OBLIGATIONS OF USERS UNDER THE FCRA
The federal Fair Credit Reporting Act (FCRA) requires that this notice
be provided to inform users of consumer reports of their legal obligations. State
law may impose additional requirements. This first section of this summary sets
forth the responsibilities imposed by the FCRA on all users of consumer reports.
The subsequent sections discuss the duties of users of reports that contain specific
types of information, or that are used for certain purposes, and the legal consequences
of violations. The FCRA, 15 U.S.C. 1681-1681u, is set forth in full at the Federal
Trade Commission's Internet web site (www.ftc.gov).
I. OBLIGATIONS OF ALL USERS OF CONSUMER REPORTS
A. Users Must Have a Permissible Purpose
Congress has limited the use of consumer reports to protect consumers' privacy.
All users must have a permissible purpose under the FCRA to obtain a consumer report.
Section 604 of the FCRA contains a list of the permissible purposes under the law.
As ordered by a court or a federal grand jury subpoena. Section
As instructed by the consumer in writing. Section 604(a)(2)
For the extension of credit as a result of an application from a
consumer, or the review or collection of a consumer's account. Section 604(a)(3)(A)
For employment purposes, including hiring and promotion decisions,
where the consumer has given written permission. Sections 604(a)(3)(B) and 604(b)
For the underwriting of insurance as a result of an application
from a consumer. Section 604(a)(3)(C)
When there is a legitimate business need, in connection with a business
transaction that is initiated by the consumer. Section 604(a)(3)(F)(i)
To review a consumer's account to determine whether the consumer
continues to meet the terms of the account. Section 604(a)(3)(F)(ii)
To determine a consumer's eligibility for a license or other benefit
granted by a governmental instrumentality required by law to consider an applicant's
financial responsibility or status. Section 604(a)(3)(D)
For use by a potential investor or servicer, or current insurer,
in a valuation or assessment of the credit or prepayment risks associated with an
existing credit obligation. Section 604(a)(3)(E)
For use by state and local officials in connection with the determination
of child support payments, or modifications and enforcement thereof. Sections 604(a)(4)
and 604(a)(5) In addition, creditors and insurers may obtain certain consumer
report information for the purpose of making unsolicited offers of credit or insurance.
The particular obligations of users of this "prescreened" information
are described in Section V below.
B. Users Must Provide Certifications
Section 604(f) of the FCRA prohibits any person from obtaining a consumer
report from a consumer reporting agency (CRA) unless the person has certified to
the CRA (by a general or specific certification, as appropriate) the permissible
purpose(s) for which the report is being obtained and certifies that the report
will not be used for any other purpose.
C. Users Must Notify Consumers When Adverse Actions Are Taken The term "adverse action" is defined very broadly
by Section 603 of the FCRA. "Adverse actions" include all business, credit,
and employment actions affecting consumers that can be considered to have a negative
impact -- such as unfavorably changing credit or contract terms or conditions, denying
or canceling credit or insurance, offering credit on less favorable terms than requested,
or denying employment or promotion.
1. Adverse Actions Based on Information Obtained From a CRA If a user takes any type of adverse action that is based at
least in part on information contained in a consumer report, the user is required
by Section 615(a) of the FCRA to notify the consumer. The notification may be done
in writing, orally, or by electronic means. It must include the following:
The name, address, and telephone number of the CRA (including a
toll-free telephone number, if it is a nationwide CRA) that provided the report.
A statement that the CRA did not make the adverse decision and is
not able to explain why the decision was made.
A statement setting forth the consumer's right to obtain a free
disclosure of the consumer's file from the CRA if the consumer requests the report
within 60 days.
A statement setting forth the consumer's right to dispute directly
with the CRA the accuracy or completeness of any information provided by the CRA.
2. Adverse Actions Based on Information Obtained From Third Parties
Who Are Not Consumer Reporting Agencies If a person
denies (or increases the charge for) credit for personal, family, or household purposes
based either wholly or partly upon information from a person other than a CRA, and
the information is the type of consumer information covered by the FCRA, Section
615(b)(1) of the FCRA requires that the user clearly and accurately disclose to
the consumer his or her right to obtain disclosure of the nature of the information
that was relied upon by making a written request within 60 days of notification.
The user must provide the disclosure within a reasonable period of time following
the consumer's written request.
3. Adverse Actions Based on Information Obtained From Affiliates If a person takes an adverse action involving insurance, employment,
or a credit transaction initiated by the consumer, based on information of the type
covered by the FCRA, and this information was obtained from an entity affiliated
with the user of the information by common ownership or control, Section 615(b)(2)
requires the user to notify the consumer of the adverse action. The notification
must inform the consumer that he or she may obtain a disclosure of the nature of
the information relied upon by making a written request within 60 days of receiving
the adverse action notice. If the consumer makes such a request, the user must disclose
the nature of the information not later than 30 days after receiving the request.
(Information that is obtained directly from an affiliated entity relating solely
to its transactions or experiences with the consumer, and information from a consumer
report obtained from an affiliate are not covered by Section 615(b)(2).)
II. OBLIGATIONS OF USERS WHEN CONSUMER REPORTS ARE OBTAINED FOR
EMPLOYMENT PURPOSES If information from a CRA is
used for employment purposes, the user has specific duties, which are set forth
in Section 604(b) of the FCRA. The user must:
Make a clear and conspicuous written disclosure to the consumer
before the report is obtained, in a document that consists solely of the disclosure,
that a consumer report may be obtained.
Obtain prior written authorization from the consumer.
Certify to the CRA that the above steps have been followed, that
the information being obtained will not be used in violation of any federal or state
equal opportunity law or regulation, and that, if any adverse action is to be taken
based on the consumer report, a copy of the report and a summary of the consumer's
rights will be provided to the consumer.
Before taking an adverse action, provide a copy of the report to
the consumer as well as the summary of the consumer's rights. (The user should receive
this summary from the CRA, because Section 604(b)(1)(B) of the FCRA requires CRAs
to provide a copy of the summary with each consumer report obtained for employment
III. OBLIGATIONS OF USERS OF INVESTIGATIVE CONSUMER REPORTS Investigative consumer reports are a special type of consumer
report in which information about a consumer's character, general reputation, personal
characteristics, and mode of living is obtained through personal interviews. Consumers
who are the subjects of such reports are given special rights under the FCRA. If
a user intends to obtain an investigative consumer report, Section 606 of the FCRA
requires the following:
The user must disclose to the consumer that an investigative consumer
report may be obtained. This must be done in a written disclosure that is mailed,
or otherwise delivered, to the consumer not later than three days after the date
on which the report was first requested. The disclosure must include a statement
informing the consumer of his or her right to request additional disclosures of
the nature and scope of the investigation as described below, and must include the
summary of consumer rights required by Section 609 of the FCRA. (The user should
be able to obtain a copy of the notice of consumer rights from the CRA that provided
the consumer report.)
The user must certify to the CRA that the disclosures set forth
above have been made and that the user will make the disclosure described below.
Upon the written request of a consumer made within a reasonable
period of time after the disclosures required above, the user must make a complete
disclosure of the nature and scope of the investigation that was requested. This
must be made in a written statement that is mailed, or otherwise delivered, to the
consumer no later than five days after the date on which the request was received
from the consumer or the report was first requested, whichever is later in time.
IV. OBLIGATIONS OF USERS OF CONSUMER REPORTS CONTAINING MEDICAL
INFORMATION Section 604(g) of the FCRA prohibits
consumer reporting agencies from providing consumer reports that contain medical
information for employment purposes, or in connection with credit or insurance transactions,
without the specific prior consent of the consumer who is the subject of the report.
In the case of medical information being sought for employment purposes, the consumer
must explicitly consent to the release of the medical information in addition to
authorizing the obtaining of a consumer report generally.
V. OBLIGATIONS OF USERS OF "PRESCREENED" LISTS The FCRA permits creditors and insurers to obtain limited consumer
report information for use in connection with unsolicited offers of credit or insurance
under certain circumstances. Sections 603(l), 604(c), 604(e), and 615(d) This practice
is known as "prescreening" and typically involves obtaining a list of
consumers from a CRA who meet certain pre established criteria. If any person intends
to use prescreened lists, that person must (1) before the offer is made, establish
the criteria that will be relied upon to make the offer and to grant credit or insurance,
and (2) maintain such criteria on file for a three-year period beginning on the
date on which the offer is made to each consumer. In addition, any user must provide
with each written solicitation a clear and conspicuous statement that:
Information contained in a consumer's CRA file was used in connection
with the transaction.
The consumer received the offer because he or she satisfied the
criteria for credit worthiness or insurability used to screen for the offer.
Credit or insurance may not be extended if, after the consumer responds,
it is determined that the consumer does not meet the criteria used for screening
or any applicable criteria bearing on credit worthiness or insurability, or the
consumer does not furnish required collateral.
The consumer may prohibit the use of information in his or her file
in connection with future prescreened offers of credit or insurance by contacting
the notification system established by the CRA that provided the report. This statement
must include the address and toll-free telephone number of the appropriate notification
VI. OBLIGATIONS OF RESELLERS
Section 607(e) of the FCRA requires any person who obtains a consumer report for
resale to take the following steps:
Disclose the identity of the end-user to the source CRA.
Identify to the source CRA each permissible purpose for which the
report will be furnished to the end-user.
Establish and follow reasonable procedures to ensure that reports
are resold only for permissible purposes, including procedures to obtain:
(1) the identity of all end users; (2) certifications from all users
of each purpose for which reports will be used; and (3) certifications that reports
will not be used for any purpose other than the purpose(s) specified to the reseller.
Resale's must make reasonable efforts to verify this information before selling
VII. LIABILITY FOR VIOLATIONS OF THE FCRA
Failure to comply with the FCRA can result in state or federal enforcement
actions, as well as private lawsuits. Sections 616, 617, and 621. In addition, any
person who knowingly and willfully obtains a consumer report under false pretenses
may face criminal prosecution. Section 619