Under which circumstance must a dealership send an adverse action notice?

A dealership is required to send an adverse action notice when a customer's credit application is denied. This requirement is part of the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA), which mandate that consumers must be informed when a credit application does not result in approval. The notice must detail the reasons for the adverse action and informs the applicant of their rights.

When a credit application is denied, the dealership has a legal obligation to provide this notice to ensure transparency in the credit decision-making process. This not only promotes fair lending practices but also allows consumers to understand the factors that contributed to the denial, which can help them in future applications.

In contrast, situations where a customer does not apply for credit, is approved for a lower loan amount, or when the dealership receives positive feedback from the lender do not trigger the requirement for an adverse action notice. They do not involve an adverse decision regarding credit that would necessitate informing the consumer under the applicable laws.