Chapter 4: Federal Privacy Protection and Consumer Identification Laws

Fair and Accurate Credit Transactions Act (FACTA OR FACT ACT)

-2003; this was a time that identity theft was an ever-increasing problem for consumers and creditors -is intended to primarily help consumers fight the growing crime of identity theft -the law focused on accuracy, privacy, limits on information sharing, and new consumer rights to disclose

Minimum Data REQUIRED:

A covered institution must obtain from all customers opening a new account, at a minimum, the following : 1. Name 2. Date of Birth 3. Residential or work address for individuals, or physical location address for legal entities 4. For U.S. Citizens or legal entities organized under state law: A Tax Identification Number (TIN) 5. For Lawful Permanent Residents or non-immigrants: --A TIN -passport number and country of issuance -alien identification card number -or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photo 6. For non- US Legal entities with no TIN: - A government-issued certificate of existence or good standing NOTE: If a lender is extending credit to a borrower using a mortgage broker as its agent, its must ensure that the broker is performing the bank's CIP (consumer identification Program)

National DO NOT CALL Registry

A provision of the federal Telemarketing Sales Rule, the National Do Not Call Registry (DNC) Managed by the Federal Trade Commission (FTC) which is the nation's consumer protection agency Enforced by 1. FTC Federal Trade Commission 2. Federal Communications Commission (FCC) 3. State law enforcement officials

Request a credit score (FCRA)

Although not free, consumers have the right to ask for their credit score from any consumer credit reporting agencies that create or distribute scores used in residential real property loans.

Fraud Alert

Condition Attached to a credit report that requires lenders to take extra precautions to verify that the identity of the party seeking to establish a credit account is actually the individual who wants the new account.

Customer

Consumer with a continuing, significant relationship with a financial institution

Copy of Consumer Credit File (FCRA)

Consumers are entitles to a free copy of their credit reports form a credit reporting agency under these circumstances: 1. The information in the credit report resulted in adverse action 2. The consumer was a victim of Identity theft and a fraud alert was inserted in the credit file 3. The credit file contains inaccurate information as a result of fraud 4. The Consumer is on public assistance or is unemployed. Additionally, all consumers are entitled to ONE FREE disclosure every 12 months upon request from each of the three nationwide credit bureaus

Limit Prescreened Offers (FCRA)

Consumers may choose to limit "prescreened" offers of credit based on information in their credit report. Unsolicited prescreened offers for credit and insurance must include a toll-free phone number to call to be removed from the lists on which there offers are based.

Financial Privacy Rule (GLB)

Governs the collection and disclosure of customer's personal finance information - known as nonpublic personal information Restricting when and under what circumstances such information may be disclosed to affiliates and to nonaffiliated third parties. Nonpublic personal info could include: 1. What a consumer or customer puts on an application 2. Data about the individual from another source, such as a credit bureau 3. Transactions between the individual and the company, such as an account balance, payment history, or credit/ debit card purchase information

Consumer Financial Protection Bureau (CFPB)

Independent agency within the Federal Reserve with Rule Making and enforcement authority over many consumer financial laws. Established under Title X of the Dodd-Frank Act

Consumer

Individual who obtains, or has obtained, a financial product or service from a financial institution for personal, family, or household reasons.

Fraud Alert

NOTE: when an MLO is running a credit report and sees a fraud alert, they must contact the person whose name is on the account at the number provided to the credit burea or take other reasonable steps to ensure that the person applying for a mortgage loan is not really an IDENTITY THIEF

Access to Credit Reports under the Federal and Accurate Credit Transactions Act

One of the major provisions of the FACT Act is to allow consumers easier access to their credit reports as a way to spot possible identity theft and allow dispute of inaccurate information Requires that consumers applying for home loans to receive the -Home Loan Applicant Credit Score Information Disclosure Notice, which explains their rights If a consumer believes they are a victim of identity theft. the FACT Act allows the consumer to contact the credit bureas and place a FRAUD ALERT

Credit Freeze

Places a credit file "on ice" by preventing the information from being reported to 3rd parties, such as credit grantors and other companies. Lenders are not able to get access to the file without receiving permission from the account holder. The credit file can still be disclosed in certain situations, such as for companies doing business with the account holder and for collection agencies working for one of the companies.

Pretexting Provisions (GLB)

Protects consumers from individuals and companies that obtain their personal financial information under false, ficticious, or fraudulent pretenses

Fair Credit Reporting Act (FCRA)

Regulation V It is a federal law dealing with the granting of credit info, the rights of debtors, and the responsibilities of creditors. It is the first legislation to address credit reporting and was implemented in 1970. Its important to note that when this act was implemented, the nation hasn't fallen yet to identity theft. The people were more concerned with access to their credit accounts vs their identities being stolen.

USA Patriot Act

Short Name for : The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act - enacted in October 2001 in response to the 9/11 Terrorist attacks The Act: 1. Increases the ability of law enforcement agencies to search telephone, e-mail. medical, financial, and other records 2. Eases Restrictions on Foreign intelligence gathering within the United States 3. Expands the Secretary of the Treasury's authority to regulate financial transactions, particularly those involving foreign individuals and entities 4. Enhances the discretion of law inforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts.

Consumer Rights Under FCRA

The Fair Credit Reporting Act provides consumers with the following rights to: 1. An adverse action notice 2. A copy of consumer credit file 3. Request their Credit Score 4. Dispute incomplete or inaccurate information 5.Limit prescreened offers

7 Major Titles of FACTA

The Fair and Accurate Transactions Act (FACTA/ FACT Act) contains 7 major titles: 1. Identity theft prevention and Credit History Restoration 2. Improvements in use of and Consumer Access to Credit Information 3. Enhancing the Accuracy of Consumer Report Information 4. Limiting the Use and Sharing of Medical Information in the Financial System 5. Financial Literacy and Education Improvement 6. Protecting Employee Misconduct Investigations 7. Relation to State Laws

Gramm-Leach-Bliley ACT (GLB) (SPF) The Financial Modernization Act of 1999

The Financial Modernization Act of 1999, or Gramm-Leach-Bliley Act includes provisions in Title- Privacy: - to protect and regulate the disclosure of consumer's personal financial information There are 3 Principal Parts to the privacy requirements: 1. Safeguards Rule 2. Pretexting 3. Financial Privacy Rule REMEMBER SPF!! The GLB act gives authority to 8 federal agencies and the states to administer and enforce Title V- Privacy These regulations apply to financial institutions, which include not only banks, securities firms , and insurance companies, but also companies providing many other types of financial products and services to consumers, such as: 1.Lending, brokering, or servicing any type of consumer loan 2. Transferring or Safeguarding money 3. Preparing Individual tax returns 4. Providing Financial Advice or Credit Counseling 5. Providing residential reals estate settlement services 6. Collecting Consumer Debts

Red Flags Rule

This is section 114 that requires that : 1. Financial Institutions and Creditors to Implement a written identity theft prevention program 2. Card Issuers to assess the validity of change of address requests 3. Users of Consumer Reports to reasonably verify the identity of the subject of a consumer report in the event of a notice of address discrepancy Section 114 applies to federal and state-chartered banks and credit unions, non-bank lenders, mortgage brokers, any person who regularly participates in a credit decision (including setting the terms of credit, and any person who requests a consumer report. Every organization has the flexibility to define a program that is appropriate to the size and operation of their particular business.

Consumer Reporting Agency Obligations (FCRA)

Under the Federal Credit Reporting Act , consumer reporting agencies: 1. May not report outdated negative information: -in most cases 7 year old negative info and bankruptcies over 10 years have to be removed -Criminal convictions reporting have to time limit 2. Must limit access to credit file - only those with a legitimate business need, usually to consider an application with a creditor, insurer, employer, landlord or other business. -FCRA specifies those with a valid need for access 3. May not give out consumer credit information -to an employer, or potential employer without written consent given to employer by the consumer

Established Business Relationship (EBR)

a telemarketer may call a consumer with whom it has an Established Business Relationship (EPR) for up to - 18 months after the consumer's last purchase even if the consumer's number is on the national DNC list In addition a company may call a consumer for up to -3 months after the consumer makes an inquiry or submits an application to the company Obtaining the Name, phone number, and signature from a consumer provides written consent that does not expire until rescinded ONE WARNING! : If a consumer has asked to be on a company's internal DNC list, the company may NOT call even if there is an Established Business Relationship. This prohibition is ONLY against solicitation of new business. Calls may be made to consumers in reference to a current relationship, such as a creditor making a collection call.

The National DO NOT CALL Registry applies to :

any plan, program, or campaign to sell goods or services through interstate phone calls. This includes telemarketers who solicit consumers, often on behalf of 3rd party sellers. It also includes sellers who provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. Does Not limit: -calls by political organizations, -charities -telephone surveyors To keep from violating National Do Not Call regulations, a company MUST maintain national and internal list of customers and prospects to keep them updated regularly. 1. The national DNC list must be updated every 3 months 2. The internal DNC list must be updated every 30 days A consumer on the registry who recieves a telemarketing call despite being on the registry is able to file a complaint with the FTC. Violators could be fined up to $16,000 per call

Dispute Incomplete or Inaccurate information (FCRA)

consumers have the right to dispute any incomplete or inaccurate info they find in their credit report. The consumer reporting agency must correct or delete inaccurate, incomplete, or unverifiable information.

Title III of the Patriot Act

designated the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 requires lenders and banks to create and maintain customer identification programs to prevent financing of terrist operations and money laundering CIPs require covered institutions to verify the identity for customers who are entering into a "Formal Relationship" such as taking out a loan or a credit account

Consumer Privacy Policy Notice (GLB)

explains the lender's information collection procedures and information sharing and transfer practices. Financial institutions must disclose its policy to consumers BEFORE they disclose personal information, disclose the policy annually for customers throughout the financial relationship, and provide the consumer instructions on how to Opt-Out of having this information shared Even if consumer doesn't opt out, finacial institutions are prohibited from disclosing, other than to a consumer reporting agency, access codes or account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail. Creditors are responsible for validating any other entity to which they transfer custody of private consumer data

Adverse Action Notice (FCRA)

notice that your credit was denied for a particular reason with info of why and who denied it

Truncation of Credit and Debit Card Numbers

the FACT ACT prohibits businesses from printing more than 5 digits of any customer's debit or credit card number or expiration date on any reciept provided to the card holder at the point of sales or transaction The provision EXCLUDES: - Handwritten or Imprinted Receipts if that is the only method of recording the card number

Safeguards Rule (GLB)

the safeguards rule requires all financial institutions to design, implement, and maintain safeguards to protect customer information while it is in the custody and control of the institution and its agents A written safeguards policy must include provisions that: 1. Ensure the Security and Confidentiality of Customer Records 2. Protect against any anticipated threats or hazards to the security of such records 3. Protect against the Unauthorized access or use of such records or information in ways that could result in substantial harm or inconvenience to customers

Security and Disposal under the FACT Act

to further protect the privacy of consumer financial information, the FACT Act requires businesses to take measures to responsibly secure and dispose of sensitive personal information found in a consumer's credit report Reasonable Methods for Security and Disposal include: 1. Burning or shredding papers that contain consumer report information so that the information cannot be reconstructed 2. Destroying or Erasing electronic files or media so that information cannot be reconstructed 3. Placing all pending loan documents in LOCKED desks, cabinets, or storage rooms at the end of the day.

The website to get a free copy of your credit report once every 12 months from each of the 3 Credit Bureaus: Experian, Equifax, Transunion

www.annualcreditreport.com which is maintained in cooperating with the FTC - Federal Trade Commission

Credit Freezes under FACTA

FACTA allows consumers to place a credit freeze to prevent info from showing on a credit report. When applying for a mortgage loan, consumer may then temporarily "thaw" the credit report by contacting the credit burea that is "freezing" the report to obtain a temporary password, which allows the reporting agency to access the report Finally the act allows members of the military who are deploying overseas to place a credit freeze, thereby making fraudulent applications for credit more difficult