We travel around a lot … hearing war stories, sharing ideas, witnessing the right and the wrong way to do any variety of things (sort of like a honeybee). So this week we thought we’d share an issue we’ve seen a lot of in the past month, something that keeps popping up.
The Massachusetts Adverse Action requirements.
Most everyone is comfortable with the Federal requirements (under ECOA) for Adverse Actions … 30-days, notice, etc. etc. But Massachusetts has its own Adverse Action rules, and we have to comply with both, they’re not the same! Different disclosure. Different timing requirements. But probably all on the same form (phew).
Let us go through the basics:
There are three requirements that Massachusetts sets forth regarding Adverse Action notices that are not found in ECOA.
1. If your decision was wholly or partially due to information contained in a consumer report from a consumer reporting agency, you have to, within ten (10) business days of your decision, notify such consumer in writing against whom such adverse action has been taken.
This 10- day requirement is not found in ECOA. Under ECOA, for instance, you are required notify the applicant within 30 days after receiving a completed application of the adverse action on the application.
2. You HAVE to provide written notice as follows:
“You have the right to obtain a free copy of your credit report within sixty days from the consumer credit reporting agency which has been identified on this notice. The consumer credit reporting agency must provide someone to help you interpret the information on your credit report. Each calendar year you are entitled to receive, upon request, one free consumer report.
You have the right to dispute inaccurate information by contacting the consumer credit reporting agency directly. If you have notified a consumer credit reporting agency in writing that you dispute the accuracy of information in your file, the agency must then, within thirty business days, reinvestigate and modify or remove inaccurate information. The consumer credit reporting agency may not charge a fee for this service.
If reinvestigation does not resolve the dispute to your satisfaction, you may send a statement to the consumer credit reporting agency, to be kept in your file, explaining why you think the record is inaccurate. The consumer credit reporting agency must include your statement about the disputed information in a report it issues about you”.
3. Finally, under Massachusetts law, you HAVE to notify the consumer, in writing, at the time of a mortgage loan application denial of his right to appeal any such denial to the appropriate mortgage review board.
Similar to the two other requirements listed above, this is obligation is not found in ECOA.
At this point, you may be asking yourself, “well, I thought that federal law trumped state law. Therefore, as long as follow the federal law (ECOA) shouldn’t I be good?”
That’s a good question. However, (thankfully) ECOA provides guidance here. It states, “[e]xcept as otherwise provided in this section, this regulation alters, affects, or preempts only those state laws that are inconsistent with the Act and this regulation and then only to the extent of the inconsistency. A state law is not inconsistent if it is more protective of an applicant.”
What does that mean? It means that both Federal and Massachusetts State Law apply, because State Law only supplements the Federal ECOA requirements (and does not replace them).
Please call or post comments if anything here is unclear or you want to dive into anything here a little deeper. We’re excited for the opportunity to share some of our ideas and thoughts with the SNECG group … and we hope we continue to be a valuable partner to all its members.
Ben Giumarra is a regulatory consultant for Spillane Consulting Associates, Inc. out of Braintree, MA. SCA has provided Consulting, Professional Staffing, and Quality Control services to New England Financial Institutions since 1991, with a primary focus in mortgage lending.