November 11, 2014 at 10:33 am EST #6510rcooperMember
A question we received from a member:
We have a customer who has a home equity line of credit that we need to freeze because of past dues. The loan officer told the customer that they would need to freeze the line of credit. Do we have to give a written notification and do we need to give a certain number of days advance notice?November 11, 2014 at 10:33 am EST #6511rcooperMember
From the information you’ve given, it sounds like your action is permitted under Reg Z and that you would not need to send an AAN notice under Reg B within 30 days of taking in the adverse action (i.e. freezing the account). However, I still suggest that you review 1026.40(f) to make sure your action is permitted and also 1002.2(c) and it’s commentary for AAN information.
You may also have notification requirements under Reg Z which requires that in certain circumstances you must notify the customer of the account restriction. See the excerpt from Reg Z and its commentary below to determine if this notification would apply to your specific situation.
(iii) Notice to restrict credit. For home-equity plans subject to the requirements of §1026.40, if the creditor prohibits additional extensions of credit or reduces the credit limit pursuant to §1026.40(f)(3)(i) or (f)(3)(vi), the creditor shall mail or deliver written notice of the action to each consumer who will be affected. The notice must be provided not later than three business days after the action is taken and shall contain specific reasons for the action. If the creditor requires the consumer to request reinstatement of credit privileges, the notice also shall state that fact.
Commentary 9(c)(1)(iii) Notice to Restrict Credit
1. Written request for reinstatement. If a creditor requires the request for reinstatement of credit privileges to be in writing, the notice under §1026.9(c)(1)(iii) must state that fact.
2. Notice not required. A creditor need not provide a notice under this paragraph if, pursuant to the commentary to §1026.40(f)(2), a creditor freezes a line or reduces a credit line rather than terminating a plan and accelerating the balance.
You can access the regulations here: https://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR&searchPath=Title+12%2FChapter+X%2FPart+1026&oldPath=Title+12%2FChapter+X%2FPart+1026&isCollapsed=false&selectedYearFrom=2014&ycord=880
Note Added: You must also consider your contract and state law requirements, as well as the adverse action notification requirements under FCRA.
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