How soon must an adverse action notice be sent after a credit application is denied?

The correct timeframe for sending an adverse action notice after a credit application is denied is within 30 days of the application's decision. This requirement is in line with federal regulations, specifically the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), which mandate that if a credit application is denied, the applicant must be informed of the adverse action and the reasons for the decision or the details needed to obtain the reasons.

This 30-day period allows the lender sufficient time to process the application and reach a decision while ensuring the applicant is informed in a timely manner. By adhering to this regulation, lenders promote transparency in the lending process and provide consumers with the information necessary to understand why their credit was not approved, enabling them to address any potential issues or seek alternative credit options.

Other options fail to meet regulatory standards. Sending the notice immediately upon receipt of the application does not account for the necessary processing time; notifying the applicant at the time of vehicle delivery would be inappropriate as it does not align with the timeline mandated by law; and sending the notice within 10 days of closing the dealership does not correspond to the 30-day requirement that is designed to protect consumers' rights.