Adverse action notices for cosigners

When it comes to providing required disclosures and notices, compliance officers know they need to send them, but a question that often comes up is: Whom do you need to send them to? This NAFCU blog covers joint owners and applicants and this NAFCU blog covers adverse action notices for joint applicants. Today’s post covers whether a cosigner needs to receive an adverse action notice. Adverse action notices can be required under both Regulation B and the FCRA so both will be addressed, starting with Regulation B.

Section 1002.9(a) of Regulation B requires adverse action notices anytime a credit union takes “adverse action” against an “applicant.” Adverse action includes denying an application or credit limit increase request, terminating an account or making an unfavorable change to the account terms. An applicant is the “person who requests or who has received an extension of credit.” This definition goes on to explain a guarantor or cosigner is only considered an “applicant” under section 1002.7(d), which covers when a spouse or other person may be required to sign a credit or security instrument.

As a cosigner is not considered an “applicant” for purposes of the notice requirements, a cosigner does not need to receive an adverse action notice. It does not matter whether the applicant’s or the cosigner’s creditworthiness is the basis for the adverse action. However, if an adverse action notice is required, the notice must still be sent to the “applicant.”


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