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Fair Credit Reporting: Section 603(x)

Section 603(x) defines “nationwide specialty consumer reporting agency” as a CRA “that compiles and maintains files on consumers on a nationwide basis relating to (1) medical records or payments; 2) residential or tenant history; (3) check writing history; (4) employment history; or (5) insurance claims.”155

1. RELATION TO OTHER SECTIONS

Fair Credit Reporting: Sections 603(y)(1), 603(y)(2)

Section 603(y)(1) excludes from the definition of “consumer report” those reports made solely for the purpose of investigating (1) suspected employment misconduct or (2) compliance with applicable laws or rules or “any pre-existing written policies of the employer.” Section 603(y)(2) requires that an employer that has taken adverse action based on such a report provide the employee a summary of the “nature and substance” of the information.

1. PRE-EXISTING WRITTEN POLICIES

Fair Credit Reporting: Section 604(a)

Section 604(a) says that “any consumer reporting agency may furnish a consumer report under the following circumstances and no other. . . .” Its subsections enumerate specific permissible purposes.

1. RELATION TO SECTION 603(d) (DEFINITION OF “CONSUMER REPORT”)

Fair Credit Reporting: Section 604(a)(1)

Section 604(a)(1) allows CRAs to furnish consumer reports in response to the “order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.”

1. SUBPOENA

Fair Credit Reporting: Section 604(a)(3)(A)

Section 604(a)(3)(A) allows a CRA to furnish consumer reports to a person which it has reason to believe “intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer”

1. REPORTS “IN CONNECTION WITH A CREDIT TRANSACTION INVOLVING THE CONSUMER”

Fair Credit Reporting: Section 604(a)(3)(B)

Section 604(a)(3)(B) allows a CRA to furnish consumer reports to a person which it has reason to believe “intends to use the information for employment purposes.”

1. RELATION TO OTHER SECTIONS

This subsection establishes that CRAs may provide reports for employment purposes. Section 604(b) imposes certain duties on employers and CRAs in such cases.

2. CURRENT EMPLOYEES

Fair Credit Reporting: Section 604(a)(3)(C)

Section 604(a)(3)(C) allows a CRA to furnish consumer reports to a person which it has reason to believe “intends to use the information in connection with the underwriting of insurance involving the consumer.”

1. PERMISSIBLE PURPOSE EXISTS FOR “UNDERWRITING OF INSURANCE”

Fair Credit Reporting: Section 604(a)(3)(D)

Section 604(a)(3)(D) allows a CRA to furnish consumer reports to a person which it has reason to believe “intends to use the information in connection with a determination of the consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status.”

1. GENERAL

Fair Credit Reporting: Section 604(a)(3)(E)

Section 604(a)(3)(E) allows a CRA to furnish consumer reports to a person which it has reason to believe “intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation.”

Fair Credit Reporting: Section 604(a)(3)(F)

Section 604(a)(3)(F) allows a CRA to furnish consumer reports to a person which it has reason to believe “otherwise has a legitimate business need for the information (i) in connection with a business transaction that is initiated by the consumer or (ii) to review an account to determine whether the consumer continues to meet the terms of the account.”

1. RELATION TO OTHER SUBSECTIONS OF SECTION 604(a)(3)

Fair Credit Reporting: Section 604(a)(3)(G)

Section 604(a)(3)(G) allows CRAs to provide consumer reports to “executive departments and agencies in connection with the issuance of government-sponsored individually-billed travel charge cards.”

Fair Credit Reporting: Sections 604(a)(4), 604(a)(5)

Sections 604(a)(4) and 604(a)(5) permit child support authorities to obtain consumer reports on parents in connection with the assessment of child support obligations. One of the requirements for a child support enforcement agency to obtain a report is that it has to certify that it “has provided at least 10 days’ prior notice to the consumer whose report is requested by certified or registered mail to the last known address of the consumer.”

1. GENERAL

Fair Credit Reporting: Section 604(a)(6)

Section 604(a)(6) permits the Federal Deposit Insurance Corporation and National Credit Union Administration to obtain consumer reports in connection with their duties as conservator, receiver, or liquidating agent for failed or failing financial institutions under applicable laws.

Fair Credit Reporting: Section 604(b)

Section 604(b) sets forth provisions relating to consumer reports for employment purposes, imposing specific duties on CRAs and employers in this context.

1. SCOPE OF “EMPLOYMENT PURPOSES”

Section 604(b)’s disclosure and authorization requirements apply where the consumer report is obtained for “employment purposes” even where the consumer is not technically an “employee” of the report user. See comment 603(h)-2.

2. SUSPECTED WORKPLACE WRONGDOING

Fair Credit Reporting: Section 604(b)(1)

Section 604(b)(1) requires that, when a CRA furnishes a consumer report for employment purposes, it must obtain a certification from the user stating that the user (1) has obtained the consumer’s consent, (2) will provide the consumer with a copy of his or her report and a summary of rights under the FCRA before taking adverse action, and (3) will not use the report to violate employment opportunity laws.

1. GENERAL

Fair Credit Reporting: Section 604(b)(2)

Section 604(b)(2) provides that, except for employers in the trucking industry, a person may not obtain a consumer report for employment purposes unless the person makes “(i) a clear and conspicuous disclosure in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by

Fair Credit Reporting: Section 604(b)(3)

Section 604(b)(3) provides that, except for employment in the trucking industry, an employer intending to take adverse action shall, before taking such action, provide the consumer a copy of his or her consumer report and a summary of the consumer’s rights under the FCRA. The summary is to be in a form prescribed by the FTC under section 609(c)(3).

1. GENERAL RULE

Fair Credit Reporting: Section 604(c)

Section 604(c) governs the practice of “prescreening” in connection with credit and insurance solicitations. Subsection (1) allows prescreened solicitations only if the consumer consents or if the “transaction consists of a firm offer of credit or insurance” and the consumer has not opted out of receiving such solicitations. Subsection (2) limits the information that the CRA can provide to the business seeking the information for prescreening purposes.

Fair Credit Reporting: Introduction and Table of Contents

This report is available online at www.ftc.gov. The online version of this report contains live hyperlinks.

Contents

Staff Report

I. Introduction

II. Evolution of the Fair Credit Reporting Act

III. FTC Enforcement of the FCRA

IV. FTC’s Regulatory and Interpretive Roles

V. FTC Staff Summary and Relationship to 1990 Commentary

Fair Credit Reporting: I. Introduction

The Fair Credit Reporting Act6 (“FCRA”) governs the collection, assembly, and use of consumer report information and provides the framework for the credit reporting system in the United States. The FCRA was enacted in 1970, and it has been amended several times in the ensuing years.