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 Fair
Credit Reporting Act
FCRA
 Applicability to Financial Institutions
- Although the enforcement of the FCRA is not the
direct responsibility of the federal banking agencies (the FCRA is enforced by
the Federal Trade Commission), all of the federal regulatory agencies regularly
examine their banks for FCRA compliance as a part of the bank's overall
compliance program
- See
Compliance Examinations
 Banks
may be subject to the FCRA as
- Credit grantors
- Purchasers of dealer paper
- Issuers of credit cards and as employers
- In general, the FCRA does not apply to commercial
transactions including those involving agricultural credit
- A bank may also be subject to the FCRA as a
Consumer Reporting Agency
Consumer
Reporting Agencies
- The term consumer reporting agency applies to any
organization that renders a consumer report
- Accordingly, banks that issue
consumer reports, are covered by the FCRA
- A bank may become a consumer reporting agency if
it regularly furnishes information about a consumer to, for example, other
creditors, correspondents, holding companies, or affiliates, other than
information on its own transactions or experiences with the consumer
- However, if the bank furnishes information from
outside sources to another party involved in the same transaction, it does not
become a consumer reporting agency. For instance, such parties could
include:
- An insurer or a guarantor (as in the case of
Federal Housing Administration, VA, or private insurers or insured student loan
programs)
- Other financial institutions participating in the
transaction,
- A collection agency engaged in collecting on the
transaction
Obligations
of Consumer Reporting Agencies
- All consumer reporting agencies must
- Make required disclosures to consumers upon
request and proper identification
- Ensure that obsolete information is not reported
- Resolve accuracy disputes with customers
- Provide reports only for legitimate purposes
- Keep a dated record of each recipient of information
about a consumer, even when the inquiry is oral
- Train personnel sufficiently to explain information
furnished to customers
- A bank must also make to the consumer the
disclosures required of a user, whenever it, because of information from an
outside source, denies or increases the cost of credit requested by a merchant
to be extended directly or indirectly to a consumer
- However, the merchant must have advised the
consumer of the banks name and address before contacting it to prevent the bank
from becoming a consumer reporting agency
Required Disclosures SEC_CODE_REF_0090001192884
Information
from a Consumer Reporting Agency
- If consumer credit is denied or the cost of
credit is increased, partially or wholly on the basis of information from a
consumer reporting agency, the bank must disclose, orally or in writing, that
information in the report was used in the credit decision
- It must inform the consumer of the name and
address of the consumer reporting agency from which it received the information.
It is recommended that the disclosure be made in writing
Information
from a Source Other Than a Consumer Reporting Agency
- If consumer credit is denied or the cost of
credit is increased, partially or wholly on the basis of information obtained
from a source other than a consumer reporting agency, the user must disclose the
applicants right to file a written request for the nature of the information
within 60 days of learning of the adverse action
- Alternatively, the bank may
disclose the nature of the information and must do so, if it receives a request
from the consumer. That information should be sufficiently detailed to enable
the consumer to evaluate its accuracy.
- The source of the information need not be, but
may be, disclosed. In some instances, it may be impossible to identify the
nature of certain information without also revealing the source
General
- Required Disclosures
- The obligations imposed on users of credit
information are intended to allow applicants to correct erroneous reports. The
disclosures are triggered by either a denial of credit or an increase in its
cost. If credit is approved, but for a lesser amount than the original request,
a denial under the FCRA has occurred
- The disclosures required of users of credit
information also apply to outside information on co-makers, guarantors, or
sureties. Disclosures should be made to the party to whom they relate. In
addition, denial of an overdraft or refusal to authorize a credit card purchase
based on information from any outside source would trigger the need for
disclosures, assuming the information bears upon the consumers
creditworthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living. The requirements for
disclosures by users of information apply to the general type of consumer credit
transactions covered by
Reg Z
- Banks may disclose orally the information
required under the FCRA. However, if the action resulting in a denial of credit
under the FCRA also meets the definition of adverse action under Regulation B (12 CFR 202.2(c)), the bank must
make additional written disclosures to the consumer (Regulation B
12 CFR 202.9). The
required disclosures for both the FCRA and Regulation B may be provided on the
same disclosure form, but they are independent and one cannot substitute for the
other. To meet the requirements of both the FCRA and Regulation B, banks may
wish to use form letters, copies of which may be kept in files with the
completed application forms. That practice allows internal monitoring of
compliance and provides evidence in the event of litigation
Fair
Credit Reporting Act - Frequently Asked Questions
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