Notice of adverse action on a loan application

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Notice of adverse action on a loan application

Postby Dog_Papa » Wed Dec 19, 2012 4:11 pm

I went to 3 different lending institutions about a auto loan. Two approved the loan and one wanted more info than I was comfortable giving
them. I have had other problems with this Credit Union as well. Like them making simple transactions complex, when they should not be.
During the application process, I informed them that I had a lower interest rate. I saw no reason to continue with the app. No I have
gotten a notice of adverse action letter in the mail. It states the adverse action was due to member request. Couldn't they have just
dropped the application, instead of this action denying me credit? This can't be good for my credit report.

The rep at the credit union, also wanted to sell me an extended warranty and go through a 3rd party auto broker. I didn't figure I needed
so bozo shopping for a for me. I feel the rep at the credit union did this out of spite. She has also given info I know to be wrong. In other
words she is incompetent. I tried reading the Fair Credit Reporting act. It is very hard to follow and is a very long and cumbersome document.

I have the loan from another organization, should I do anything about this adverse action or not?
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Re: Notice of adverse action on a loan application

Postby jmuc85 » Wed Dec 19, 2012 6:06 pm

An adverse action notice does not do anything to your credit; it is just a notice required to be sent out by the Federal government. Typically if the application is withdrawn, a notice will not be sent. But some Banks probably are extra safe and just send them out in these cases. Compliance regulators are very tough on Banks and it is much better to be safe than sorry. Do not worry about it.
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Re: Notice of adverse action on a loan application

Postby grabiner » Thu Dec 20, 2012 12:20 am

Dog_Papa wrote:Couldn't they have just
dropped the application, instead of this action denying me credit? This can't be good for my credit report.


What appears on your credit report is just the inquiry, which already happened; this indicates that the credit union looked at your credit file as part of an auto loan application, but not whether the loan was denied, granted on terms you didn't like, or taken out but not yet reported in the credit file. Since you applied to three lenders in a short time, credit scoring algorithms will treat that as a single inquiry, recognizing that you probably weren't trying to buy three cars at once.
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Re: Notice of adverse action on a loan application

Postby LifeIsGood » Thu Dec 20, 2012 9:33 am

Time to switch credit unions.
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Re: Notice of adverse action on a loan application

Postby Dog_Papa » Thu Dec 20, 2012 11:21 am

grabiner wrote:
Dog_Papa wrote:Couldn't they have just
dropped the application, instead of this action denying me credit? This can't be good for my credit report.


What appears on your credit report is just the inquiry, which already happened; this indicates that the credit union looked at your credit file as part of an auto loan application, but not whether the loan was denied, granted on terms you didn't like, or taken out but not yet reported in the credit file. Since you applied to three lenders in a short time, credit scoring algorithms will treat that as a single inquiry, recognizing that you probably weren't trying to buy three cars at once.


If this is the case, why is it called adverse action? Why is this action covered, as part of consumer protection, in the FCRA and the ECOA. I realize it will show that they looked at my credit report, but with only 3 lenders looking, that would not harm my credit in any way. They could have just let the app drop. Maybe they don't know how to use their info system, or something like that. The rep at the credit union, was not pleased, when I didn't need her loan, or other services. I could tell by the look on her face. I have never rec'd a notice like this before. She seemed to feel I should continue with the app, even though they had a higher interest rate, than other lenders. My gut tells me
something is not right here.
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Re: Notice of adverse action on a loan application

Postby Mudpuppy » Thu Dec 20, 2012 4:16 pm

Dog_Papa wrote:
grabiner wrote:
Dog_Papa wrote:Couldn't they have just
dropped the application, instead of this action denying me credit? This can't be good for my credit report.


What appears on your credit report is just the inquiry, which already happened; this indicates that the credit union looked at your credit file as part of an auto loan application, but not whether the loan was denied, granted on terms you didn't like, or taken out but not yet reported in the credit file. Since you applied to three lenders in a short time, credit scoring algorithms will treat that as a single inquiry, recognizing that you probably weren't trying to buy three cars at once.


If this is the case, why is it called adverse action? Why is this action covered, as part of consumer protection, in the FCRA and the ECOA. I realize it will show that they looked at my credit report, but with only 3 lenders looking, that would not harm my credit in any way. They could have just let the app drop. Maybe they don't know how to use their info system, or something like that. The rep at the credit union, was not pleased, when I didn't need her loan, or other services. I could tell by the look on her face. I have never rec'd a notice like this before. She seemed to feel I should continue with the app, even though they had a higher interest rate, than other lenders. My gut tells me
something is not right here.

Pull your credit reports. I think you'll find that the others are right and the only thing on your credit report will be a hard or soft pull (credit check). There will be nothing there about denying the application. Why? Because a notice of adverse action is about denying the application due to what is ON the credit report, in case there are erroneous entries on the credit report. It's not about putting negative things on your credit report. The adverse action notice also entitles you to a free credit report (that doesn't count against your annual free report) from the credit bureaus listed in the report, so you can check for erroneous entries and dispute them if needed.

To put it in simpler terms, the only thing that goes on to your credit report is the application via the hard/soft pulls. If you are accepted, the credit report will also reflect the new account. However, if there is no new account, the credit report does not know (and does not care) if you decided to cancel the application or were denied. It's just not something that is reported.
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Re: Notice of adverse action on a loan application

Postby dm200 » Thu Dec 20, 2012 4:53 pm

Dog_Papa wrote:I went to 3 different lending institutions about a auto loan. Two approved the loan and one wanted more info than I was comfortable giving
them. I have had other problems with this Credit Union as well. Like them making simple transactions complex, when they should not be.
During the application process, I informed them that I had a lower interest rate. I saw no reason to continue with the app. No I have
gotten a notice of adverse action letter in the mail. It states the adverse action was due to member request. Couldn't they have just
dropped the application, instead of this action denying me credit? This can't be good for my credit report.

The rep at the credit union, also wanted to sell me an extended warranty and go through a 3rd party auto broker. I didn't figure I needed
so bozo shopping for a for me. I feel the rep at the credit union did this out of spite. She has also given info I know to be wrong. In other
words she is incompetent. I tried reading the Fair Credit Reporting act. It is very hard to follow and is a very long and cumbersome document.

I have the loan from another organization, should I do anything about this adverse action or not?


The issuance of an "Adverse action notice" is required of lenders in many circumstances, and the lender that does not issue one under required circumstances can be subject to regulatory (federal) scrutiny and penalties. Withour knowing all the details, I can't express an opinion whether this was required or there was someone incompetent at your credit union. Just be aware that credit unions often must do things that appear silly or stupid. It is also the case that, because of the complexity of rules,regulations, laws, etc. that different credit unions reach different conclusions about how to meet these complex requirements.

The asverse action notice sffects NOTHING on your credit rating or score.

If you believe that this credit union (or an eployee) is providing less than satisfactory service, since you are an owner of the credit union, I strongly suggest a communication to the "Supervisory Committee" of the credit union. That committee makes sure the annual audit is done and deals with member complints as well. If this is a state chartered credit union, sometimes this committee is called the "Audit Committee".

It might be that the Board of this credit union and/or upper management is not aware of how this employee treats members. Or, it may be that they "know", but are unable/unwilling to do anything. I have seen both. I strongly believe you should, though, send a letter to the Supervisory Committee. Their contact information should be in your newsletter or on the web site or available on request.
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Re: Notice of adverse action on a loan application

Postby grabiner » Thu Dec 20, 2012 8:22 pm

And an adverse action notice must be given whenever the loan is denied. I have received two adverse action requests which had nothing to do with my credit report: "Unable to verify Social Security Number" (the credit union had the wrong number) and "Time with current employer" (this credit union refused to give a car loan to anyone who hadn't been in the same job for at least 6 months, and didn't tell me that until after I applied for the loan; they didn't care that I was moving to a new job with a much higher salary).
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Re: Notice of adverse action on a loan application

Postby mike143 » Thu Dec 20, 2012 8:35 pm

I dropped the credit union a long time ago, I won't name names. Their website looked like a child put it together and it never integrated with any finance software. They always made me feel like I was scum bag when borrowing money. Once I became wiser I dropped them and used the most equitable businesses/institutions. The only debt I carry now is my mortgage 3.875% (little over 4% APR) and 0% on a credit card to delay payment.

Recently we used PenFed to pull all the equity out of my wife's vehicle at 1.99% from Honda to 1.49% from PenFed to refinance some of my wife's student loans near 7%. Remaining loans are at less than 4% and have cash on hand to pay them off but have requirements for cash that prevent from paying them off.
Nothing is free, someone pays...You can't spend your way to financial freedom.
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