Ch 4 Federal Privacy Protection and Consumer Identification Law

Summary

1. Regulation V implements FCRA, a federal law dealing with granting of credit, access to credit information, rights of debtors, and responsibilities of creditors. 2. FCRA provides consumers with the right to: An Adverse Action Notice in the event of a loan decline, request a copy of their consumer credit file, request their credit score, dispute incomplete or inaccurate information, and limit prescreened offers. 3. Under FCRA, consumer reporting agencies: May not report outdated negative information, information that is more than 7 years old, or bankruptcies more than 10 years old; no time limit on reporting of criminal convictions. Must limit access to a credit file, may provide information to people with a legitimate business need. May not give consumer credit information to employer, or potential employer, without written consent. 4. FACTA, amended the federal Fair Credit Reporting Act; helps consumers fight identity theft. 5. Major provision of the FACT Act is to allow consumers easier access to credit reports to spot identity theft and allow dispute of inaccurate info. Consumers applying for home loans must receive the Home Loan Applicant Credit Score Information Disclosure Notice. 6. If a consumer believes he is a victim of identity theft, the FACT Act allows the consumer to contact the credit bureau and place a fraud alert. 7. The FACT Act allows consumers to place a credit freeze to prevent the information from showing on a credit report. 8. FACTA prohibits businesses from printing more than five digits of any customer's credit/debit card number or expiration date on any receipt. 9. FACTA requires businesses to be responsibly secure and dispose of sensitive personal information in a consumer's credit report, by shredding consumer's documents, placing them in a locked storage area, and taking steps to protect information stored on electronic media. 10. Red Flags Rules require financial institutions and creditors to implement a written identity theft prevention program; card issuers to assess the validity of change of address requests; and 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. 11. Gramm-Leach-Bliley Act includes provisions to protect and regulate the disclosure of consumers' personal financial information; including The Financial Privacy Rule, Safeguards Rule, and Pretexting Provisions 12. Under GLB, a company's obligations depend on whether the company has consumers or customers (significant and/or long-term). 13. U. S. Patriot Act increases ability of law enforcement to search phone, e-mail, medical, financial, and other records; eases restrictions on foreign intelligence within the United States; expands the Secretary of the Treasury's authority to regulate financial transactions; and enhances ability of law enforcement/ immigration authorities in detaining deporting immigrants suspected of terrorism-related acts. 14. National Do Not Call Registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls, including telemarketers who solicit consumers. 15. A loan originator may call a consumer with whom it has an EBR for up to 18 months after the consumer's last purchase, delivery, or payment, even if the consumer's number is on the National Do Not Call Registry. In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company.

Gramm-Leach-Bliley Act (GLB Act)

• AKA Financial Services Modernization Act - Financial Privacy Rule - Safeguards Rule (SPF) - Pretexting Provisions • Gives agencies and states the authority to administer/enforce Title V/ Privacy for: - Financial institutions, including banks, securities firms and insurance companies - Companies that provide products and services to consumers

FCRA Consumer Rights

• Adverse Action Notice - Any entity that uses a credit report or another type of consumer report to deny an application for credit, insurance, or employment • Copy of Consumer Credit File • Request Credit Score • Dispute Incomplete or Inaccurate Information • Limit Prescreened Offers

Access to Credit Reports (FACTA)

• Allows consumers: - Access to credit report - Home Loan Applicant Credit Score Information Disclosure notice - Free copy of credit report once every 12 month - To place fraud alerts and credit freezes • Protects members of military deploying overseas from fraud

Adverse Action Notice

• Any entity that uses a credit report or another type of consumer report to deny an application for credit, insurance, or employment must provide the consumer with name, address and phone number of the agency that provided that information

Limit Prescreened Offers

• Consumer may limit prescreened offers of credit and insurance based on information in their credit report • Unsolicited prescreened offers must include toll-free number to be removed from list

Dispute Incomplete/Inaccurate

• Consumers have the right to dispute any incomplete or inaccurate information they find in their credit report • Consumer reporting agency must correct or delete inaccurate incomplete or unverifiable information

Copy of Consumer Credit File

• Entitled to free copy of credit file if: - Information resulted in adverse action - Victim of identity theft (with fraud alert) - Inaccurate information as a result of fraud - On Public assistance or unemployed • One free disclosure every 12 months • Right to request credit score from any reporting agencies that create or distribute scores in residential real property loans

Red Flags Rules

• Financial institutions and creditors to implement written identity theft protection program • Card issuers to assess the validity of change of address requests • Users of credit reports to reasonably verify the identity of subject in case of address discrepancy • Applies to: - Federal and state chartered banks and credit unions - Non-bank lenders - Mortgage brokers - Any person/entity participating in credit decision

Financial Privacy Rule

• Governs collection of nonpublic personal info: - What a consumer puts on an application - Data about individual from another source - Transactions, such as balance and purchases - Whether individual is customer or consumer • Restricts when information may be disclosed to affiliates and nonaffiliated third parties • Requires Consumer Privacy Notice • Provides opt-out opportunity

Fair Credit Reporting Act (FCRA)

• Implemented in 1970 by Regulation V • Deals with: - Granting of credit - Access to credit information - Rights of debtors - Responsibilities of creditors

USA Patriot Act

• Increases ability of law enforcement to search phone, e-mail, medical, financial, and other records • Eases restrictions on foreign intelligence gathering within the United States • Expands the Secretary of the Treasury's authority to regulate financial transactions • Enhances the discretion of law enforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts • Requires lenders and banks to create and maintain customer identification programs

Fair and Accurate Credit Transaction Act

• Intended to help consumers fight identity theft • Major Titles - Identity Theft Prevention/Credit History Restoration - Improvements to Use and Access to Credit Information - Enhancing the Accuracy of Consumer Report Info - Limiting Use and Sharing of Medical Information in the Financial System - Financial Literacy and Education Improvement - Protecting Employee Misconduct Investigations - Relation to State Laws

National Do Not Call Registry

• Managed by the FTC, the FCC, and states • Applies to interstate sales phone calls • Does not apply to charities, political organization, or surveys • Companies must maintain: - National list (update every 31 days) - Internal list (update every 30 days) • Allows consumers to file complaints with FTC • Fines up to $16,000 per incident

Established Business Relationship

• May call a consumer for up to: - 18 months after the consumer's last purchase - 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 • If consumer on DNC list company, cannot call even if there is an EBR

Consumer Report Agency Obligations

• May not report outdated negative credit information: - Negative credit information more than 7 years - Bankruptcies more than 10 years • Must limit access to a credit file to those with legitimate business need • May not give out consumer credit information to an employer, or a potential employer, without written consent

FACTA Consumer Protections

• Prohibits businesses from printing more than five digits of any customer's credit/debit card number or expiration date on any receipt • Requires businesses to: - Burn or shred papers that contain consumer report information - Destroy or erase electronic files or media so that information cannot be recovered - Lock up all pending loan documents at the end of the workday

Pretexting Provisions

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

Safeguards Rule

• Requires financial institutions to design, implement, and maintain safeguards to protect and control consumer data • Written Safeguards Policy must: - Ensure security and confidentiality - Protect against anticipated threats or hazards - Protect against unauthorized access that could harm or inconvenience consumers

Minimum Data Required

• When opening new account: - Name and date of birth - Residential or work address for individuals, or physical location address for legal entities - U.S. citizens or legal entities organized under state law: Tax ID number (TIN) - Lawful permanent residents or non-immigrants: TIN, passport number and country of issuance, alien ID card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photo - Non-U.S. legal entities with no TIN: A government-issued certificate of existence or good standing