Fair Credit Reporting - Federal Reserve System

1 fair Credit Reporting Background Consumer Report The fair Credit Reporting Act (FCRA) deals with the A consumer report is any written, oral, or other rights of consumers in relation to their Credit reports communication of any information by a consumer and the obligations of Credit Reporting agencies Reporting agency that bears on a consumer's and the businesses that provide information to creditworthiness, Credit standing, Credit capacity, them. The FCRA has been revised numerous times character, general reputation, personal character.

2 Since it took effect in 1971, notably by passage of istics, or mode of living that is used (or is expected the Consumer Credit Reporting Reform Act of to be used) or collected in whole or in part for the 1996, the Gramm-Leach-Bliley Act of 1999, and the purpose of serving as a factor in establishing the fair and Accurate Credit Transactions Act of 2003 consumer's eligibility for (FACT Act). Credit or insurance to be used primarily for The FACT Act created new responsibilities for personal, family, or household purposes.

3 Consumer Reporting agencies and users of con . Employment purposes; or sumer reports, many concerning consumer disclo . sures and identity theft. It also created new rights Any other purpose authorized under FCRA, for consumers, including the right to free annual section 604. consumer reports and improved access to report The term consumer report'' does not include information, with the aim of making data in the consumer Reporting System more accurate. Any report containing information solely about transactions or experiences between the con.

4 Sumer and the institution making the report;. Coverage Any communication of that transaction or experi . Business entities that are consumer Reporting ence information among entities related by agencies have significant responsibilities under the common ownership or affiliated by corporate FCRA; business entities that are not consumer control (for example, different banks that are Reporting agencies have somewhat lesser respon members of the same holding company, or sibilities. Generally, financial institutions are not subsidiary companies of a bank).

5 Considered consumer Reporting agencies; how Communication of other information among per . ever, those that engage in certain types of sons related by common ownership or affiliated information-sharing practices can be deemed con by corporate control if sumer Reporting agencies. In addition, the FCRA. applies to financial institutions that operate as It is clearly and conspicuously disclosed to the consumer that the information may be commu . Procurers and users of information (for example, nicated among such persons, and when granting Credit , purchasing dealer paper, or opening deposit accounts), The consumer is given the opportunity, before the time the information is communicated, to Furnishers and transmitters of information (by direct that the information not be communi.)

6 Reporting information to consumer Reporting agen cated among such persons;. cies or other third parties, or to affiliates), Any authorization or approval of a specific Marketers of Credit or insurance products, or extension of Credit directly or indirectly by the Employers. issuer of a Credit card or similar device;. Any report in which a person who has been Key Definitions requested by a third party to make a specific extension of Credit directly or indirectly to a Key definitions used throughout the FCRA include consumer (such as a lender who has received a the following: request from a broker) conveys his or her decision with respect to such request, if the third party advises the consumer of the name and Consumer address of the person to whom the request was A consumer is an individual.

7 Made, and such person makes the disclosures to Consumer Compliance Handbook FCRA 1 (11/06). fair Credit Reporting the consumer required under FCRA, section 615; employment purposes that adversely affects any or current or prospective employee A communication described in FCRA, subsec A denial or cancellation of, an increase in any tion 603(o) or (x) (which relate to certain investi charge for, or any other adverse or unfavorable gative reports and certain reports to prospective change in the terms of any license or benefit employers).

8 Described in FCRA, section 604(a)(3)(D). An action taken or determination that (1) is made Person in connection with an application made by, or transaction initiated by, any consumer, or in A person is any individual, partnership, corpora connection with a review of an account to tion, trust, estate, cooperative, association, govern determine whether the consumer continues to ment or governmental subdivision or agency, or meet the terms of the account, and (2) is adverse other entity. to the interests of the consumer Investigative Consumer Report Employment Purposes An investigative consumer report is a consumer A consumer report used for employment purposes report or portion thereof for which information on a is a report used for the purpose of evaluating a consumer's character, general reputation, per.

9 Consumer for employment, promotion, reassign . sonal characteristics, or mode of living is obtained ment, or retention as an employee. through personal interviews with neighbors, friends, or associates of the consumer, or with oth . ers with whom the consumer is acquainted or who Consumer Reporting Agency may have knowledge concerning any such infor . mation. However, such information does not A consumer Reporting agency is any person that include specific factual information on a consum (1) for monetary fees, dues, or on a cooperative er's Credit record obtained directly from a creditor nonprofit basis regularly engages in whole or in of the consumer or from a consumer Reporting part in the practice of assembling or evaluating agency when such information was obtained consumer Credit information, or other information directly from a creditor of the consumer or from on consumers, for the purpose of furnishing the consumer.

10 Consumer reports to third parties, and (2) uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer Adverse Action reports. With regard to Credit transactions, the term adverse action has the same meaning as used in sec . tion 701(d)(6) of the Equal Credit Opportunity Act Implementation of the FCRA. (ECOA), Regulation B, and the official staff com Some of the requirements for financial institutions mentary. Under the ECOA, an adverse action'' is a imposed by the FCRA are written directly into the denial or revocation of Credit , a change in the terms statute; others are contained in regulations issued of an existing Credit arrangement, or a refusal to jointly by the FFIEC agencies; still others are spelled grant Credit in substantially the same amount or on out in regulations issued by the Federal Reserve terms substantially similar to those requested.