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Fair Credit Reporting: C.1 Introduction

The Fair Credit Reporting Act requires the Consumer Financial Protection Board (CFPB) to develop a number of model forms for credit reporting agencies, users, and furnishers to use. A table of these forms is set forth below. The authority, purpose, and legal effect of these model forms are set forth in 12 C.F.R.

Fair Credit Reporting: C.4 Summary of Consumer Identity Theft Rights

Section 1681g(d) of the FCRA requires the CFPB, in consultation with the federal banking agencies and the National Credit Union Administration, to prepare a model summary of the rights of consumers “with respect to the procedures for remedying the effects of fraud or identity theft.” Consumer reporting agencies must distribute this form to any consumer who “contacts a consumer reporting agency and expresses a belief that the consumer is a victim of fraud or identity theft.”

Fair Credit Reporting: C.5 FTC Identity Theft Affidavit

The FTC developed the ID Theft Affidavit to assist victims who dispute fraudulent debts and accounts opened by an identity thief. The FTC’s ID Theft Affidavit is intended to simplify this process. Instead of completing different forms, consumers can use the ID Theft Affidavit to alert companies when a new account was opened in the identity theft victim’s name. The company can then investigate the fraud and decide the outcome of the consumer’s claim.

Fair Credit Reporting: C.6 Notice of Furnisher Responsibilities

Section 1681e(d)(1) of the FCRA requires that consumer reporting agencies distribute to each person that regularly furnishes information to the agency or that receives information from the agency a notice of the person’s responsibilities under the FCRA. The FCRA requires the CFPB to “prescribe” the content of model notices that can be used to comply with section 1681e(d)(1).

Fair Credit Reporting: Introduction

Many consumers learn of errors in a consumer report only when a creditor or other user informs the consumer that adverse action has been based on a report. Users must also certify to the agency that the user has a permissible purpose for obtaining a consumer report. Some users, including employers, users of investigative consumer reports, users of reports containing medical information, users of prescreened lists, and resellers of credit reports, have additional obligations.

Fair Credit Reporting: I. OBLIGATIONS OF ALL USERS OF CONSUMER REPORTS

A. Users Must Have a Permissible Purpose

Congress has limited the use of consumer reports to protect consumers’ privacy. All users must have a permissible purpose under the FCRA to obtain a consumer report. Section 604 contains a list of the permissible purposes under the law. These are:

Fair Credit Reporting: II. CREDITORS MUST MAKE ADDITIONAL DISCLOSURES

If a person uses a consumer report in connection with an application for, or a grant, extension, or provision of, credit to a consumer on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers from or through that person, based in whole or in part on a consumer report, the person must provide a risk based pricing notice to the consumer in accordance with the regulations prescribed by the CFPB.

Fair Credit Reporting: IV. OBLIGATIONS WHEN INVESTIGATIVE CONSUMER REPORTS ARE USED

Investigative consumer reports are 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 by an entity or person that is a consumer reporting agency. Consumers who are the subjects of such reports are given special rights under the FCRA. If a user intends to obtain an investigative consumer report, Section 606 requires the following:

Fair Credit Reporting: V. SPECIAL PROCEDURES FOR EMPLOYEE INVESTIGATIONS

Section 603(x) provides special procedures for investigations of suspected misconduct by an employee or for compliance with Federal, state or local laws and regulations or the rules of a self-regulatory organization, and compliance with written policies of the employer. These investigations are not treated as consumer reports so long as the employer or its agent complies with the procedures set forth in Section 603(x), and a summary describing the nature and scope of the inquiry is made to the employee if an adverse action is taken based on the investigation.

Fair Credit Reporting: VI. OBLIGATIONS OF USERS OF MEDICAL INFORMATION

Section 604(g) limits the use of medical information obtained from consumer reporting agencies (other than payment information that appears in a coded form that does not identify the medical provider). If the information is to be used for an insurance transaction, the consumer must give consent to the user of the report or the information must be coded. If the report is to be used for employment purposes or in connection with a credit transaction (except as provided in federal regulations), the consumer must provide specific written consent and the medical information must be relevant.

Fair Credit Reporting: VII. OBLIGATIONS OF USERS OF “PRESCREENED” LISTS

The FCRA permits creditors and insurers to obtain limited consumer report information for use in connection with unsolicited offers of credit or insurance under certain circumstances. Sections 603(l), 604(c), 604(e), and 615(d). This practice is known as “prescreening” and typically involves obtaining from a CRA a list of consumers who meet certain pre-established criteria.

Fair Credit Reporting: IX. LIABILITY FOR VIOLATIONS OF THE FCRA

Failure to comply with the FCRA can result in state government or federal government enforcement actions, as well as private lawsuits. Sections 616, 617, and 621. In addition, any person who knowingly and willfully obtains a consumer report under false pretenses may face criminal prosecution. Section 619.

The CFPB’s website, www.consumerfinance.gov/learnmore, has more information about the FCRA, including publications for businesses and the full text of the FCRA.

Fair Credit Reporting: C.8 Model Prescreen Opt-Out Notices

Section 1681m(d) of the FCRA directs the CFPB, in consultation with FTC, the federal banking agencies and the National Credit Union Administration, to adopt a rule governing the required notice to consumers regarding the right to opt out of prescreened solicitations for credit or insurance. The CFPB issued such a rule, 12 C.F.R. § 1022.54(c) (Appx.

Fair Credit Reporting: Introduction

This section contains five sample notification forms. These forms are intended for use in fulfilling notification requirements of both the Fair Credit Reporting Act and the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 through 1691f.

Fair Credit Reporting: Form C-1—Sample Notice of Action Taken and Statement of Reasons

Statement of Credit Denial, Termination or Change

Date: __________________________________________________________________________________________________________________

Applicant’s Name: _______________________________________________________________________________________________________

Applicant’s Address: _____________________________________________________________________________________________________

Description of Account, Transaction, or Requested Credit: _______________________________________________________________________

Fair Credit Reporting: Form C-2—Sample Notice of Action Taken and Statement of Reasons

Date

Dear Applicant: Thank you for your recent application. Your request for [a loan/a credit card/an increase in your credit limit] was carefully considered, and we regret that we are unable to approve your application at this time, for the following reason(s):

Your Income:

__________________ is below our minimum requirement.

__________________ is insufficient to sustain payments on the amount of credit requested.

__________________ could not be verified.

Your Employment:

Fair Credit Reporting: Form C-3—Sample Notice of Action Taken and Statement of Reasons [(Credit Scoring)]

Date

Dear Applicant: Thank you for your recent application for __________________. We regret that we are unable to approve your request.

[Reasons for Denial of Credit]

Your application was processed by a [credit scoring] system that assigns a numerical value to the various items of information we consider in evaluating an application. These numerical values are based upon the results of analyses of repayment histories of large numbers of customers.

Fair Credit Reporting: Form C-4—Sample Notice of Action Taken, Statement of Reasons and Counteroffer

Date __________________

Dear Applicant:

Thank you for your application for ________________________________________________. We are unable to offer you credit on the terms that you requested for the following reason(s):

______________________________________________________________________________________________________________________

We can, however, offer you credit on the following terms:

______________________________________________________________________________________________________________________

Fair Credit Reporting: Form C-5—Sample Disclosure of Right to Request Specific Reasons for Credit Denial

Date __________________

Dear Applicant:

Thank you for applying to us for __________________.

After carefully reviewing your application, we are sorry to advise you that we cannot [open an account for you/grant a loan to you/ increase your credit limit] at this time. If you would like a statement of specific reasons why your application was denied, please contact [our credit service manager] shown below within 60 days of the date of this letter. We will provide you with the statement of reasons within 30 days after receiving your request.

Creditor’s Name

Fair Credit Reporting: C.10 Risk-Based Pricing Notices

Section 1681m(h) of the FCRA requires creditors to provide a risk-based pricing notice whenever they grant credit on terms that are materially less favorable than their most favorable terms based on a consumer report. Subsection 1681m(h)(6)(B)(iv) requires the CFPB to issue a model notice for this purpose. The CFPB has issued seven model forms, set forth below. Model Forms H-6 and H-7 incorporate the credit score disclosure requirement added by the Dodd-Frank Act.

Fair Credit Reporting: Introduction

If a company engages in affiliate sharing of consumer information, section 1681s-3(a)(1) of the FCRA requires the company to provide a notice and opportunity to opt out. The FCRA requires regulations to govern this notice, and the CFPB issued such a rule, 12 C.F.R. § 1022.23 (Appx. B.2.1, supra). To assist in compliance, the CFPB provided five model notices.