Fair Credit Reporting Act is more than Fair Credit Reporting
By Ken Simmons, Managing Director, SEDA Experts LLC
The Fair Credit Reporting Act regulates the collection of credit information and the access to credit reports.
There are a few basic tenants to FCRA, including:
Users of a consumer report must have a legally permissible purpose to obtain a report. Opening an account, a request for credit or servicing an existing account (for example).
Consumers are provided an opportunity to opt-out of information sharing between affiliates.
Financial institutions in covered transactions that use credit scores must provide a disclosure containing information about the customer’s credit score.
Other aspects of the FCRA that are overlooked include:
Consumers have the right to place a “security freeze” on their credit report, which will prohibit a consumer reporting agency from releasing credit information without their express authorization. The security freeze is designed to prevent credit, loans, and services from being evaluated or granted without their knowledge. This is a fraud prevention tool as well.
The Act generally prohibits creditors from obtaining and using medical information in connection with any determination of the consumer’s eligibility, or continued eligibility, for credit. Lenders must be cautious when referencing medical collections as a reason for denial.
The risk-based pricing notice is also a creation of FCRA. The notice must be delivered to a consumer when the creditor, based on a credit report, extends credit on terms that are “materially less favorable” than the terms the creditor has extended to other consumers. The risk-based pricing notice requirement is designed primarily to improve the accuracy of consumer reports by alerting consumers to the existence of negative information in their consumer reports so that the consumers can, if they choose, check their consumer reports for accuracy and correct any inaccurate information.
Financial institutions must develop and implement reasonable policies and procedures for furnishing an address for the consumer that has reasonably been confirmed accurate. The continuous reporting of addresses works to maintain current information on the consumer and assists with fraud prevention.
Financial Institutions must establish and implement reasonable written policies and procedures regarding the accuracy and integrity of credit reporting that it furnishes to a consumer reporting agency.
Kenneth Simmons, with over 30 years of industry experience as Executive Vice President at leading financial institutions, and as Bank Examiner at OCC and FDIC, is a top expert in regulatory compliance, anti-money laundering, bank secrecy act, and financial crimes risk management.
Mr. Simmons is a Review Board Member & Faculty at the Association of Certified Anti-Money Laundering Specialists, and the North & South Metro Atlanta Compliance Roundtable Founder & Chairperson at the Community Bankers Association, and the founder and CEO of Compliance and AML Solutions.