Federal Government Restricts Permissible Use of Consumer Reports

The Fair Credit Reporting Act requires that all users of Consumer Reports have a permissible purpose prior to ordering a report. As a result, RHOL requires that members document that they are complying with the Act and using private financial information for tenant screening or debt collection.

Section 604 of the FCRA contains a list of permissible purposes under the current law. These are:

As ordered by a court of federal grand jury subpoena. Section 604 (a) (1)

As instructed by the consumer in writing. Section 604 (a) (2)

For the extension of credit as a result of an application from a consumer, or the review or collection of a consumer's account. Section 604 (a) (3) (A)

For employment purposes, including hiring and promotion decisions, where the consumer has given written permission. Section 604 (a) (3) (B) and 604 (b)

For the underwriting of insurance as a result of an application from a consumer. Section 604 (a) (3) (C)

When there is a legitimate business need, in connection with a business transaction that is initiated by the consumer. Section 604 (a) (3) (F) (i)

To review a consumer's account to determine whether the consumer continues to meet the terms of the account. Section 604 (a) (3) (F) (ii)

To determine a 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. Section 604 (a) (3) (D)

For use by a potential investor or servicer, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation. Section 604 (a) (3) (E)

For use by state or local officials in connection with the determination of child support payments, or modifications and enforcement thereof. Sections 604 (a) (4) and 604 (a) (5).

The entire text of the FCRA, with the old language and changes is available here. It can also be viewed through the Federal Trade Commission's Internet website at: http://www.ftc.gov.