Under what circumstance must a lender send a Notice of Action Taken?

A lender is required to send a Notice of Action Taken when a loan application is denied to inform the borrower of the decision. This notice must detail the reasons for denial and include information about the borrower's rights, helping to maintain transparency in the lending process. This requirement is established under Regulation B, which is part of the Equal Credit Opportunity Act (ECOA). It ensures that borrowers are aware of their application's status and the rationale for the lender's decision, thus promoting fair lending practices.

In contrast, a notice is not necessary when a loan is approved, as the borrower will usually receive confirmation through a loan agreement or approval documentation. Similarly, delays in the application process may not trigger a notice unless they lead to a denial; the lender typically communicates with the borrower regarding any delays on a case-by-case basis. Additionally, a notice is not required when a borrower makes a payment, as this is a routine transaction that does not affect the status of the loan application.