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When the bank reports a delinquency to a consumer reporting agency, must it notify each customer to whom negative information will be reported or may it provide the notice only to the primary borrower?

When the bank reports negative information to a consumer reporting agency about a delinquency, (Appendix B to Part 1022) must it provide the notice about providing negative reports to each customer to whom negative information will be or has been reported or may it provide the notice only to the primary borrower? In the case of a business account (line of credit or credit card), may the bank send the notice to the business or does it need to provide it to each guarantor?

Section §623(a)(G)(7)(i) requires financial institutions to provide the notice to any person to whom it has “extended” credit: “If any financial institution that extends credit…and furnishes negative information to…an agency regarding credit extended to a customer, the financial institution must provide a clear and conspicuous notice about furnishing negative information, in writing, to the customer.”

If there is a “primary borrower,” presumably there is also a joint borrower who has been “extended credit.” Any joint or co-borrowers should thus be notified if the bank reports negative information about them. The bank must provide the notice “prior to, or no later than 30 days after, furnishing the negative information.” Thus, it may include the notice at the time the loan is made (so long as it is not included in the Truth in Lending Act disclosures) or on a notice of default, a billing statement, or other document sent to the customer within that timeframe.

The language “regarding credit extended to a customer” eliminates guarantors, as the credit is not extended to the guarantor but to the business. That said, there is nothing prohibiting the bank from sending the notice to the guarantor, but it is not required. (May 2018)

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