Adverse Action

If you're an auto dealer, lender, retailer, mortgage company or financial professional, there's a good likelihood that the Federal Adverse Action requirements apply to you. We're highlighting Adverse Action because noncompliance with these particular requirements can be very costly. LexAlign can help you.

Click on any title below to learn why LexAlign should be an essential component of your Adverse Action compliance practices.

Generally, an "adverse action" occurs when you take an action on a request for credit or existing credit account that is not favorable to the applicant or account holder, as a result of a decision on that person's credit worthiness or eligibility.

Under Federal law, anyone taking adverse actions is required to provide certain disclosures (notices) to the applicant or account holder, and to keep certain records.


If you fail to give an Adverse Action Notice (or related notice) when required to so, or your Adverse Action Notice is in the wrong format or doesn't contain the right disclosures, you could face debilitating penalties and liability. You have to be correct, and you have to be on time, every time.

Congress has given private persons the right to sue you for failing to give them the required notice at the required time. You could face liability of up to $10,000 (plus costs) in private individual actions and much, much more in class actions.

The regulators may also bring an enforcement action against you. Take the example of Stewart Finance Company, a group of related companies that were shut down by the Federal Trade Commission, and whose principals and owners were forced to pay hundreds of thousands of dollars in restitution for having failed to give Adverse Action Notices when required to do so, among other lapses and misdeeds.

The Adverse Action requirements apply to Lenders as well as many other types of companies.

If you help consumers or businesses apply for financing or any other type of credit, or if you purchase or maintain credit accounts, you may well be covered by these requirements. Unless you're performing a purely mechanical role and not making any individualized decisions on credit applications or accounts, you're most likely covered.

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The form and content of Adverse Action Notices and the related record-keeping requirements vary based on many factors, such as the type of person applying, what information you base your decision on, and how many applications you take. LexAlign can help you determine the particular requirements that apply to you.

After creating an account on LexAlign, auto dealers, lenders, retailers, accountants and related companies will see an "Adverse Action" topic button on their Topics page. This button gives you access to our Adverse Action App: a series of simple questions designed to determine if our Adverse Action products are suitable for you, and if so, what your particular needs are. Any manager, controller, F&I officer or other person familiar with your business should be able to complete the questions in minutes.

Based on your responses, we'll provide an Adverse Action Checklist, written Policy and set of Consumer Notices, all tailored to your business, and intended to help you avoid liability and attain compliance with the Adverse Action requirements.

Our Adverse Action topic is currently available to beta testers. If you're interested in participating in our beta round, please contact us.

If you're ready to get started, please let us know.

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