FCRA

What are the required elements of an adverse action notice?

- The name, address, and telephone number of the consumer reporting agency and a toll-free telephone number if it is a nationwide consumer reporting agency - A statement that the consumer reporting agency 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 credit report from the consumer reporting agency if the consumer requests the report within 60 days - A statement setting forth the consumer's right to dispute directly with the consumer reporting agency the accuracy or completeness of any information provided by the consumer reporting agency - The credit score and the reasons for the score, if the denial is based, in whole or in part, on a consumer's credit score

What are the three categories of adverse action?

Adverse action based on information obtained from a consumer reporting agency (CRA) Adverse action based on information obtained from third parties, including affiliates, that are not consumer reporting agencies Adverse action related to employment decisions, such as decisions not to hire or not to promote

Information from affiliates

Adverse action notice is not required if the information the affiliate provides is limited to the affiliate's experience and transactions with the consumer. If the bank relies on information from an affiliate that is not the affiliate's experience and transaction information, it must notify the consumer of the action taken and the consumer's right to obtain the nature of the information upon which the action is based. The consumer must make the request within 60 days of receiving the notice. The bank has 30 days to respond.

What is the FCRA definition of affiliate?

Affiliates are entities that are related by common ownership or affiliated by corporate control. For example, if ABC Holding Company owns ABC Bank, ABC Mortgage Company, and ABC Insurance Agency, the bank, mortgage company, insurance agency, and the holding company are affiliates.

Who gets FCRA adverse action notices?

Any consumer who is the subject of the report used must receive an adverse action notice. The credit score information, if required, must only be sent to the person who is the subject of the credit score—credit scores are considered private, even among co-applicants and co-account holders.

How does the FCRA define adverse action?

Denying or canceling credit Unfavorably changing credit or contract terms or conditions Offering credit on less favorable terms than requested Denying a deposit account or related services, such as an ATM or debit card

Information from third parties

If the bank denies a c c app or increases charges on credit in whole or in part based on info from a third party that is not a consumer reporting agency or an affiliate, upon the consumer's written request for the reasons for the adverse action, the bank must disclose the nature of the information provided by such third party. The consumer has 60 days from the time it receives an adverse action notice (e.g., pursuant to the Equal Credit Opportunity Act) to make the request. While it is a bit confusing, the bank need not provide an FCRA adverse action when it takes adverse action based on information from a third party. That does not mean the consumer does not receive an adverse action notice. The Equal Credit Opportunity Act adverse action notice provides that information and explains how the consumer can obtain the third-party information used to make the adverse decision.

WHat actions must be performed in order for a bank to use a credit report when hiring?

Provide the consumer a clear and conspicuous written disclosure stating that a consumer report may be obtained Obtain written authorization from the consumer Certify to the consumer reporting agency providing the report thatThe above steps have been followedThe information being obtained will not be used in violation of any federal or state equal opportunity law or regulationBefore taking adverse action based on the consumer report, the userwill provide the consumer a copy of the report and a summary of the consumer's rights

When is the ECOA notice required?

The ECOA notice is required for any adverse credit decision, whether or not the consumer report impacted the decision. the ECOA notice must include the reasons for the adverse action or a notice of the customer's right to know those reasons.

WHat is the purpose of the adverse action notice?

The purpose of the notice is to inform consumers about how information in consumer reports is used and also to alert them that information in a consumer report may be inaccurate and should be corrected.

What is the FCRA definition of a third-party?

Third parties are persons or entities that are not affiliates and not consumer reporting agencies, but that could provide information bearing on the customer's credit standing, character, general reputation, personal characteristic, mode of living, or creditworthiness.

True or False? An employer must comply with the FCRA adverse action notice requirements when denying an employment application based on information in a consumer report. However, the employer would not have to provide an Equal Credit Opportunity Act adverse action notice because the application does not involve credit.

True. The statement is true because the FCRA requires an employer to provide a copy of the report and a summary of the consumer's rights prior to taking adverse action, but no Equal Credit Opportunity Act adverse action notice is required.