As the economy continues to struggle through the pandemic, many consumers are experiencing credit loss. Either their current creditors are deciding to discontinue the relationship or lower the line of credit, or people seeking to obtain new credit are being turned away. Often times the consumer is frustrated as they believe their credit file or credit scores don’t warrant such action. What rights do we have in this situation?
Having credit is not a right that we have. There is no guarantee. Most lenders are private banks, and aside from the few regulations they have on lending decisions, they largely have the freedom to decide to whom they lend money and on what terms. The one primary mandate banks must adhere to is that they cannot discriminate in their lending policies on the basis of race, age, religion, national origin, or gender classification. Those five areas have always been protected since the Civil Rights Act of 1964, and those rights extend to lending. Therefore, so that creditors are demonstrating that their reasons for refusing credit are not discriminatory, the lender must send written notification to the consumer explaining the reasons for denial. This letter is commonly referred to as an “adverse action” notice.
An adverse action notice must notify the consumer either the reasons for the denial or at least provide instructions on how to obtain the particular reasons for the denial. An adverse action letter must notify that if there was any credit report review as part of the application (spoiler alert: there always is) then the identity of of what credit bureau was used must be provided. In addition, it must notify you of your rights under the Fair Credit Reporting Act to obtain a free report with that adverse action letter. Thus, a consumer receiving a credit denial should know credit report that caused the denial, and have an easy time obtaining a copy of that report to review and confirm that it is true.
Here is where the consumer must look to analyze. Are the reasons for the denial accurate and true reasons that appear on your credit report? If so, then the lender has discharged any responsibility it may have to that consumer and was well warranted in its denial. However, the problems arise when either the reason for the denial points to an inaccuracy on the credit report, or the reasons for the denial do not even appear on the credit report. Analysis must be made into why the application was denied, and undoubtedly an attorney should be contacted to perform this analysis – most preferably one with experience in working with the Fair Credit Reporting Act.