We were recently told about a “carrot and stick” disclosure for counteroffers under ECOA. Our compliance department wasn’t able to find anything on it, but we would still like to know more. What is this “carrot and stick” disclosure?
The terminology “carrot and stick” for the subject disclosure is rarely used in common compliance parlance. However, there really is a disclosure under the Equal Credit Opportunity Act (ECOA) that old hands at mortgage compliance sometimes still refer to as “carrot and stick.”
This metaphorical term usually refers to the ability of a lender to issue a disclosure that combines a counteroffer with an adverse action notice. A creditor that gives an applicant a combined counteroffer and adverse action notice need not send a second adverse action notice if the applicant does not accept the counteroffer. [12 CFR Supplement I, Part 202, Official Staff Interpretations, § 202.9(a)(1)-6]
Appendix C to Regulation B, the implementing regulation of ECOA, includes a sample of a combined counteroffer and adverse action notice, which is given in form C-4 of Appendix C to the regulation. [12 CFR Part 202, Appendix C-4]
Lenders Compliance Group