This seems to be an issue for the industry. Sounds legal?

Either way, it's ridiculous. If they can fix it, they should. But I've worked in industries where there are similar policies against approaching the line of coaching people around compliance. Dumb, but it wasn't our choice. Maybe it's a similar issue?

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Maybe. They also said they "cannot reverse it", which strikes me as a little serious.

Does that mean that even if I were to adjust my application they can just never accept it in perpetuity?