The Fair Credit Reporting Act

If a person harmed files and wins a lawsuit, civil penalties may be the amount of the _______ damages, which cannot be less than $100 nor more than _________.

Actual; $1,000

If a determination is made that a dispute is frivolous or irrelevant, the person making the determination must notify the consumer of the determination no later than __________________ after making the determination.

Five business days

Disputed Information

Consumers have the right to dispute information directly with the furnisher providing it. To do so, a consumer must submit a dispute notice that: Identifies the specific information being disputed Explains the basis for the dispute Includes all supporting documentation Upon receiving this notice, the furnisher must: Conduct an investigation Review all relevant information provided with the notice Report the investigation results to the consumer Promptly notify each CRA of any inaccurate information found through investigation These requirements do not apply if the furnisher determines that the dispute is frivolous or irrelevant, either because the consumer fails to provide sufficient information to investigate or has previously submitted a substantially similar dispute.

Complying with the FCRA

The FCRA includes requirements and restrictions for CRAs, users of information, and furnishers of information. Mortgage entities, such as lenders and servicers, are unique because they qualify as both users and furnishers. As information users, mortgage licensees obtain consumer reports from CRAs in order to make credit offers or decisions. As information furnishers, mortgage licensees report information about things like payment history and existing obligations to CRAs. This section will focus on the requirements of the FCRA as they apply to mortgage companies as users and furnishers of information.

Duties of Information Furnishers

Information furnishers cannot provide any information that they know or have reason to believe is inaccurate. A furnisher would have reason to believe that information is inaccurate if specific evidence exists that would cause a reasonable person to substantially doubt the information's accuracy. If a furnisher determines that information it supplied to a CRA is inaccurate or incomplete, any CRA that received the information must be notified. This notification should include corrections necessary to make the information accurate and complete. If information is subject to a dispute, notice of the consumer's dispute must also be given. If an information furnisher regularly reports information on a consumer who has an account and the account is closed, CRAs must be notified of the closer. Notice of delinquent accounts must be given within 90 days after the account is placed for collection or charged for profit or loss.

What first step must any information user take when requesting a consumer report from a consumer reporting agency?

It must certify that the reason for wanting the report is a permissible reason

Complying with the Law: Information Users

Because they base loan decisions in large part on the information found in a consumer report, mortgage licensees are considered to be users of information under the FCRA. As previously noted, the FCRA only permits the use of consumer reports in specific situations. When an information user requests a consumer report, it must supply the consumer reporting agency with a certification that states the permissible purpose for which the user is making the request (15 U.S.C. §1681b(f)). For mortgage licensees, a permissible purpose would include: In accordance with written instructions from the consumer To a person that intends to use it for any of the following reasons:A credit transaction involving the consumerLicense eligibility or a similar governmental benefit that requires consideration of financial responsibilityValuation or assessment of credit or prepayment risks associated with an existing credit obligation (such as refinancing a mortgage)A legitimate business need in connection with either a transaction initiated by the consumer or a review of an account to determine if the consumer continues to meet the terms of the account (15 U.S.C. §1681b(a))

Definitions

The FCRA contains the following definitions that apply throughout its provisions (15 U.S.C. §1681a). Adverse action: any denial, cancellation, or unfavorable change in insurance coverage, or a denial of employment based on a consumer report. Consumer report: the communication of any information from a consumer reporting agency that relates to a consumer's creditworthiness, credit standing, credit capacity, character, personal characteristics, or mode of living which is used or expected to be used in order to determine the consumer's eligibility for credit or insurance to be used for personal, family, or household purposes or to evaluate a consumer for employment. Consumer reporting agency (CRA): any person who regularly engages, for fees or on a cooperative nonprofit basis, in the practice of assembling or evaluating consumer credit information to provide consumer reports to third parties. Examples of CRAs are Equifax, Experian, and TransUnion. File: all of the information about a consumer that is recorded and retained by a CRA. Fraud alert: a statement in the file of a consumer notifying all prospective users of a report that the consumer may be a victim of fraud, including identity theft. Identity theft: a fraud committed using the identifying information of another person. Investigative consumer report: a consumer report containing information about a consumer's character, general reputation, personal characteristics, and mode of living, that is obtained through personal interviews. Person: individuals, partnerships, corporations, trusts, estates, cooperatives, associations, governments, and governmental agencies.

If a violation of the FCRA is _________, the person harmed has the right to sue the person causing the harm in civil court.

Intentional

Adverse Action

If a user takes adverse action based on information contained in a consumer report, the user must: Give the consumer notice of the adverse action Disclose the numerical credit score used in taking the adverse action and make all required consumer disclosures Give the consumer the name, address, and telephone number of the consumer reporting agency that furnished the report and a statement that the consumer reporting agency did not make the adverse decision and cannot supply reasons why the action was taken Tell the consumer of his or her right to a free copy of the consumer report, if the request is made within 60 days, and of his or her right to contest any information contained in the report (15 U.S.C. §1681m(a)) The federal Equal Credit Opportunity Act (ECOA) requires a written notice of adverse action to be provided no later than 30 days after receiving a mortgage loan application. This disclosure should include all of the above information about the credit score and how to contact the CRA that provided the information.

Transactions not Initiated by the Consumer

Some mortgage companies may use solicitations in order to generate business. Whenever an information user makes a solicitation for a credit offer to a consumer, the user must disclose the following: Information contained in the individual's consumer report was used in connection with the transaction The offer is being made because the consumer satisfied the criteria for creditworthiness or insurability Credit may not be extended if, after responding, the consumer does not meet the criteria for qualification or fails to supply any required collateral The consumer has the right to prohibit information contained in the consumer's file from being used for these solicitations The consumer has the right to be taken off the list by using a notification system, including the address and the toll-free number of the appropriate notification system (15 U.S.C. §1681m(d))

Duties Involving Identity Theft

The FCRA prohibits anyone from selling, transferring, or placing for collection any debt that they have been notified is the result of identity theft (15 U.S.C. §1681m(f)). The law does not prohibit: The repurchase of a debt that the contract requires because of identity theft The securitization of a debt or the pledging of the debt as collateral, or The transfer of the debt as a result of a merger, an acquisition, or a transfer of assets (15 U.S.C. §1681m)

Penalties

The FCRA provides for different civil penalties depending upon whether the violation is intentional or accidental. If the violation is intentional, the person harmed has the right to sue the person causing the harm in civil court. If the person harmed wins the lawsuit, the civil penalties are as follows: The amount of the actual damages sustained, which cannot be less than $100 or more than $1,000, or, if the liability arises from obtaining a consumer report under false pretenses, the greater of $1,000 or actual damages Punitive damages Costs and reasonable attorney's fees (15 U.S.C. §1681n)

Intro

The Fair Credit Reporting Act (FCRA) is a federal law enacted in 1970 as an amendment to the Consumer Credit Protection Act. Its purpose is to improve accuracy, impartiality, privacy, and fairness in credit reporting by imposing special requirements on consumer reporting agencies, companies that supply information to consumer reporting agencies, and companies that use consumers' personal information. Prior to the FCRA, credit reports were compiled, and credit scores were determined, largely out of view. Consumers were often unaware of what their credit score was, why a loan was denied, or why a potential employer or landlord rejected an application. Since the enactment of the FCRA and its amendments, the credit reporting process is much more transparent, and consumers have been given rights to view their reports and to act to correct errors.