FTC targets Quicken Loans
December 31, 2002
Agency alleges online preapproval process violated credit reporting law
Inman News Features
The Federal Trade Commission said today that Livonia, Mich.-based online mortgage lender Quicken Loans has agreed to settle FTC allegations that it didn't provide adverse action notices required by federal law when a borrower was denied a loan on the basis of a credit report.
The proposed consent agreement announced today for public comment would require that Quicken Loans provide prospective borrowers a specific notice whenever it takes any adverse action with respect to an application for credit on the basis of information contained in a credit report. A consent agreement is for settlement purposes and isn't an admission of guilt, according to the FTC.
The FTC charged that Quicken Loans didn't comply with in whole or part on a credit report. The notice is designed to give borro the Fair Credit Reporting Act's requirement that lenders that deny credit, insurance, employment or certain other benefits must notify the applicant when the action was basedwers a chance to dispute the accuracy or completeness of the credit report information, according to the FTC.
The company reportedly told news organizations the settlement agreement won't affect its current business practices because it modified its online preapproval process in March 2001.
Quicken Loans offered approximately 35 different mortgage loan products on its Web site, plus other loan products that weren't available online, according to the FTC's information. The FTC said prospective borrowers were given an opportunity to obtain online preapproval for a loan based on Quicken Loan's review of their credit report and information they supplied to the online lender.
Borrowers who were preapproved received an online letter containing the terms of the preapproved loan. Borrowers who weren't preapproved received an advisory that said: "[b]ased on the information you have provided, it appears that you have unique borrowing needs," according to the FTC. Borrowers who didn't then submit additional contact information online to enable a Quicken Loans loan representative to contact them received no further contact from Quicken Loans, according to the FTC.
The FTC alleged that the failure to provide a preapproval letter was an adverse action that triggered the requirement of notice that the decision was based on the borrower's credit report.
The proposed consent agreement would require Quicken to provide a notice that complies with the credit reporting law whenever it takes an adverse action with respect to a borrower's application for credit based on information in a credit report. Failure to grant an online preapproval wouldn't be considered an adverse action triggering the notice requirement if Quicken Loans provided a disclosure that preapproval may be granted online or offline and that a decision might be delayed if Quicken Loans needed additional information.
Quicken Loans was spun off six months ago from its original parent company Intuit, which sold the operation to a holding company owned by private investors. The company license the Quicken Loans trademark from Intuit.
Copyright: Inman News Service
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