What situations fall under the scope of an adverse action notice?

An adverse action notice is required when a lender takes a negative action regarding a consumer's application or account, specifically related to credit. This notice serves to inform the consumer of the unfavorable actions that have been taken and the reasons behind those decisions.

In this context, the correct choice highlights that a refusal to grant new credit and any unfavorable changes to existing terms are situations that fall under the scope of an adverse action notice. When a lender denies a credit application or modifies the terms of an existing loan negatively (such as increasing fees or reducing credit limits), the lender is obliged to notify the consumer of these adverse actions. This is important for transparency and consumer rights, as it allows borrowers to understand what actions have been taken and enables them to assess their credit standing.

In contrast, the other choices do not reflect situations that would require an adverse action notice. Granting new credit or increasing limits represents a positive outcome for the consumer, thus not warranting such a notice. Denying only mortgage applications is too narrow of a definition, as adverse actions can involve any type of credit application, not limited to mortgages. Lastly, changes in interest rates on existing accounts, unless they are unfavorable adjustments that signify an adverse action, may not qualify for a notice unless they affect