Nationwide Mortgage Licensing System (NMLS) Practice Exam

What is the time frame for a lender to send an adverse action notice?

1. 5 days

2. 10 days

3. 30 days

4. 60 days

The correct answer is: 30 days

The proper time frame for a lender to send an adverse action notice is 30 days from the date the application is denied or the requested credit is not granted. This requirement is established under the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), which intend to ensure that consumers are informed about the reasons for adverse actions related to their credit applications. This notification serves important purposes: it gives applicants insight into the decision-making process and also informs them if they have the right to dispute the adverse information that might have impacted their application. The notice must contain specific details about the reasons for denial and the rights of the applicant. The other time frames provided do not align with the regulatory standards set forth in these laws, making them inappropriate for this scenario. Thus, the correct answer reflects the legal obligation lenders have to keep applicants informed in a timely manner.