All Mike Jacobs wanted was an answer.
To Jacobs, a denial didn’t make sense.
“I ran my credit report, which is unblemished,” said Jacobs, 53. “The credit report was all positive with no derogatory, negative or late payments recorded.”
He (and Bamboozled, for that matter) thought the lender might be in violation of the Fair Credit Reporting Act (FCRA) for not promptly answering his request for a reason for the rejection.
Jacobs was wrong. Bamboozled was wrong. But the lender’s molasses response was wrong, too.
Here’s what happened.
APPLICATION AND DENIAL
Mike and Karen Jacobs visited the East Hanover Best Buy store on Oct. 24, 2011 to purchase a laptop computer.
“To apply for the card I entered information on the touch pad near the register,” Jacobs said. “After a few minutes the sales associate told me I was rejected and needed to apply again.”
Because Karen Jacobs had to get back to work, Mike Jacobs told the salesman he’d return in 15 minutes to finish the process after driving his wife.
When Jacobs got back to the store, he tried again. The salesman told Jacobs he had to call the bank — HSBC — directly. Jacobs was unable to get through on his cell phone, so the salesman called from the store phone.
After a few minutes, the salesman hung up the phone. Jacobs said the salesman reported the application had been “rejected and a letter would be forthcoming with the reason.”
Jacobs used another credit card for the purchase and he left the store, but he was uneasy about the denial.
“My concern about denied credit was, ‘Why?’ ” he said. “I wanted to correct any errors that might haunt me in the future.”
He decided to wait for the letter from HSBC, known as an “adverse action” letter, and he received two copies on Oct. 28.
“For specific reasons or to review your application, please call us at. … We will send you a written statement of the specific reason for your denial within 30 days of receiving your request,” the letters said.
On Nov. 3, Jacobs said he called HSBC. The rep promised to send the explanation letter in seven to 10 business days, Jacobs said.
Around the same time, Jacobs said he made the request for information in writing to the address listed on his adverse action letter.
By Dec. 5, he hadn’t received anything, so he called again. The rep explained Jacobs was denied because of an error with his Social Security number, and the letter was promised again in seven to 10 business days.
By Dec. 16, no letter.
Jacobs wrote another letter to HSBC, repeating his request.
By Dec. 31, he still had no written notification, so he reached out to Bamboozled.
Jacobs said he thought the bank was in violation of FCRA because it didn’t respond to his requests in writing in 30 days.
We reached out to HSBC, which said it would look into the issue. In the meantime, on Jan. 5, Jacobs finally received the long-awaited letter, which was dated Dec. 29.
“We were unable to approve your application due to unverifiable information on your application,” it said.
That’s what he had been waiting for.
We wanted to know what took so long.
While HSBC looked for answers, we researched FCRA and we learned something new.
“FCRA deals with consumer reporting agencies,” said Federal Trade Commission spokeswoman Katherine Armstrong. “For example, if a creditor, a landlord, an employer obtains a consumer report and they make an adverse action denying credit or employment or a rental because of information based in whole or in part on the consumer report, the point is to let consumers know when adverse action is taken against them so they can correct inaccurate information.”
Ah. So because Jacobs’ credit denial — because of a transposed Social Security number — was at the application level, FCRA doesn’t apply.
So what does FCRA do?
If you’re denied among other things credit, a job or insurance (that good old “adverse action” phrase comes into play here) because of information in your credit report, you have the right to know what agency provided that information.
You have the right to a free credit report if: Someone took an adverse action against you because of information in your report, you are the victim of identity theft, your file contains inaccurate information because of fraud or you are on public assistance.
The latest addition to FCRA gives consumers a free copy of their credit report (even without adverse action) from Equifax, Experian, and TransUnion once a year. You can get them at AnnualCreditReport.com.
There are also other protections, but there are no rules that concern rejections based on something other than a credit report (except for those that deal with discrimination issues, and those are covered by a different rule).
Jacobs and Bamboozled were surprised to hear the news. And given its lack of response, it seems HSBC was a bit surprised, too.
In fact, we didn’t get an answer from the bank until after we informed HSBC that it apparently didn’t have to work within a particular time frame.
“We responded swiftly, providing a decline letter days after the application was submitted,” said spokesman Neal McGarity. “An appropriate adverse action letter was provided in compliance with applicable law.”
Yes, the adverse action letter was swift. That was never an issue. Getting the reason for the decline wasn’t swift at all, at least not by our calendar.
Jacobs understands he was mistaken about FCRA, but that doesn’t change what he was worried about in the first place.
“My major concern was negative information in my credit report. The error was simple and the worry was compounded by HSBC foot dragging,” Jacobs said.
It’s understandable that a consumer might be wrong about FCRA, but in more than two months of contact — including HSBC reps saying multiple times the explanation letter was on the way — it’s surprising that no one at the bank knew or told Jacobs that it was not required to respond in any particular time frame to his request.
It’s nice to learn something new once in a while.