Refusing, Terminating, and Limiting Credit
Question
These are the definitions of _____________: The refusal to grant credit in substantially the amount or on substantially the terms requested in an application (and the applicant uses or expressly accepts the credit offered) A termination of the account or an unfavorable change in the terms of an account, unless the change affects substantially all of the lender's accounts of that type. A refusal to increase the amount of credit available to an applicant who has made an application for an increase
Answers
Explanations
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A. B. C. D.A
The correct answer is A. Adverse action-12 CFR 202.2(c).
Adverse action refers to any action taken by a creditor or lender that negatively affects a consumer's ability to obtain credit, such as denying credit, increasing the cost of credit, or decreasing the amount of credit available to the consumer. Adverse action is regulated by the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, which is codified at 12 CFR Part 202.
Under 12 CFR 202.2(c), adverse action includes three specific types of actions:
The refusal to grant credit in substantially the amount or on substantially the terms requested in an application (and the applicant uses or expressly accepts the credit offered). This means that if a consumer applies for credit and the lender offers less favorable terms than what the consumer requested, but the consumer accepts the credit anyway, this is still considered adverse action.
A termination of the account or an unfavorable change in the terms of an account, unless the change affects substantially all of the lender's accounts of that type. This means that if a lender closes a consumer's account or makes a negative change to the terms of the account, such as increasing the interest rate, this is considered adverse action, unless the change applies to all of the lender's accounts of that type.
A refusal to increase the amount of credit available to an applicant who has made an application for an increase. This means that if a consumer already has credit with a lender and applies for an increase, but the lender refuses to grant the increase, this is considered adverse action.
In summary, adverse action is any action taken by a creditor that negatively affects a consumer's ability to obtain credit. The three specific types of actions that fall under adverse action are the refusal to grant credit in substantially the amount or on substantially the terms requested, a termination of the account or an unfavorable change in the terms of an account, and a refusal to increase the amount of credit available to an applicant who has made an application for an increase.
