What must lenders do if a consumer's application for credit is denied?

Lenders are required to provide a written explanation of a credit denial as part of compliance with the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA). This written notice must include the specific reasons for the denial or inform the consumer that they can request the reasons within a reasonable time frame.

Written communication is essential in these situations, as it ensures that the consumer fully understands the reasons behind the lender's decision. This is not only a regulatory requirement but also a proactive approach to customer service, as it allows consumers the opportunity to improve their credit profile or to understand the aspects that may have negatively impacted their application.

The other options do not fulfill the legal obligations imposed on lenders. Verbal notifications alone do not provide the necessary documentation or clarity that may be needed, while requiring a consumer to reapply or contacting them with alternative options does not align with the requirement to formally explain the reasons for the denial. The focus on providing clear, written communication protects consumers and fosters transparency in the lending process.