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Requirements on Users of Credit Reports
A “credit report” is a collection of a consumer’s credit history. It includes such information as: past payment history, current credit accountings, late payments, credit limits, any debt or bill collection activity, liens, judgments, bankruptcies, etc. A “user” of a credit report is anyone who employs a report in the decision of whether to extend any form of credit. Extending credit may include financing a sale, establishing a recurring account, hiring, or loaning money. The FCRA places the following requirements on businesses that use credit reports to make decisions affecting the consumer:
• Notice of Rejection – The FCRA allows a user of a credit report to request the report for a permissible reason. It requires that businesses inform consumers who seek credit for personal, family, or household purposes if their request is denied because of an adverse credit report. The notice must include the source of the credit report and notification of the right to make a request within 60 days to the reporting agency regarding the nature of the information received.
⁃ Note: The purpose of this provision is to allow the individual to receive the report and challenge its accuracy.
• Investigative Consumer Reports – “Investigative consumer reports” are investigations carried out through personal interviews in the consumer’s community to uncover personal details, such as her character, lifestyle, community reputation, etc. A business seeking to acquire such information may only seek such a report after giving 3-days notice to the consumer. The consumer may request information on the scope and nature of the investigation.
⁃ Note: The purpose of this provision is to protect consumers from the negative consequences of personal inquiries.
• Employer Background Checks – Employers using consumer reports to screen job applicants or perspective employees must follow specific procedures, including:
⁃ obtaining written permission;
⁃ explaining how the credit report will be used;
⁃ avoiding any inappropriate or non-disclosed uses of the report;
⁃ providing a copy of the credit report (if the employee is not hired); and
⁃ allowing the applicant to dispute any information contained in the report before making a final decision.
The above-referenced list of common users of a credit report is not exhaustive. There may be any number of situations in which an individual uses a credit report in decisions affecting an individual.
• Note: A major limitation is that the FCRA does not limit the use or consideration of prior history or experiences between the consumer and the user of the credit report. Also, the bank falls under an exception if it gives its opinion of the credit worthiness of the consumer within the report.