[jfranz17]

When a borrowers application is run through the system and the system set-internal scoring declines them, we cannot see the exact reason for decline. It is LoanMe’s proprietary scoring system which makes us tick. Its system driven based on the borrowers history which quite literally turns it into an internal scoring number. If the number is lower than the threshold for that program, the system declines them. For declines that do not meet our minimum criteria, we do share that with our partners.

So what exactly do you disclose when giving adverse action notices? The Equal Credit Opportunity Act requires specific reasons for denial and in official staff interpretations, they go into detail as to what needs to be disclosed when using credit scoring systems:

4. Credit scoring system. If a creditor bases the denial or other adverse action on a credit scoring system, the reasons disclosed must relate only to those factors actually scored in the system. Moreover, no factor that was a principal reason for adverse action may be excluded from disclosure. The creditor must disclose the actual reasons for denial (for example, “age of automobile”) even if the relationship of that factor to predicting creditworthiness may not be clear to the applicant.
5. Credit scoring—method for selecting reasons. The regulation does not require that any one method be used for selecting reasons for a credit denial or other adverse action that is based on a credit scoring system. Various methods will meet the requirements of the regulation. One method is to identify the factors for which the applicant's score fell furthest below the average score for each of those factors achieved by applicants whose total score was at or slightly above the minimum passing score. Another method is to identify the factors for which the applicant's score fell furthest below the average score for each of those factors achieved by all applicants. These average scores could be calculated during the development or use of the system. Any other method that produces results substantially similar to either of these methods is also acceptable under the regulation.