Compliance Alliance Q&A
Question of the Week: November 30, 2023
Q: If we have a customer with a credit card which is currently delinquent according to the agreement, are we required to provide an Adverse Action Notice before closing it out due to charge off?
A: Subject to any language within the loan agreement providing otherwise, the definition of "adverse action" within Regulation B provides a specific exemption for accountholders that are currently delinquent at the time an action is taken, as you can see below. Therefore, an adverse action notice is not necessary when closing an account due to a current delinquency.
"(2) The term does not include:
(ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;
....
2. Current delinquency or default. The term adverse action does not include a creditor's termination of an account when the accountholder is currently in default or delinquent on that account. Notification in accordance with § 1002.9 of the regulation generally is required, however, if the creditor's action is based on a past delinquency or default on the account."
https://www.consumerfinance.gov/rules-policy/regulations/1002/2/#7ae2562961d72df6ca35db9818a90553ee87215eec5e8e9b1b9521e1
As always, if you have any additional questions about these proposed amendments, feel free to contact us on the Hotline.”
Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call (888) 353-3933 or email info@compliancealliance.com and ask for our Membership Team. A: Subject to any language within the loan agreement providing otherwise, the definition of "adverse action" within Regulation B provides a specific exemption for accountholders that are currently delinquent at the time an action is taken, as you can see below. Therefore, an adverse action notice is not necessary when closing an account due to a current delinquency.
"(2) The term does not include:
(ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;
....
2. Current delinquency or default. The term adverse action does not include a creditor's termination of an account when the accountholder is currently in default or delinquent on that account. Notification in accordance with § 1002.9 of the regulation generally is required, however, if the creditor's action is based on a past delinquency or default on the account."
https://www.consumerfinance.gov/rules-policy/regulations/1002/2/#7ae2562961d72df6ca35db9818a90553ee87215eec5e8e9b1b9521e1
As always, if you have any additional questions about these proposed amendments, feel free to contact us on the Hotline.”