Managing Debt

DEEEECLINED! Get the Details about Your Notice of Denial!

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Doritos and Mountain Dew. That's all I wanted. It was my third year of law school in
Florida. I walked into the gas station,
grabbed my goods, and went to the counter to begin a day with a friend on his
boat. I handed the items over to the
clerk, he scanned them with a ubiquitous beep.
I slid my card.


"DEEEEEECLINED!" He didn't so much scream it as much as he swung it like a blunt force weapon. The sound came from his not-so-insignificant gut. Like a Viking charging. My friend standing behind me heard him. Everyone heard him. I felt it. My mother, I am sure, felt a surge of disappointment six states away. I didn't have enough money to buy processed cheese and yellow caffeine. My friend who had been standing behind me gently added his items to mine, slid his card, and we left.

Getting declined hurts! It doesn't just hurt. It is personal. Somehow we feel it reflects on us as people. I know someone whose debit card was declined through a processing error—he paid with another card, went to the nearest ATM, printed of a balance receipt, and left it for the waitress to see that he really did have money.

People of all socio-economic classes currently struggle to obtain credit. According to the Federal Reserve Board's April 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices, banks continue to report "tightened credit standards on residential mortgages." So, if you've gotten rejected recently too, you are not alone. People who could get credit three years ago can't get credit now.

While the Viking at the gas station bellowed my rejection, you probably got a consumer credit "Dear John" letter, a.k.a. "Denial Notice". In no uncertain terms you were told "No." You are probably wondering why you received a denial notice, what it means, and what you can do.

The first step is to figure out why you were denied credit. The good news is that federal law grants you the right to obtain specific information. Getting your hands on the reason you were denied may not be easy, but the information can help you learn how to qualify next time.

Two key federal bodies of law provide you the right to receive specific information. First, the Equal Credit Opportunity Act (and Regulation B) prohibit certain discriminatory practices. These laws require creditors to explain the reason they denied you. They require creditors to keep certain records and send you these notices to document the actual reason you were denied. The second federal law requiring the denial notice is the Fair Credit Reporting Act. It requires creditors to tell you if they based your denial on information from a consumer-reporting agency (or other outside source) and to tell you if they obtained certain information from an affiliated company.

These laws mandate specific requirements for your denial letter. When you got denied, your notice was most likely titled: Disclosure of Right To Request Specific Reasons for Credit Denial or a Notice of Action Taken and Statement of Reasons. The first type of notice is very general and tells you that you can ask for more information. The second type of letter is more informative and actually lists the denial reason. If your notice didn't really tell you why you were denied, you can force the creditor to provide a specific reason, as long as you properly contact the creditor within 60 days.

To get the information, send a letter to the creditor at the address provided. Give them your information and tell them in writing that you "would like a statement of specific reasons why your application was denied." Always send your notice by certified mail, return receipt requested.

If your denial notice already included specific reasons, pay attention to those reasons. Creditors establish certain criteria, often called underwriting, and if you meet the criteria, creditors want to lend you money.  This is how they make money and stay in business. It is always possible the creditor may have misunderstood your financial situation.

Maybe you accidentally entered the wrong information on your application. If this is the case, the creditor may be amenable to providing credit if you can update your application with correct information. The creditor might have denied you based on your "length of employment."  While you may have entered "7" as the number of years you have worked for your employer, the credit analyst may have misunderstood your response to mean seven months. Or perhaps the creditor could not contact your credit references and denied you credit instead of notifying you about this problem. If you can alert your references, you may be able to get credit.

These are just examples, but you get the point. Don't curl up into ball or write poetry about it. Investigate it, learn from it, and use the information to your advantage. (And if you already wrote poetry about the experience, please post it!)

If you were denied because of something in your credit report, order your report and see what it says. If it contains inaccuracies, you can correct them with the consumer reporting agencies. 

Naturally, nobody wants to be declined. Certainly, "Dear John" letters don't feel good. That being said, federal law does provide you a great way to figure out what's going on with your credit. The good news is you can take the time to find out why you got denied so it won't happen again.

This article is
intended to be informational and does not provide legal advice nor create an
attorney-client relationship. Laws are constantly changing, and each federal
law, state law, and regulation should be checked by legal counsel for the most
current version and before acting on this information. Certification as a
Specialist in Consumer Finance Law by the


Commission on Continuing Legal Education
and Specialization is not currently available. None of the attorneys listed in
this communication are certified in any area of

Justin B. Hosie – Justin Hosie is a member of Chambliss, Bahner & Stophel, P.C.’s
Consumer Finance Group, focusing his practice on consumer financial
services, the Federal Electronic Signatures Act, Truth in Lending Act,
Equal Credit Opportunity Act, and Electronic Funds Transfer Act, as
well as state regulatory compliance.

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