Question:

If a loan account is charged off and closed, are we required to send an Adverse Action Notice to the borrower?

Answer:

You would not need to provide an adverse action notice in the case you described, since it doesn’t meet the definition of Adverse Action in Reg B:

(2) The term does not include:

(i) A change in the terms of an account expressly agreed to by an applicant;

(ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;

Here is the Official Interpretation of this section:

2. Current delinquency or default. The term adverse action does not include a creditor’s termination of an account when the accountholder is currently in default or delinquent on that account. Notification in accordance with § 1002.9 of the regulation generally is required, however, if the creditor’s action is based on a past delinquency or default on the account.