Credit Denials and Your Rights to Information

What do you do when you receive a letter from your creditor that informs you that your account is being closed or severely reduced?  It is a common misconception that if you pay your bills, a bank can’t close your account.  Banks and credit card companies have a great deal of latitude when it comes to consumer lending, and there are very few regulations they must adhere to.  Here are some important facts about consumer lending, your rights to information, and what you can do to protect yourself.

The Banks Requirements:

Banks are free to set lending parameters on however they see fit.  Some banks seek to take minimal risks on the loans they give out, and therefore will require a higher credit rating.  Other banks extend credit more freely and provide opportunities to a greater portion of the population.  Those banks will require a far lower credit rating.  However, they are free to set these terms as they see fit.  They just cannot set parameters that discriminate, or have the effect of discriminating, based on race, age, national origin, religion, or gender.

In order to ensure that lenders are not discriminating, the Equal Credit Opportunity Act requires that disclosure be sent to you when adverse action is taken on your application.  Adverse action can be an outright denial or acceptance of lesser terms than originally sought.  The disclosure must identify the particular reason for the denial of credit.  If a credit report was used in the decision process, then the lender must disclose which credit bureau(s) provided a report and what information appeared on the report that caused the denial.

The disclosure provided by the lender must also advise you of other rights you have under the Fair Credit Reporting Act.  The disclosure must notify you that you are entitled to obtain a copy of your report from the credit bureau at no charge, and it must notify you that you have the right to dispute inaccurate information on your report.   These letters provide valuable information to attorneys handling FCRA cases, so don’t tear them up and throw them out when you receive one.

What Can the Consumer Do?:

Quite simply, follow the instructions on that denial letter.  Identify the credit bureaus that provided a report.  Send them a request for a copy of your report along with a copy of the denial letter so they can see that you are requesting your free report.   Within a week or two you will receive a copy of your credit report in the mail.  Take a moment to compare the report with the statements in the letter.  Do they match?  Are the reasons for the credit denial apparent on the report?  If it is, then you at least have your answer, and you know what needs to be done to improve your credit to have a better chance next time.  However, if the reasons for the denial are not apparent on the credit report you received, you should contact us now – Contact SmithMarco, P.C. for a completely free case review.

Larry Smith

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