the consumer s address submitted on the application. File the notice as you normally would, writing MAILED across the top. If the mail is returned for any reason, staple the returned envelope with contents to documents in file. By law, all copies of adverse action notices are to be kept on file for no less than 25 months from the date of the notice. ECOA Qualifications Prior to Adverse Action Prior to issuance of an Adverse Action Notice; qualifications by fair treatment of all applicants in an unbiased and equal manner adhering to the Company s Compliance Manual in regards to The (ECOA) Equal Credit Opportunity Act, under Regulation B. It is prohibited from discriminating against any applicant with respect to credit on the basis of race, color, religion, national origin, sex, martial status or age. (Provided the consumer meet State Law Age requirements and have the mental capacity to enter into a legal contract). It is prohibited to discriminate against any applicant on the basis that all or part of their income derives from public assistance. (In addition to this it must 1 st be disclosed that alimony, child support or separate maintenance need not be revealed, unless the applicant wishes to rely on it in determining creditworthiness) It is prohibited to discourage any applicant from applying for credit; in person orally or through telephone inquiries. Qualifying Factors for an Adverse Action Notice Before an Adverse Action Notice is given to a consumer, the following must happen: 1. The consumer must complete a written loan application. 2. The consumer must be qualified by an equal credit / scoring system. 3. The consumer must request a specific dollar amount. 4. The consumer is unable to meet one or more of the loan requirements. 5. The consumer must be checked against a State approved database. (when required by law, i.e. Payday loans ) 2 rev

3 Types of Adverse Action Notices / Denial letters Standard Consumer Non-Military The majorities of consumers that apply for a loan with the company are not active members of the military and are subject to meeting the company s qualifying guidelines. Those that do not qualify for a loan are to receive the standard adverse action notice / denial letter. Standard Used for all prospective customers that are not active members, spouses or dependants of an active member of the military Service Member Active Duty All active members of the military, spouses or dependants of an active member of the military fall under guidelines set forth by the Truth in Lending Act (TILA) and the Military Annual Percentage Rate (MAPR) acceptable to the Department of Defense (DOD). Due to these Acts, we are unable to qualify the Men and Women of the Military in accordance with the company underwriting guidelines. What is a Service Member? Understanding what constitutes being a Service Member or dependant of is your first step in correctly qualifying per the (DOD). A service member is a covered member if, they are on active duty under order of more than thirty days. This includes active National Guard or Reserve duty. The term dependant is defined as a member s spouse, child, or anyone for whom the member has provided one-half of their support for the past 180 days. The term child includes children under 18 and children under age 23 who are enrolled in an educational institution. Stepchildren are included in the definition of child. A knowing violation of any provision of the Act is a misdemeanor with potential fine and imprisonment of up to one year. It is possible that a violation of the Act could also create a cause of action by the customer against a pawn shop. Military / Service Member Civil Relief Act (SCRA) Generic notice used for all prospective customers that are active members, spouses or dependants of an active member of the military. This notice is required to be given to the service member or dependant. Notice Information Requirements The following information must be on each Adverse Action Notice that is given to a standard consumer. Consumer s Name Reason for loan denial Agency used in determination Exceptions If a consumer applies for a specific loan amount but the amount is not approved, and a lesser amount is counter offered and accepted by the consumer, there is no Adverse Action Notice / Denial Letter required. 3 rev

4 Adverse Action Reason Each Adverse Action Notice must list a reason for the Adverse Action / Denial Letter. Below are the reasons listed in the company s adverse action notice. One or more of these reasons must be checked / marked as the reason the company cannot make the consumer a loan on each adverse action notice / denial letter that is given to a consumer. The following descriptions listed are Reason(s) and examples of how each Reason is to be used: Pay Special Attention to Incomplete Application Notice requirements. Underwriting Requirements, Which may have been one or more of the following reasons: 1. Improper ID If a consumer fails to present the required identification such as; a valid State s drivers or non-drivers ID. 2. Provide Active checking account If a consumer fails to present a checking account statement dated within the last 30 days or fails to present checks for their checking account. (Payday loans) 3. Provide other (misc) required information or documentation if a consumer fails to present Other (misc) required information or documentation such as proof of residence. 4. Unable to Verify Employment If a consumer s employment is unverifiable by the company. (either verbally or in written form) 5. Income requirements not met If a consumer does not have enough income to support the repayment of the loan amount requested. 6. Incomplete or Unverifiable References If the consumer fails to supply the required number of references (3) or if the company is unable to verify the references supplied. 7. Incomplete Application ECOA Section 12 CFR (c) If a consumer fails to completely fill out a loan application and leaves out imperative information about themselves or other related information. Additionally, the information needed must be specified in writing to be considered and must provide a reasonable time period to furnish the missing information. The company considerers a time period of 30 days is reasonable. Applicant must return to the same location and must provide employee with notice of Adverse Action received. 8. 3rd Party Database State approved database(s) show if consumers have outstanding loan(s) that would cause them to exceed the amount requested under the applicable state law. If when checked against the State approved databases the consumer has outstanding deferred presentment transaction(s) that total, or exceed the $500 State limit. Notes: All applicants client screen must be completed and status of denied should be marked to show they were denied a loan to coincide with the completed Adverse Action Log on file. A creditor can take into consideration whether or not an applicant has a telephone at their place of residence but it does not have to be in their name. Consumers applying for a Payday loan can not have outstanding deferred presentment transactions with any other deferred presentment providers that equal more than the State s $500 limit. (Per a State approved database) 4 rev

5 Record Retention A copy of all Adverse Action Notices must be kept on file in the store in which the adverse action notice was given. All adverse action notices must be tracked on an adverse action log that is kept in the store in which the adverse action notice was given. The adverse action log is to be kept in the front of the Active Payday Loans filing cabinet drawer. Dedicate a single green hanging file folder labeled Adverse Action File with the Adverse Action Log located in front of any adverse action notices. The hanging file folder will contain all the adverse action notices given to consumers that are denied credit along with the consumer s loan application. (i.e. staple the consumer s adverse action notice to their completed written loan application, enter the notice on the log and place them in the folder.) In the event the customer completes a loan application, and after scoring them, they do not qualify for the requested loan amount, the completed customer score sheet must also be attached with the adverse action notice and completed loan application prior to filing. 5 rev