When a lender decreases a credit limit, what must they inform the consumer about?

Study for the CFPB Mortgage Compliance Test. Learn with detailed quizzes and flashcards. Understand the key concepts, regulations, and guidelines with comprehensive explanations. Get ready to ace your exam!

When a lender decreases a credit limit, it is essential for them to inform the consumer that their credit limit has been decreased. This is a part of their obligation to provide transparency and clear communication about changes that affect the consumer’s credit access and financial situation. Consumers have the right to know when a significant change occurs, such as a reduction in their credit limit, because this can impact their credit score and available borrowing capacity.

This requirement aligns with regulatory expectations aimed at protecting consumers and ensuring they are aware of terms that might affect their financial health. By notifying the consumer about the decreased credit limit, the lender helps the consumer make informed decisions about their finances, such as managing their spending or understanding the implications for their credit utilization ratio.

In contrast, informing the consumer about the new interest rate, current account terms, or additional fees is not specifically mandated in the context of a credit limit decrease, making the communication about the decrease itself crucial.

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