ARLINGTON, Va.—Is a credit union required to provide a cosigner with an adverse action notice?
The answer, said NAFCU Senior Regulatory Compliance Counsel Jennifer Aguilar, lies in requirements under Regulation B and the Fair Credit Reporting Act (FCRA).
"Section 1002.9(a) of Regulation B requires adverse action notices anytime a credit union takes 'adverse action' against an 'applicant,'" stated Aguilar. "Adverse action includes denying an application or credit limit increase request, terminating an account or making an unfavorable change to the account terms."
Aguilar noted that an applicant is defined as the "person who requests or who has received and extension of credit," explaining that a cosigner is only considered an applicant under a certain section of Regulation B; therefore, a cosigner does not need to receive an adverse action notice in most instances.
As for requirements under the FCRA, adverse action notices are required whenever a credit union takes action against a consumer based on information included in a consumer report.
"While adverse action has a more expansive definition under the FCRA, the FCRA looks to Regulation B for what constitutes adverse action in the credit application context," Aguilar added. "In other words, when it comes to credit applications, if it's not adverse action under Regulation B, then it's not adverse action under the FCRA."