Consumer complaint received 2025-04-17 00:00:00
Product: Credit card — General-purpose credit card or charge card
Issue: Getting a credit card — Application denied
Company: DISCOVER BANK
State: HI

Complaint narrative:
Thanks. Ill review the Discover Financial Services prospectus and relevant consumer, banking, and UCC laws to help draft a formal dispute letter. The letter will argue that by submitting a credit application, you provided consideration ( a form of security ) and were therefore entitled to receive credit or something of value in return. Ill include applicable legal references and regulatory citations to support your position. 

Ill update you shortly with the completed letter and supporting argument. 

[ Your Name ] [ Your Address ] [ City, State ZIP ] [ Email Address ] [ Date ] * * Re : Dispute of Credit Application Denial * * I am writing to formally dispute the denial of my recent credit application with Discover. I received an adverse action letter dated [ Date ] stating that my application was denied, citing an XXXX credit score of 559 and various negative credit factors as the reasons for denial. I respectfully request that Discover Bank review and reconsider this decision. I believe the denial was improper in light of the consideration I provided in the application process and may not fully comply with applicable laws and regulations. 

This letter outlines the * * grounds for my dispute * * and the * * legal principles * * supporting my position. In summary, my application itself constituted a form of valuable consideration ( or security ) given to Discover, which I argue creates an obligation for Discover to provide something of value in return namely, the extension of credit or at least a fair outcome. Denying the application after accepting my information and promise to repay raises issues under * * contract law ( consideration ) * *, as well as potential non-compliance with * * consumer protection laws * * ( such as the Equal Credit Opportunity Act and Fair Credit Reporting Act ) and relevant * * Uniform Commercial Code ( UCC ) * * provisions. I will detail each of these points below : XXXX. * * Consideration Provided by Applicant ( Contractual Obligation and Prospectus Representations ) : * * By filling out and submitting my credit application, I provided sensitive personal and financial information, consented to a hard credit inquiry ( which itself has an impact on my credit score ), and effectively offered a promise to repay any credit extended to me. In other words, I gave something of value to Discover in the hopes of obtaining credit. Discovers own public filings underscore that such customer obligations are considered valuable assets to the company. For example, Discovers XXXX prospectus filed XX/XX/year> notes that the company holds tens of billions of dollars in * loan receivables * ( debts owed by customers ) on its balance sheet. These receivables which originate from customers credit agreements are effectively the product of customers promises to repay. In fact, as of that filing, Discover had * * {$86.00} XXXX in loan receivables * * owed by its customers. This clearly illustrates that when a customer is extended credit, the customers promise to repay ( the credit agreement ) becomes an * * asset of considerable value * * to Discover. 

Given this context, the act of applying for credit is more than a XXXX-sided request it is part of a mutual exchange. I offered to enter into a binding obligation, backed by my credit history and legal promise to pay, which would have created a valuable receivable ( a * * security or asset * * ) for Discover had the credit been granted. In contract law, such an exchange of promises and information is viewed as * * consideration * * : each party agrees to provide something of value to the other in a contract. Here, my * * consideration * * was provided upfront. By submitting my application, I effectively offered a contract : I would incur a debt and repay it with interest ( benefiting Discover ) in exchange for the extension of credit. Discover accepted and used my information ( for example, by pulling my credit report and presumably evaluating my data ), but then declined to extend the credit that was the expected exchange for my consideration. This result appears to be * * inequitable and contrary to fundamental contract principles * * essentially, XXXX side of the bargain ( my side ) provided value, but the other side did not reciprocate with the agreed-upon value ( the credit ). 

I urge Discover to consider that, under basic contract law, a contract requires * * mutual consideration * *. If XXXX party provides consideration ( here, my providing of personal data, a credit inquiry authorization, and a promise to take on and repay debt ), the other party must provide the bargained-for benefit ( the credit or loan ) or else the agreement fails for lack of consideration. It could be argued that by accepting my application and not extending credit, Discover has retained the benefit of my consideration without fulfilling its own promise effectively an * * unjust outcome * *. I ask that you review whether this denial, in light of the consideration I provided, is consistent with the fair dealing and good faith expected in consumer credit contracts. 

XXXX. * * Potential Violation of Equal Credit Opportunity Act ( ECOA ) Fair Treatment and Specific Reasons : * * The * * Equal Credit Opportunity Act * * ( ECOA ), XXXX XXXX. XXXX * * et seq. * *, is a federal law that protects applicants from unfair or discriminatory credit practices. Under XXXX ( implemented by Regulation B, XXXX XXXX  XXXX ), creditors must evaluate applications fairly and are * * required to provide applicants with specific reasons for any credit denial * * ( [ Equal Credit Opportunity Act | Federal Trade Commission ]. Simply stating a vague or generalized reason is not sufficient ; the reasons must indicate the principal factors that led to the adverse decision ( [ V. Lending Equal Credit Opportunity Act ] (. In my case, the adverse action notice listed my low XXXX credit score ( XXXX ) and certain unspecified negative factors from my credit report. I appreciate that Discover did disclose my credit score and some factors ; however, I am concerned that these reasons may not meet the spirit of ECOAs requirements for specificity. 

Regulation B explicitly cautions that creditors should not simply cite a credit score or say an applicant did not meet internal standards without further explanation, as that is generally deemed * * insufficient * * ( [ V. Lending Equal Credit Opportunity Act ]. The law expects creditors to state the real, substantive reasons for denial ( for example, delinquencies on accounts in last XXXX months or high credit utilization ratio, etc., if those were in fact the factors ) rather than a blanket your score was too low. In the staff commentary to XXXX regulations, it is noted that a statement that an adverse action was based on a credit scoring result alone is not adequate ; the creditor must disclose the key factors that contributed to that score or decision ( [ V. Lending Equal Credit Opportunity Act ]. If my denial letter did not clearly itemize those key factors, it may not be fully compliant. I request that Discover provide a more detailed breakdown of the exact reasons my application was deemed unsatisfactory, in compliance with XXXX requirement of a statement of specific reasons. This transparency is not only my right under the law, but it will also help me address any correctable issues in my credit profile. 

Moreover, XXXX * * prohibits discriminatory or arbitrary lending decisions * *. I trust that my denial was based solely on credit risk criteria. However, given the emphasis XXXX places on fair treatment, I ask Discover to ensure that my application was given an * * individualized and fair assessment * * not just an automated rejection due to a single metric. A credit score is a summary of ones credit history, but it may not tell the whole story. If there were any extenuating circumstances or recent improvements in my financial situation that a score alone doesnt capture, XXXX would support a creditor considering such information upon the applicants request. I am prepared to provide additional information ( e.g. proof of income, explanation of any past issues on my report, etc. ) and I ask that you consider such information in a * * reconsideration * * of my application. Denying credit without allowing an opportunity for me to address the cited issues could be seen as contrary to the spirit of XXXXs mandate of * * fair lending * *. 

XXXX. * * Fair Credit Reporting Act ( FCRA ) Accuracy of Information and Adverse Action Rights : * * The * * Fair Credit Reporting Act * *, XXXX XXXX. XXXX * * et seq. * *, governs the use of consumer credit information. Under FCRA, when a creditor takes an adverse action based on a credit report, the consumer has a right to be notified and provided with certain information. I acknowledge that Discovers denial letter did notify me of my credit score and the agency ( XXXX ) that supplied it, which is a requirement of FCRA. However, I want to emphasize my FCRA rights in this dispute because they underscore the importance of accuracy and fairness in credit decisions. 

FCRAs purpose is to ensure * * fair and accurate credit reporting * *, and it imposes duties on both credit bureaus and companies that use credit reports. Notably, companies that use a credit report to deny credit * * must notify the consumer of the adverse action and provide information about the credit bureau report used * * ( [ Fair Credit Reporting Act | Federal Trade Commission ]. This is to allow the consumer to verify the reports accuracy and dispute any errors. I am in the process of obtaining my full XXXX credit report ( to which I am entitled for free because I was denied credit ) and will carefully review it for any inaccuracies that might have contributed to the XXXX score. If I find erroneous or outdated information on my report, I will file disputes with the credit bureau under my FCRA rights. I ask that Discover likewise * * ensure that the information on which it based the denial was current and correct * *. If, for instance, certain negative items on my report have been resolved or were reported in error, then the premise for denial would be invalid. Under FCRA, furnishers of information ( creditors ) and credit bureaus have an obligation to * * investigate and correct disputed information * * ( [ Fair Credit Reporting Act | Federal Trade Commission ] ). I will exercise that right to correct my report if needed, and I request that Discover be willing to * * re-evaluate my application in light of any corrections or clarifications * * to my credit history. 

Furthermore, FCRA along with Regulation V and the Dodd-Frank Act amendments require that if a credit score is used in taking adverse action, the creditor should disclose not just the score but also the key factors that adversely affected the score ( sometimes listed as Reason Codes ). My letter did list a few factors ( such as number of inquiries, etc., if I recall correctly ). If any of those factors were misinterpreted or if my situation has changed ( for example, inquiries might have been from rate-shopping for a mortgage or auto loan, which can be viewed differently, or high balances might have since been paid down ), I urge you to take that into account. In sum, under FCRA I have the * * right to an accurate assessment * *, and I am ensuring my credit data is correct. I respectfully ask Discover to * * reconsider the decision once the accuracy of the underlying data is confirmed * *, as denying credit on the basis of incomplete or inaccurate data would be unjust and contrary to federal law. 

XXXX. * * Uniform Commercial Code ( UCC ) Negotiable Instrument and Obligation Principles : * * In addition to federal consumer laws, * * principles from the Uniform Commercial Code * * support my position that my credit application created an obligation on the part of Discover once I provided my signed promise. While a credit card application is not a negotiable instrument in the traditional sense ( its an application for a line of credit, not a check or promissory note since no specific sum is promised yet ), there are analogous concepts in the XXXX that shed light on the situation. XXXX * * Article XXXX * * deals with negotiable instruments ( like promissory notes and checks ), and it defines when an instrument is given for value and what constitutes consideration. Notably, * * XXXX XXXX * * states that an instrument is issued for value if it is issued for a promise of performance ( [ XXXX. Value and consideration. | XXXX XXXX XXXX ] for an instrument may be any consideration sufficient to form a contract ( [ XXXX. Value and consideration. | XXXX XXXX XXXX ]. The XXXX explicitly provides that the maker of an instrument has a defense if the instrument was issued without consideration ( [ XXXX. Value and consideration. | XXXX XXXX XXXX ] in other words, if XXXX party signs a promissory note but the other party gives nothing in return, the note is not enforceable due to lack of consideration. 

By analogy, when I signed the credit application, I was essentially offering a written promise to perform ( to repay any credit extended ). This can be likened to an * * instrument offered for value * * the value being my commitment to pay and the resulting account that Discover would own. Under XXXX principles, my promise would make the instrument ( application/contract ) * * valuable and binding, only if the other party ( Discover ) gives value in exchange * * ( [ XXXX. Value and consideration. | XXXX XXXX XXXX ] The expected exchange was the extension of credit. If no credit is extended ( no value given to me ), then the situation is akin to an instrument issued without consideration. In such a case, * * the issuer ( in a note scenario, that would be me as the applicant ) would have a defense or right to void the instrument * * ( [ XXXX. Value and consideration. | XXXX XXXX XXXX ]. Practically speaking, because my application was denied, I am not bound to any credit agreement but the * * implications are that Discover should not benefit from my signed promise or credit inquiry without fulfilling its end of the bargain * *. I provided my note ( my obligation to repay ) ; Discover chose not to fund it. Under contract and XXXX logic, Discover should then not retain any rights or benefits from that note. 

I also note that * * XXXX Article XXXX * *, which governs bank deposits and collections, contains the concept of * * dishonor * * of an item. If I were to draw an analogy, my credit application and the accompanying promise could be seen as a financial item presented for payment ( credit ) much like a check I wrote to draw on my own creditworthiness. Discovers denial of the application could be viewed as a * * dishonor of that item * *. While Article XXXX ( specifically XXXX XXXX ) deals with wrongful dishonor of a customers checks by a bank, the spirit of those rules is to prevent banks from improperly refusing valid instruments. Here, I presented a * * good faith financial instrument in the form of my application and personal covenant to repay * *, backed by my credit history and income. I contend that outright denial, absent any compelling reason beyond a single score number, is analogous to a * * wrongful refusal to honor a valid instrument or obligation * *. I provided what should be considered * * security * * ( my promise and credit data ) to back the extension of funds; rejecting it after the fact leaves that security on the table unused, to my detriment and with no benefit to me. 

In summary on this point, the * * XXXX teaches that agreements to pay must be met with payment ( or credit ) in return * * otherwise the agreement is null. I ask that Discover recognize my application as a serious financial instrument that carried an expectation of reciprocity. Denying me the credit effectively nullifies the contract we nearly formed. If Discover will not extend the credit, then at the very least principles of equity and good faith would dictate that any negative effects to me from the process be mitigated ( for example, I ask that the hard inquiry on my credit report be removed if the denial stands, since that inquiry now serves no legitimate purpose except to hurt my score ). I believe a far better resolution, however, is to * * extend the credit * * ( or offer a smaller credit line or a secured card option if appropriate ) so that both parties exchange value and the intent of the application is fulfilled. This would realign the outcome with contractual fairness.

Company response to consumer: Closed with explanation