Federal Fair Credit Reporting Act ( FCRA )
National Credit Union Administration
Federal credit unions.
What must entities do when reporting information to a CRA?
Submit all information with accuracy and integrity
Fact Act
1. FCRA - Fair Credit Rporting Act > 1.1. NCUA 1.2. Federal Trade Comission 1.3. Federal Banking Regulators
Who Regulates Whom?
1. Office of the Comptroller of the Currency (OCC) 2. Federal Reserve 3. Federal Deposit Insurance Corporation (FDIC) 4. Consumer Finance Protection Bureau (CFPB) 5. National Credit Union Administration 6. State regulatory agencies
Consumer Reports
A consumer report contains information on the consumer's creditworthiness or general reputation. The information on the consumer report is used or is expected to be used or collected for the purpose of serving as a factor in establishing consumer's eligibility for the following services: •Credit or insurance for personal, family, or household purposes •Employment •Other services defined by the Act
The Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA) role:
Amended the FCRA by adding consumer protections intended to help reduce identity theft. The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) added further disclosure requirements to help consumers understand their consumer credit scores when those scores are used by a bank to either grant or deny credit.
Investigative reports
An investigative consumer report is 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. Making a particularly risky or high-dollar loan or hiring for a high-level position at your bank may require you or someone at your bank to order or perform an investigative consumer report. Consumers who are the subjects of such reports are given special rights under the FCRA. If you intend to obtain an investigative consumer report, you must disclose to the consumer that an investigative consumer report may be obtained. Rules regarding disclosure, timing, and a notice of rights apply to investigative consumer reports as well. Ask your supervisor if this is something you need to know.
Bill Ding wants to open an account with Community Bank. As part of the account opening process, Barry, the CSR, obtains a report from an agency that compiles information on mishandled checking and savings accounts. The report states that Bill's account has been closed by Big Bucks Bank because of repeated overdrafts and debit card abuse. Based on this information, Barry decides to refuse to open the account for Bill. Has Barry obtained a consumer report?
Barry has obtained a consumer report. The agency that compiles and sells this information to banks (e.g., a deposit account verification service) is a consumer reporting agency that collects information from other sources that bear on a consumer's individual creditworthiness or general reputation and, for a fee, disseminates that information to others. The report also reflects on Bill's character and his capacity to effectively manage his account
Buck Shott has applied for a supervisory position at the ammunition factory where he is employed. Due to the sensitive nature of this position, Buck's employer has requested and obtained a credit report on Buck, which shows that four times Buck was 60 days past due on his auto loan with Ruger National Bank. Buck does not recall ever being past due once, much less four times! Buck immediately contacts Ruger National Bank and you have been assigned to assist him. Which two statements are true concerning Buck's dispute? A) Buck's dispute is frivolous or irrelevant because it does not pertain to an application for credit. Applications for employment are not covered under this part of the Act B) Buck must contact the credit bureau that provided the information before the bank can investigate C) Buck's dispute notice must include sufficient information to identify the account involved, the information in dispute, an explanation of the dispute, and all supporting documentation reasonably required by the furnisher D) Once Ruger National Bank receives Buck's dispute, it must complete the investigation generally within 30 days, and if the investigation indicates the information reported was inaccurate, the bank must promptly notify each CRA to which it provided the information and correct it
C and D are Correct A is incorrect because a denial of employment due to erroneous information is covered and must be investigated. B is incorrect because under the new FACT Act revised rules, consumers are permitted to dispute erroneous information directly with the furnisher.
ChecxSystem
Chex Systems, Inc. (ChexSystems) is a nationwide specialty consumer reporting agency under the federal Fair Credit Reporting Act (FCRA). ChexSystems' clients regularly contribute information on closed checking and savings accounts
ChexSystems
ChexSystems,is another credit reporting agency, that deals with negative bank information. It has nothing to do with FICO scores or the big three consumer credit reporting bureaus, but it is where an overdraft debt is most likely to end up. ChexSystems is a large network with a membership comprised of over 80% of the banks and credit unions in the United States. A negative marks reported in their database makes it hard or impossible to open a checking or savings account at a traditional bank for up to five years, according to Bankrate and ChexSystems. The debt is only recorded if it remains severely overdue.
State regulatory agencies
Each state has its own agency that regulates state-chartered credit unions and banks.
Consumer Finance Protection Bureau (CFPB)
Financial institutions with more than $10 billion in assets. However, the Bureau also has direct regulatory authority over many state-based entities that offer financial products or services.
What to do?
Free file disclosure once per year from each of the major credit bureaus. Ask for your credit score (there may be a fee). Verify accuracy of report when required for employment purposes. Notification if your file has been used against you. Dispute and correct information that is incomplete or inaccurate.Remove outdated, negative information (seven-years old or 10 years in the case of bankruptcy).
Anna Conda wants to apply for a teller position with Community Bank. As part of the application process, Jake the HR representative, contacts the local courthouse to verify that Anna has no criminal record. Has Jake obtained a consumer report?
Jake has not obtained a consumer report. Information obtained directly from the source, such as the court, is not considered a consumer report. For example, if Jake declines Anna's application for employment because the court records showed that Anna had been arrested for shoplifting, no further action is required under the FCRA because the court verifying information directly is not a consumer reporting agency.
The Fair Credit Reporting Act (FCRA) is a federal law that requires:
Lenders, employers, insurance companies, and anyone using a consumer report to exercise fairness, confidentiality, and accuracy in preparing, submitting, using, and disclosing credit information. This law regulates the reporting and use of consumer credit information and seeks to ensure that reports from consumer reporting agencies contain only impartial, accurate, relevant, and recent information.
Office of the Comptroller of the Currency (OCC)
National banks, federal branches, federal agencies of foreign banks, and institutions formerly regulated by the OTS, as of July 21, 2011.
Lacy and Casey Macey have had a mortgage with your bank for 10 years. Property values have risen in your neighborhood and you are sure that they have enough equity in their home to get a home equity line of credit. However, you do not want to offer them that option without first knowing if their credit is good enough to qualify. Can you obtain a credit report in this instance?
No. Although you may obtain a credit report for review purposes, you may do that solely to decide whether to modify the terms of the existing account. The solicitation of a new product or service is not a permissible purpose under the FCRA.
Bill Foldes, president of Billfolds R Us, Inc., has applied for a commercial line of credit for his business. Mr. Foldes will not be personally responsible for the loan. Under FCRA, does your bank have a permissible purpose to obtain a consumer report on Mr. Foldes? Why or why not?
No. Because Mr. Foldes is not personally liable for the debt, your bank does not have a permissible purpose under FCRA to obtain a consumer report. However, if Mr. Foldes gives written consent, you may do so.
You are a lender at your bank and often obtain consumer reports for loan applicants. Your neighbor, Owen Moore, who is not a customer of your bank, has been having problems with past due bills. He asks you to please obtain his consumer report. He wants to see if any of the creditors have placed any derogatory information on the report. Can you do that?
No. You do not have a permissible purpose to obtain that consumer report. When your bank requests a consumer report, the bank certifies to the CRA that it has a legitimate business reason for the report. Mr. Moore is not a loan applicant, is not applying for a position and is not applying for insurance, so the bank has no legitimate business need for the report. Even if Owen gives you permission, you still have no legitimate business need for the information because it is for Owen's personal use, not for the bank. Owen is entitled to one free consumer report each year, so you should direct him to contact any of the three major consumer reporting agencies and order the report himself.
Federal Reserve
State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks and organizations operating under Section 25 of the Federal Reserve Act.
Federal Deposit Insurance Corporation (FDIC)
State non-member banks and insured state branches of foreign banks.
The two most extensive amendments were:
The Consumer Credit Reporting Reform Act of 1996 (the "1996 amendments") and the Fair and Accurate Credit Transactions Act of 2003("FACT Act").
Consumer report information may be used by entities to predict the risk of future nonpayment, default, or other adverse events
The FCRA was enacted to (1) prevent the misuse of sensitive consumer information by limiting recipients to those who have a legitimate need for it; (2) improve the accuracy and integrity of consumer reports;and (3) promote the efficiency of the nation's banking and consumer credit systems.
FCRA
The Fair Credit Reporting Act (FCRA) is the act that regulates the collection of credit information and access to your credit report. It was enacted in 1970 to ensure fairness, accuracy and privacy of the personal information contained in the files of the credit reporting agencies. It requires that any person or entity requesting your report must demonstrate a permissible purpose for the information before it is released. It also designates the Federal Trade Commission (FTC) as the enforcement authority for the provisions of the act.
What are Specialty CRAs ?
They collect and report information about a consumer to employers, insurance companies, banks, and landlords. They include entities other than the big three CRAs: Experian, Equifax, and TransUnion, Specialty CRAs may report on a consumer's medical condition, rental history, bank account, employee background checks, and insurance claim history (for example, CLUE reports used by insurance companies or ChexSystem reports used by banks
Neverland, Inc. needs a business loan to open a new location in the suburbs. The bank has asked Peter Pann, one of the principals of the business, to personally guarantee the loan. Does the bank have a permissible purpose to obtain a consumer report on Mr. Pann?
Yes. Because Mr. Pann may become personally liable for repayment of the debit, a permissible purpose for obtaining a consumer report exists.
The FCRA regulates the practices of consumer reporting agencies ("CRAs")
collect and compile consumer information into consumer reports for use by credit grantors, insurance companies, employers, landlords, and other entities in making eligibility decisions affecting consumers. Information included in consumer reports generally may include consumers' credit history and payment patterns, as well as demographic and identifying information and public record information (e.g., arrests, judgments, and bankruptcies).
The Fair Credit Reporting Act (FCRA) is a federal law that addresses the rights and obligations of four groups:
•Consumer reporting agencies •Users of consumer information •Furnishers of consumer information •Consumers
Section 623 of the FCRA describes the responsibilities of banks (furnishers)that furnish information about consumers to consumer reporting agencies (CRAs). The FACT Act amended the FCRA to add additional requirement addressing the accuracy and integrity of the reported information and furnishers' responsibilities to reinvestigate disputes based on direct disputes from consumers. Furnishers are also required to establish policies and procedures to implement these requirements. Entities reporting information to a CRA must take the following actions:
•Ensure that they provide complete and accurate information •Ensure that any information reported is done so with integrity •Investigate disputed information and promptly correct or update the information, as necessary, or explain why the credit report is correct within 30 days of receipt of notice of a dispute •Provide the consumer with the name, address, and telephone number of the CRA if information from a credit report was used to make an adverse decision •Provide consumers with a notice informing them that negative credit information has been or will be reported to the CRA (this notice requirement does not apply to reports made to deposit account verification services or other "specialty" CRAs)
The three Nationwide CRAs (Equifax, Experian, and TransUnion) and specialty CRAs that offer deposit account verification services, such as ChexSystems, which has a number of the following responsibilities under FCRA:
•Maintaining accurate information in their files •Following up with any disputes regarding inaccurate information •Providing consumer reports to banks and other users of information and correcting inaccurate information as needed •Maintaining active duty and identity theft alerts •Notifying banks and other potential users of information about possible address discrepancies, providing consumers with information about the consumer in the agency's files, and taking steps to verify the accuracy of information disputed by a consumer •The three Nationwide CRAs must, upon request, provide consumers with at least one free credit report per year. A consumer may also obtain a free credit report from any of the CRAs if that consumer is denied credit, insurance, or employment on the basis of information contained in that report
An information furnisher is a company that provides information to consumer reporting agencies (CRAs). Banks provide a huge amount of the following information to consumer reporting agencies:
•Payment history on credit cards and loans •Account history, such as deposit accounts closed due to fraud or abuse Other entities that furnish information to CRAs can include courts (reporting judgments or bankruptcies), current and former employers, and bonding companies.
