By Joe Patry
Recently, in Bartlett v. Bank of Am., NA, CIV.A. MJG-13-975, 2014 WL 3773711 (D. Md. July 29, 2014), a Maryland federal court rejected borrowers’ argument that their mortgage servicer violated the FCRA by accessing their credit reports without notifying them that it had done so in connection with a loan modification application. Id. at *1.
The Fair Credit Reporting Act (the “FCRA”), 15 U.S.C. 1681 et seq. requires that credit reporting agencies make a number of disclosures when financial institutions access a borrower’s credit report. See, e.g., 15 U.S.C. § 1681g. The FCRA also imposes certain requirements directly on mortgage lenders. 15 U.S.C. §1681g(g)(1). In particular, when a consumer applies for a new mortgage loan on a residential property, the mortgage lender must notify the consumer “as soon as reasonably practicable” that the lender accessed that consumer’s credit report. See Id.
The borrowers argued that because an application for a loan modification is an application for credit under the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. 1691 et seq., Bartlett, 2014 WL 3773711 at *4, an application for a loan modification requires that lenders must provide borrowers with the disclosures that mortgage lenders must provide under the FCRA. Id. Notably, ECOA is silent regarding notifying borrowers that lenders have accessed borrowers’ credit report in connection with a modification review. However, ECOA requires that a creditor must inform a borrower of its action on a borrower’s application for a loan modification within thirty days of the receipt of a completed loan modification application. See Piotrowski v. Wells Fargo Bank, N.A., CIV.A. DKC 11-3758, 2013 WL 247549, *6 (D. Md. Jan. 22, 2013).
The Bartlett court rejected borrowers’ argument, noting that ECOA and FCRA have different requirements, and holding that an application for a loan modification is not an application for a new loan. Bartlett, 2014 WL 3773711 at *4. Thus, when the mortgage servicer in Bartlett accessed the borrowers’ credit reports while it was reviewing them for a loan modification, the mortgage servicer was not required to notify the borrowers that it had done so. Id.
The Bartlett decision clarifies the interplay between ECOA and the FCRA and provides some guidance to lenders and consumers regarding what disclosures a lender must make when consumers apply for loan modifications.