A counteroffer under Regulation B is what happens when a creditor reviews your credit application and, instead of approving or denying it outright, proposes different terms: a smaller loan, a higher rate, a co-signer, additional collateral. Regulation B implements the Equal Credit Opportunity Act, and it gives you a defined window to respond. If you neither accept nor use the credit offered within 90 days, the application is treated as denied.1Consumer Financial Protection Bureau. 12 CFR Part 1002 – Equal Credit Opportunity Act (Regulation B)
How a Counteroffer Differs From a Denial
Regulation B defines adverse action as a refusal to grant credit in substantially the amount or on substantially the terms you requested, unless the creditor makes a counteroffer and you accept or use the credit offered.2eCFR. 12 CFR 1002.2 – Definitions A counteroffer on its own is not adverse action. It only becomes one if you let it expire without accepting.
That matters. Adverse action triggers specific disclosure rights and leaves a visible trail. A counteroffer pauses that trigger and gives you time to evaluate the revised terms before anything hardens into a denial.
When You Should Hear Back
Once the creditor has your completed application, it must notify you of the action taken within 30 days. That deadline covers approvals, counteroffers, and denials alike.3eCFR. 12 CFR 1002.9 – Notifications
A completed application means the creditor has received all the information it regularly obtains and considers for that type and amount of credit, including credit reports, any follow-up information requested from you, and any government approvals needed to guarantee or insure the loan.2eCFR. 12 CFR 1002.2 – Definitions The creditor has to use reasonable diligence in gathering this information, so a lender dragging its feet on its own paperwork doesn’t push back your 30-day clock.
Most lenders send a combined notice that denies your original terms and presents the counteroffer in the same document. The regulation expressly permits this.4Consumer Financial Protection Bureau. 12 CFR 1002.9 – Notifications The practical reason: if you don’t accept, the creditor doesn’t have to send a second adverse action notice later, because the combined notice already contains the required disclosures.
What the Counteroffer Notice Must Tell You
When the counteroffer notice is combined with adverse action disclosures on your original terms, the written notification has to include several specific elements.4Consumer Financial Protection Bureau. 12 CFR 1002.9 – Notifications
- A clear statement of the action taken, such as “your application for a $200,000 loan at 6.5% was not approved as submitted.”
- The name and address of the creditor.
- The ECOA anti-discrimination notice: a statement that federal law prohibits creditors from discriminating on the basis of race, color, religion, national origin, sex, marital status, or age, or because your income comes from a public assistance program, or because you’ve exercised rights under the Consumer Credit Protection Act.3eCFR. 12 CFR 1002.9 – Notifications
- The name and address of the federal agency that oversees the creditor’s compliance. The regulation directs creditors to Appendix A of Part 1002 for the correct agency.
- Either the specific reasons the original terms were denied, or a notice that you can request those reasons in writing within 60 days.
The counteroffer terms themselves also need to be spelled out clearly enough that you can compare them against what you asked for. A smaller loan, a higher rate, new collateral, a required co-signer: whatever changed, the notice should say so.
The reasons the creditor gives for denying your original terms have to reflect factors it actually considered. Official guidance says disclosing more than four reasons is “not likely to be helpful.”5Consumer Financial Protection Bureau. Comment for 1002.9 – Notifications A lender using a credit scoring model must identify the scoring factors where your numbers fell furthest below the threshold. A lender using judgment-based underwriting must point to the specific parts of your application that drove the decision. Boilerplate that doesn’t connect to your actual file isn’t compliant.
One wrinkle for joint applications: when more than one person applied, the creditor only has to send the notice to one of you. If there’s an obvious primary applicant, that person gets the notice.6eCFR. 12 CFR 1002.9 – Notifications A spouse or business partner shouldn’t expect to receive an independent copy.
Your Three Options After Receiving a Counteroffer
You can accept, reject, or wait.
Acceptance usually means signing updated loan documents or confirming through the lender’s portal. The transaction then moves forward on the new terms.
Rejection can be as simple as calling your loan officer or sending a written response, depending on the lender’s procedures. The application is then effectively closed.
Doing nothing is also a choice, and it’s the one with a clock attached. If you neither accept nor use the credit offered within 90 days of the counteroffer notification, Regulation B treats the situation as adverse action, and your original application is considered denied.3eCFR. 12 CFR 1002.9 – Notifications
Read that rule carefully. The 90 days is the deadline for when adverse action kicks in, not a guarantee that the offer stays open the whole time. Official interpretation says the regulation “does not require a creditor to hold a counteroffer open for 90 days or any other particular length of time.”4Consumer Financial Protection Bureau. 12 CFR 1002.9 – Notifications A creditor can pull the counteroffer in two weeks if those terms are no longer available. What it cannot do is sit on your application past 90 days without either your acceptance or a formal denial.
If the lender already sent a combined notice at the start, no second notice is required when the 90 days run out. The disclosures you’d otherwise get are already in your hands. If the lender sent only a standalone counteroffer without the adverse action disclosures, it owes you a proper adverse action notice once the window closes.
If the Credit Is for a Business
The rules shift when the applicant is a business, and the shift depends on size.
For businesses with gross revenues of $1 million or less in the preceding fiscal year, the notification rules mostly mirror consumer credit, except the statement of action taken can be oral or written.3eCFR. 12 CFR 1002.9 – Notifications
For businesses with gross revenues above $1 million, the obligations are lighter. The creditor only needs to notify the applicant of the action taken, orally or in writing, within a “reasonable time.” There’s no 30-day deadline. The creditor doesn’t have to provide specific reasons for the denial on its own initiative, only if the applicant requests them in writing within 60 days.4Consumer Financial Protection Bureau. 12 CFR 1002.9 – Notifications Creditors can rely on the applicant’s own statement about revenue when deciding which rule set applies.
If a Creditor Doesn’t Follow These Rules
A creditor that violates Regulation B’s counteroffer requirements is liable under the Equal Credit Opportunity Act. You can sue in federal court and recover actual damages for any financial harm. On top of that, a court can award punitive damages of up to $10,000 per individual plaintiff. In a class action, punitive damages are capped at the lesser of $500,000 or one percent of the creditor’s net worth.7Office of the Law Revision Counsel. 15 USC 1691e – Civil Liability Courts also award attorney’s fees and costs to successful plaintiffs, which makes smaller claims viable to litigate. Punitive damages don’t apply to government creditors.
The statute of limitations is five years from the date of the violation.7Office of the Law Revision Counsel. 15 USC 1691e – Civil Liability If a federal agency or the Attorney General starts an enforcement action within that window, affected applicants get an additional year from the start of that proceeding to file a private claim. The Consumer Financial Protection Bureau and other supervisory agencies can also pursue enforcement separately, imposing fines and requiring corrective measures through their examination process.