• Although the FCRA does not expressly authorize it, screening is permissible if the bank follows certain rules
• The Act permits screening if the bank makes a firm offer of credit to each consumer whose name appears on the screened list
• Screening cannot be used to solicit responses for insurance, employment, or other purposes
• Bank cannot use a screened list solely to send promotional material
• FCRA is intended to safeguard the confidentiality of consumer credit information

• The statute requires a clear connection between the creditor and consumer before the creditor obtains a credit report
• A firm offer of credit to the consumer provides this connection. Permitting the practice of screening without this link would be contrary to the purpose of the act

• Bank should be specific in the credit-granting criteria it designates for targeting creditworthy consumers.  This will ensure that the bank is not obligated to extend credit to persons who do not meet its standards
• Bank may request tiered lists that identify consumers with different characteristics, enabling the bank to make different credit offers (e.g., various credit limits)
• Bank may include demographic analysis, such as data on geography (for example, to establish a service area), income, and type of employment (for example, by the use of specialized magazine subscription lists)

• This analysis may be applied by the credit bureau or by a third party after the initial screen
• The application of demographic analysis must not have the effect of unlawfully excluding persons

• If the bank wishes to limit the number of consumers to whom it offers credit, it may request the credit bureau or a third party to make random deletions from the list
• In all cases, whether an additional screen is obtained (either demographic or random), the bank must make an offer of credit to all consumers whose names appear on the final screened list

The bank must make a firm offer of credit to all consumers whose names appear on the screened list

Once the consumer has accepted the offer of credit, the bank cannot, except in limited circumstances, withdraw or deny the credit, even when the action is based on new information concerning the consumer

Only in specified and unusual circumstances that occur between the screen and the consumers acceptance may the bank withdraw an offer of credit

The bank may also withdraw the offer if it determines that the consumer:

• The bank may offer initially a modest credit limit and increase it after a full credit report has been obtained, provided the terms of the initial guaranteed credit are clearly specified
• A modest credit limit may not be lower than the usual minimum limit offered for a particular product. Once the consumer has accepted the initial credit offer, the bank may request information verifying income to offer a higher credit limit
• The bank may ask for identifying information (such as the home address and social security number) in the offer of credit
• The bank may impose a reasonable time limit on the period during which the offer of credit is available. It may treat any response received after the deadline as a regular credit application and may obtain a full credit report to evaluate the consumers creditworthiness
• Only when the consumer accepts the credit offer may the bank obtain a full credit report on the consumer. The consumers account may be reviewed regularly, and if the consumer does not prove to be creditworthy, the bank may close the account
• The bank may screen using its own records on the banks previous transactions or experiences with particular consumers without making an offer of credit. Any screening that uses records held by either subsidiaries or affiliates will trigger FCRA coverage
• The bank may require screened consumers accepting credit offers to create a legal obligation for the credit by, for example, signing a credit contract or security agreement

Yes. Reports may be obtained for this and other legitimate business purposes and for the review or collection of an account, employment, or insurance underwriting (16 CFR 604 see question 25 for a list of permissible purposes)

Yes. The bank must identify itself and certify to the reporting agency (consumer reporting agency) the purposes for which the information is sought. It must also certify that the information will be used for no other purpose (16 CFR 607)

No. A written blanket certification by the bank could cover all inquiries to a particular consumer reporting agency

Yes. A bank must make disclosures to the consumer if it denies employment or credit or insurance for personal, family, or household purposes, or increases the cost, even partially because of information in a consumer report from a consumer reporting agency. It must advise the consumer orally or in writing that information in the report caused or contributed to the denial or increase in cost, and state the name and address of the consumer reporting agency issuing the report. The bank is not required to disclose the nature of the information in the report (16 CFR 615(a) see question 56, which deals with the denial of employment based on a consumer report)

If the credit is subject to any condition (that is, credit would not have been extended without it) because of information in the consumer report, there is a denial that would require disclosures. Such cases are he requirement of a larger down payment, a shorter maturity, a cosigner, guarantor, or additional collateral. If a consumer applies, for example, for a credit card limit of $1,500 and only $1,000 is approved because of information in a consumer report, a denial has occurred

Yes. Disclosures must be made when credit for personal, family, or household purposes is denied or the charge is increased even partly because of information obtained from someone other than a consumer reporting agency bearing on the consumers creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Disclosure would not be required if the denial is based on the banks own experience with the consumer, on his/her credit application, or on the banks credit policies. Required disclosures must be made regardless of whether the information is fresh or in the files

 

At the time credit is denied or the charge increased, the bank must inform the consumer orally or in writing of his/her right to make a written request for disclosure of the nature of the information. If the consumer requests this information within 60 days, the bank must tell him/her the nature of the information orally or in writing. Note that these requirements apply to credit and not to insurance or employment when disclosures are required and a report from a consumer reporting agency is involved (16 CFR 615(b) see question 4)

The information would include that the consumers: credit history with another bank is poor; income is not what it is represented to be; period of employment, as specified on the application, is inaccurate; address is incorrect; debts are greater than represented; and statement that his/her debts are current is inaccurate. The nature of the information should be sufficient to enable the consumer to question its accuracy if he/she believes it is erroneous

The source may need to be disclosed to identify the nature of certain information but it is not required

Yes. Those disclosures should be made to the co-maker, guarantor, or surety to whom the information relates

Yes. Disclosures must be made if an overdraft is denied because of information from any outside source. This is so whether the account ordinarily includes overdraft credit privileges (for example, check credit) 


No disclosures must be made if the denial is based on the banks general policy not to honor overdrafts

Yes. The issuer must disclose the name and address of the consumer reporting agency, or the consumers right to know the nature of the information when it was received from someone other than a consumer reporting agency. In the latter instance, when a merchant is involved, it appears that the retailer must make disclosures on the issuers behalf, since the consumer must receive notice of his/her right at the time such adverse action is communicated to the consumer. However, if the information does not bear upon the customers creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living (for example, if the information is merely that the card is lost, stolen, or being used in an unauthorized manner), or if the information is not obtained from an outside source, disclosures would not be required

No. The user requirements of disclosure apply only in connection with employment or for credit or insurance for personal, family, or household purposes. For credit, they apply to the general type of consumer credit transactions covered by Regulation Z

No. Disclosure is not required in these circumstances. However, disclosures must be made if credit is denied or the cost increased because of information obtained from third parties when verifying information on the application (16 CFR 603(d)(3)(A))

No. Disclosures are required only when information is obtained from an outside source. However, disclosures must be made if the department or branch transmitting the information relays information obtained from third parties outside the bank, and the bank either denies or increases the cost of credit based upon the information

The bank should consider: filing the certification mentioned in question 2 with each consumer reporting agency whose services may be used; retaining a file copy; instructing employees that consumer reports may be obtained only for the purposes specified in the act and certification; developing procedures for making required disclosures to consumers when credit, insurance, or employment is denied, or when the cost of credit or insurance is increased, based on information obtained from outside sources; and recording all inquiries to reporting agencies or others, as well as information obtained through those inquiries, so that accurate disclosure can be made to consumers.  Forms may be useful for advising the consumer of the name and address of the consumer reporting agency (when a consumer report is involved), or his/her rights to request the nature of the information when other outside sources are involved

Yes. If the bank regularly furnishes information in its files about a consumer, other than information solely about its transactions or experiences with the consumer, it may be considered a consumer reporting agency. A consumer reporting agency is any entity that, for monetary fees or dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers to furnish consumer reports to third parties, and that uses any means or facility of interstate commerce to prepare or furnish consumer reports (16 CFR 603(d) and (f))

Yes. However, a branch or department of a bank may furnish information to another branch or department of that bank without becoming a consumer reporting agency

The bank may relate information solely about its transactions or experiences with the consumer. For example, the bank may disclose that the consumer had a history of delinquency and could give other information about the status of any loans or deposits with it. To ensure that it does not become a consumer reporting agency, it should not regularly issue information:

• Contained in credit applications bearing on the consumers creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living
• Obtained in reports from consumer reporting agencies or any other information obtained from third parties. For example, a bank that obtained information as a user may become a consumer reporting agency if it subsequently conveys the information to another bank

No. The bank would not become a consumer reporting agency since it is a joint user of the same information with the other party involved in the same transaction. For example, a bank does not become a consumer reporting agency by transmitting such information to an insurer or guarantor (as in the case of the Federal Housing Administration (FHA), Veterans Administration (VA), private insurers, or insured student loan programs) to a participating bank in connection with the same transaction, or to a collection agency in connection with its efforts to collect on the transaction. Furthermore, the procurement and transmission of a consumer report to FHA, VA, or other similar insuring or guaranteeing entity is to determine whether the entity will issue its insurance or guaranty to the holder of an obligation and not whether it will issue insurance to the consumer involved

No

Yes. Certain obsolete information may not be furnished by a consumer reporting agency. According to the act, the following subjects are obsolete:

• Bankruptcies that antedate the report by more than 10 years
• Suits and judgments, paid tax liens, and accounts placed for collection or charged to profit and loss that antedate the report by more than seven years
• Arrests, indictments, or convictions of crime that antedate the report by more than seven years
• Any adverse information that antedates the report by more than seven years. (Refer to 16 CFR 605 for information on when the time periods begin to run)

Yes. They do not apply in connection with a credit transaction expected to involve $50,000 or more in principal, or the underwriting of insurance that is expected to involve a face amount of $50,000 or more. They also do not apply to information for employment at an annual salary of $20,000 or more (16 CFR 605(b))

No. It need not remove the information from its files. However, by not removing it, the bank may be exposed to civil liability in the event that prohibited information is negligently released (16 CFR 617)

It must maintain procedures to ensure that the obsolete information specified in the act is not released, except when permitted (see question 22) in 16 CFR 604. Reasonable procedures also are necessary to ensure maximum possible accuracy of the information in any consumer report

 

Certifications must be obtained from all users of the information in any consumer report that it will be used only for authorized purposes and must not be released if the agency has any reasonable doubt that it will not be used

 

The identity of new users must be verified for authorized purposes. In addition, a consumer reporting agency has other responsibilities to consumers, as discussed under the next subhead (16 CFR 604, 605, and 607)

Reports may be furnished only:

• In response to a court order
• According to the written instructions of the consumer to whom it relates
• For an extension of credit involving the consumer (or review or collection of the consumers account)
• For employment purposes
• For the underwriting of insurance
• For a determination of the consumers eligibility for a license or other benefit granted by a governmental instrumentality in which the determination of an applicants financial responsibility or status is required by law
• For any other legitimate business need in connection with a business transaction involving the consumer (for example, on a consumer who wishes to establish a checking account in the bank, or for a builder checking the financial condition of a prospective buyer) (16 CFR 604)

It may also furnish identifying information to a governmental agency for other purposes. The information is such cases is limited to the consumers name, address, employment, and former addresses and places of employment (16 CFR 608)

Yes. Upon the request and proper identification of any consumer, the bank must disclose the nature and substance of all information, except medical, that it has in its files. In addition, it must disclose the sources of the information, except in the case of investigative consumer reports as noted in question 49. The bank also must disclose the recipients of any consumer report within six months preceding the request (two years in the case of reports furnished for employment purposes). Accordingly, a bank that is a consumer reporting agency should keep a dated record of each recipient of information about a consumer, even when the inquiry is oral (16 CFR 609)

No. A consumers general request about information in his or her file requires disclosure of the nature and substance of the information, as well as sources and recipients

Yes. Disclosure must be made only during normal business hours and only on reasonable notice by the consumer (16 CFR 610(a))

Yes. Disclosures must be made if the consumer appears in person and furnishes proper identification. Disclosures also must be made by telephone if the consumer makes a written request for telephone disclosure and properly identifies himself or herself. In making disclosures by telephone, the bank can require that any toll charge be borne by the consumer (16 CFR 610(b))

Yes. He/she can be accompanied by one other person, who must furnish reasonable identification. The consumer may be required to furnish a written statement granting permission to the bank to discuss the customers file in that persons presence (16 CFR 160(d))

Disclosures may be made either in writing or orally. If given orally, the consumer or his/her representative should be given reasonable opportunity to note down the information being disclosed

Yes. It must provide trained personnel to explain any information furnished to the consumer (16 CFR 610(c))

It means all of the information on that consumer (bearing on his creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living) recorded and retained by the bank, regardless of how the information is stored. Any bank that is a consumer reporting agency under the act should maintain a central file of information on the consumer, or be capable of collecting all the information it might have on the consumer in its various departments or branches for disclosure to the consumer (16 CFR 603(g))

Yes, depending on the time when the consumer requests information about his/her file. If he/she makes the request either within 30 days after receiving notice that a user of a consumer report has denied or increased the charge for credit or insurance (or denied employment) on the basis of the report, or within 30 days of notification from a debt collection agency affiliated with the bank that the consumers credit rating may be, or has been, adversely affected, the information must be furnished free of charge

 

However, the bank may impose a reasonable charge for making disclosures to the consumer if the request is not made within the 30-day time limit and the bank notifies the customer of the charge before making disclosures (16 CFR 612)

The bank must, within a reasonable period of time, reinvestigate and record the current status of the questioned information, unless it has reasonable grounds to believe that the dispute is frivolous or irrelevant

The act provides that the presence of information in the consumers file contradicting his/her contention does not, in and of itself, constitute reasonable grounds for believing the dispute is frivolous or irrelevant

The information must be deleted promptly from the file (16 CFR 611(a))

If reinvestigation does not resolve the dispute, the consumer is entitled to file a brief statement setting forth the nature of the dispute. This statement may be limited to 100 words, if the bank assists the consumer in writing a clear summary of the dispute. Unless there are reasonable grounds to believe that the dispute is frivolous or irrelevant, all subsequent consumer reports containing the information in question must clearly note that it is disputed by the consumer, and must provide either the consumers statement or a clear and accurate summary of it (16 CFR 611(b) and (c))

Yes. The consumer may ask a bank that is a consumer reporting agency to provide previous recipients with notification that the information has been deleted, or a copy of the statement, codification, or summary of the dispute. It must be given to any person specifically designated by the consumer who has received a consumer report containing the disputed information within the preceding two years for employment purposes, or within the preceding six months for any other purpose (16 CFR 611(d))

Yes. The bank must orally or in writing clearly and conspicuously disclose to the consumer his/her right to make the request. The disclosure must be made when, or before, the information is deleted or the consumers statement on the disputed information is received (16 CFR 611(d))

Yes, depending on when the consumer makes the request, whether the bank normally charges users of reports for furnishing them, and whether the material is found to be inaccurate or unverifiable. If the consumer makes the request either within 30 days after receiving notice that a user of a report has denied or increased the charge for credit or insurance (or denied employment) because of the report, or within 30 days of notification from a debt collection agency affiliated with the bank that the consumers credit rating may be, or has been, adversely affected, the information must be furnished free of charge.


If the request is received after 30 days, a charge may be made for furnishing notification to previous recipients. The amount must be indicated to the consumer before furnishing the information, and it may not exceed the charge that the bank would impose on each designated recipient for a consumer report. If the bank makes no such charge, then it may not charge the consumer for furnishing information about the dispute to previous recipients. In any event, the statute prohibits the imposition of any charge for notifying previous recipients about deletions of information that is found to be inaccurate or unverifiable (16 CFR 612)

Yes, if the bank wishes to avoid becoming a consumer reporting agency

 

When a dealer calls the bank before credit is extended to inquire whether it will either extend credit directly to his customer or purchase the retail contract, and the bank denies the credit or increases the cost, even partly because of information from outside sources, the dealer and the bank each must make certain disclosures to the consumer to keep the bank from being considered a consumer reporting agency

 

Whenever such a request is made, the dealer must advise the consumer of the name and address of the bank. If the bank denies credit or increases its cost, it must follow the normal procedures of a user of information from outside sources. If the banks decision was based on a report from a consumer reporting agency, it must give the consumer the name and address of the agency. If its decision was based on information from a third party that is not a consumer reporting agency, the bank must disclose to the consumer his/her right to make a written request to the bank within 60 days for disclosure of the nature of the information

 

If the decision to deny credit or increase its cost is based on the banks previous experience with the consumer or its general credit policy (for example, size of down payment or maturity required), it would not need to make any disclosure to the consumer. However, a denial requiring disclosures occurs when any condition is imposed on the dealer contract on the basis of information from any outside source. This may include increasing the discount or dealer reserve or taking the paper with recourse. It also may include requiring a larger down payment, shorter maturity, a co-signer, or guarantor (16 CFR 603(d)(3)(C) and 615)

No. Such a transaction is a business transaction that is generally beyond the scope of the act

It is a consumer report compiled from personal interviews, with neighbors, friends, associates, or others, about the consumers character, general reputation, personal characteristics, or mode of living (16 CFR 603(e))

When such a report is requested from a consumer reporting agency, the bank must, within three days, mail or deliver to the consumer written notice that an investigative report, including information about his/her character, general reputation, personal characteristics, and mode of living may be made. He/she must also be informed that he/she may make a written request for the nature and scope of the investigation. If the consumer makes a written request within a reasonable period of time, the bank must make a complete and accurate disclosure of the nature and scope of the investigation. One way to do this (although not required by law) would be to furnish the consumer with a copy of any questionnaires to be used in the investigation

 

Within five days after the consumers request (or within five days after the time the report was first requested by the bank, whichever is later), these disclosures must be made in writing by mailing them or otherwise delivering them to the consumer (16 CFR 603(e), 606, and 609(a)(2))

No. They are not applicable when the report is to be used for employment purposes and the consumer has not specifically applied for the position. In addition, they are not required if the bank conducts an investigation for its own purposes, using its own employees (16 CFR 606(a)(2))

The bank must make the user disclosures described in the first section of this handbook, Bank as a User of Consumer Reports

Yes. Adverse information (other than public record information) in such a report cannot be included in a subsequent consumer report unless verified in the process of making the subsequent report or unless received within the three months preceding the date the subsequent report is furnished (16 CFR 614)

Yes. However, if information is acquired solely for an investigative consumer report and is used for no other purpose, the source need not be disclosed (16 CFR 609(a)(2))

Yes. However, if it regularly furnishes information other than that about its own transactions or experiences with the person, it may become a consumer reporting agency (16 CFR 603(d) and 604)

It means a report used to evaluate a consumer for employment, promotion, reassignment, or retention as an employee (16 CFR 603(h))

Yes, except when the information will be used for the employment of a person at an annual salary which equals, or which may reasonably be expected to equal, $20,000 or more. In that case, the restrictions on obsolete information do not apply (16 CFR 605(b))

Yes. At the time the information is reported to the user, the bank must notify the consumer that public record information is being reported, together with the name and address of the person to whom it is being reported


As an alternative, the bank need not make these disclosures if it maintains strict procedures designed to ensure that, whenever public record information that is likely to have an adverse effect on a consumers ability to obtain employment is reported, it is complete and up-to-date. The statute provides that items of public record relating to arrests, indictments, convictions, suits, tax liens, and outstanding judgments shall be considered up-to-date if the bank reports the current public record status of the item at the time the report is submitted (16 CFR 613)

Yes. However, banks insured by the Federal Deposit Insurance Corporation and seeking to meet the requirements of section 19 of the Federal Deposit Insurance Act (12 USC 1829) should not rely entirely on a consumer report to obtain information about whether a person has been convicted of a crime involving dishonesty or breach of trust

Information relating to such crimes is relevant to meeting the requirements of section 19 regardless of when the conviction occurred, whereas such information, if older than seven years, will probably not be contained in a report from a consumer reporting agency, unless the report will be used in connection with employment at an annual salary of $20,000 or more

Generally, yes, if the bank requests the report from a consumer reporting agency. However, notification would not be required if the report is obtained in connection with employment, promotion, or reassignment for which the consumer has not specifically applied. Otherwise, he/she must be notified of the request for an investigative report within three days of the request, and the bank must otherwise comply with section 606, as outlined in questions 45, 46, and 47

Yes. If information in a consumer report from a consumer reporting agency contributes at all to a denial of employment, the person must be given the name and address of the consumer reporting agency making the report. However, if employment is denied because of information from a source other than a consumer reporting agency, no disclosures are necessary (16 CFR 615)

The act provides civil liabilities for either willfully or negligently failing to comply with the requirements of the FCRA. The liabilities apply to banks as users of consumer reports and as consumer reporting agencies where they are acting in that capacity. In the case of negligent noncompliance, a bank may be liable to the consumer for any actual damages sustained by the consumer, court costs, and reasonable attorneys fees. If the failure to comply is willful, a bank also may be liable to the consumer for punitive damages (16 CFR 616 and 617)

Yes. A user of information will not be held liable if the bank shows by a preponderance of evidence that at the time of an alleged violation it maintained reasonable procedures to ensure compliance (16 CFR 606(c) and 615(c))

Any action must be brought within two years of the date on which the liability arises, except when there has been a material and willful misrepresentation, in which case the action may be brought within two years of the misrepresentations discovery by the consumer (16 CFR 618)

Yes. The act provides for a fine of not more than $5,000 or imprisonment of not more than one year, or both, for any person who willfully and knowingly obtains information from a consumer reporting agency under false pretenses. The same criminal penalty can be imposed on any officer or employee of a bank that is a consumer reporting agency who willfully and knowingly provides information from a banks files about a consumer to a person not authorized to receive it (16 CFR 619 and 620)

This act does not exempt any person subject to the provisions of this act from complying with the laws of any state for the collection, distribution, or use of any information on consumers, except to the extent that those laws are inconsistent with any provisions of this act, and only to the extent of the inconsistency (16 CFR 622)