The Fair Credit Reporting Act (FCRA) requires that this notice be sent
to inform users of consumer reports of their legal obligations. State law may impose
additional requirements. This first section of this summary sets forth the
responsibilities imposed by the FCRA on all users of consumer reports. The subsequent
sections discuss the duties of users of reports that contain specific types of
information, or that are used for certain purposes, and the legal consequences of
violations. The FCRA, 15 U.S.C. 1681-1681u, is set forth in full at the Federal Trade
Commission's Internet web site (http://www.ftc.gov).
1. 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 of the FCRA contains a list of the permissible purposes under the law. These are:
As ordered by a court or a 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. Sections 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 XFA)
To review a consumer's account to determine whether the consumer continues to meet the
terms of the account. Section 604(a)(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 an
assessment of the credit or prepayment risks associated with an existing credit
obligation. Section 604 (a) (3) (E)
For use by state and local officials in connection with the determination of child
support payments, or modifications and enforcement thereof. Sections 604 (a) (4) and 604
(a) (5)
In addition, creditors and insurers may obtain certain consumer report information for
the purpose of making unsolicited offers of credit or insurance. The particular
obligations of users of this "prescreened" information are described in Section
V below.
B. Users Must Provide Certifications
Section 604 (f) of the FCRA prohibits any person from obtaining a consumer report from
a consumer reporting agency (CRA) unless the person has certified to the CRA (by a general
or specific certification, as appropriate) the permissible purpose (s) for which the
report is being obtained and certifies that the report will not be used for any other
purpose.
C. Users Must Notify Consumers When Adverse Actions Are Taken
The term "adverse action" is defined very broadly by Section 603 of the FCRA.
"Adverse actions" include all business, credit, and employment actions affecting
consumers that can be considered to have a negative impact-such as unfavorably changing
credit or contract terms or conditions, denying or canceling credit or insurance, offering
credit on less favorable terms than requested, or denying employment or promotion.
1. Adverse Actions Based on Information Obtained From a CRA
If a user takes any type of adverse action that is based at least in part on
information contained in a consumer report, the user is required by Section 615(a) of the
FCRA to notify the consumer. The notification may be done in writing, orally, or by
electronic means. It must include the following:
The name, address, and telephone number of the CRA (including a toll-free telephone
number, if it is a nationwide CRA) that provided the report.
• statement that the CRA did not make the adverse decision and is not able to
explain why the decision was made.
• statement setting forth the consumer's right to obtain a free disclosure of the
consumer's file from the CRA if the consumer requests the report within 60 days.
A statement setting forth the consumer's right to dispute directly with the CRA the
accuracy or completeness of any information provided by the CRA.
2. Adverse Actions Based on Information Obtained From Third Parties Who Are Not
Consumer Reporting Agencies
If a person denies (or increases the charge for) credit for personal, family, or
household purposes based either wholly or partly upon information from a person other than
a CRA, and the information is the type of consumer information covered by the FCRA,
Section 615 (b) (1) of the FCRA requires that the user clearly and accurately disclose to
the consumer his or her right to obtain disclosure of the nature of the information that
was relied upon by making a written request within 60 days of notification. The user must
provide the disclosure within a reasonable period of time following the consumer's written
request.
3. Adverse Actions Based on Information Obtained From Affiliates
If a person takes an adverse action involving credit, insurance, employment, or a
credit transaction initiated by the consumer, based on information of the type covered by
the FCRA, and this information was obtained from an entity affiliated with the user of the
information by common ownership or control, Section 615(b)(2) requires the user to notify
the consumer of the adverse action. The notification must inform the consumer that he or
she may obtain a disclosure of the nature of the information relied upon by making a
written request within 60 days of receiving the adverse action notice. If the consumer
makes such a request, the user must disclose the nature of the information not later than
30 days after receiving the request. (Information that is obtained directly from an
affiliated entity relating solely to its transactions or experiences with the consumer,
and information from a consumer report obtained from an affiliate are not covered by
Section 615(b)(2).
II. OBLIGATIONS OF USERS WHEN CONSUMER REPORTS ARE OBTAINED FOR EMPLOYMENT
PURPOSES
If information from a CRA is used for employment purposes, the user has specific
duties, which are set forth in Section 604 (b) of the FCRA. The user must:
Make a clear and conspicuous written disclosure to the consumer before the report is
obtained, in a document that consists solely of the disclosure, that a consumer report may
be obtained.
Obtain prior written authorization from the consumer.
Certify to the CRA that the above steps have been followed, that the information being
obtained will not be used in violation of any federal or state equal opportunity law or
regulation, and that, if any adverse action is to b taken based on the consumer report, a
copy of the report and a summary of the consumer's rights will be provided to the
consumer.
Before taking an adverse action, provide a copy of the report to the consumer as well
as the summary of the consumer's rights. (The user should receive this summary from the
CRA, because Section 604 (b) (1) (B) of the FCRA requires CRAs to provide a copy of the
summary with each consumer report obtained for employment purposes.)
Sections HI, IV, V, & VI relate to certain types of credit reports
(investigative or medical), prescreened lists, or resellers. They do not apply to tenant
screening so we have not included them here. Any person wanting a copy of these sections
may print them from the Act.
III. OBLIGATIONS OF USERS OF INVESTIGATIVE CONSUMER REPORTS
IV. OBLIGATIONS OF USERS OF CONSUMER REPORTS CONTAINING MEDICAL INFORMATION
V. OBLIGATIONS OF USERS OF "PRESCREENED" LISTS
VI. OBLIGATIONS OF RESELLERS
VII. LIABILITY FOR VIOLATIONS OF THE FCRA
Failure to comply with the FCRA can result in state or federal 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
