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Latest News: Compliance

Compliance Q & A: Fair Credit Report Act, HOEPA rules, Interest Rates

Friday, May 10, 2013   (0 Comments)
Posted by: Leah Redding
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Does the Fair Credit Reporting Act (FCRA) permit a credit union to share credit report information with the applicant in connection with a loan denial?


Yes, but the credit union should check its contract with the credit bureau to see if it is permissible to provide the member with an actual copy of the report. The FCRA (section 1681) permits the credit union to disclose the contents of the report to the consumer, "if adverse action against the consumer has been taken by the user based in whole or in part on the report 

Are credit unions required to give written adverse action notices?

The FCRA doesn’t require written notices. When a financial institution takes adverse action with respect to a consumer based—in whole or in part—on any information contained in a credit report, the financial institution shall provide an oral, written, or electronic notice of the adverse action to the consumer, according to Section 615 of the act. On the other hand, Regulation B (ECOA) requires adverse action notices to be in writing for consumer credit. The term "in writing” includes electronic delivery of the notice if provided in compliance with the federal ESIGN statute. But, you may give the notifications for business credit verbally or in writing. 

I understand that under the new HOEPA rules the credit union cannot extend a high-cost mortgage to a member unless the credit union receives written certification that the member has received counseling on the advisability of a high-cost mortgage. Does this mean that we cannot move forward with the loan process until we receive the certification?


No. According to the CFPB, although you cannot extend a high-cost mortgage until you receive the pre-loan certification, credit unions "may engage in other activities, such as processing an application that will result in the extension of a high-cost mortgage (for example, by ordering an appraisal or a title search.)” (Official Interpretation §1026.34)

What should a credit union do if the index it uses to calculate the interest rate for its home equity loans is no longer being published?


Regulation Z, Section 1026.40(f)(3)(ii) permits a credit union to change the index on an existing home equity loan should the current index become unavailable. However, the new index must be one which has an historical movement substantially similar to the original index and which would have resulted in an annual percentage rate substantially similar to the rate in effect at the time the original index became unavailable. A notice of change in terms must be sent to all members with existing home equity loans at least 15 days prior to implementation of the new index.