Which document must be provided to a consumer if their loan application is denied?

When a loan application is denied, the lender is required to provide an Adverse Action Notice to the consumer. This document serves as a formal communication that explains the reasons for the denial. The notice typically includes information about the credit reporting agency that provided the credit report, along with instructions for the consumer on how to obtain a free copy of their credit report, which can help them understand the factors that contributed to the denial.

The Adverse Action Notice plays an important role in promoting transparency and fairness in the lending process, as it ensures that consumers are informed about their credit status and the specific basis for the credit decision. This requirement aligns with the regulations set forth in the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), which mandate that applicants receive clear information when adverse actions are taken based on their credit profiles.