1.3 Federal Regulation Of Insurance (accuracy And Fairness Of Credit Reporting And Reasonable Procedures) Flashcards
Purpose:
Purpose: The Fair Credit Reporting Act (FCRA) mandates consumer reporting agencies to adopt reasonable procedures that cater to the needs of commerce concerning consumer credit, personnel, insurance, and related information. These procedures should ensure confidentiality, accuracy, relevancy, and fair usage of consumer information.
Key agencies
Key Agencies: Credit information is usually collected by three major bureaus:
Experian
TransUnion
Equifax
Type of information collected
Type of Information Collected: Credit reporting agencies might gather extensive personal information including:
Employment history
Home environment and addresses
Education background
Hobbies
Health details
Use of alcohol or drugs
Criminal records
Driving records
Credit records
Military history
Sources of income
Financial condition and records
Types of Reports: 2 main reports
Consumer report and investigative consumer report
Consumer report:
Provides basic information about a consumer’s credit, character, financial institutions, and public record details.
Typically gathered by credit bureaus and used by institutions for creditworthiness evaluations.
Investigative consumer report-
Contains the same information as a regular consumer report plus additional insights about the consumer’s character, habits, general reputation, and lifestyle.
Information is gathered through personal interviews with neighbors, associates, friends, and acquaintances.
Consumers must receive notification within 3 days from the request date if an investigative report is requested.
Important Restrictions:
Reports can only be requested for valid business purposes.
Violating this rule can lead to penalties up to $2,500 per violation.
Consumer Rights:
If an individual’s application (for credit, employment, insurance, etc.) is declined or modified due to information from a credit report, the individual must be:
Informed of this fact.
Given the details of the credit reporting agency involved.
Notified of their legal right to obtain a free copy of the report.
Allowed to correct any inaccuracies in their report.
Common examples of consumer rights:
Credit can be pulled by employers for employment purposes.
Credit checks are done when individuals apply for loans.
Credit checks are permissible when applying for life, auto, or other insurance products.
Violations:
Credit reports may only be requested for valid business purposes.
Unauthorized or improper requests can result in penalties up to $2,500.
These guidelines protect consumers by ensuring accuracy, fairness, transparency, and responsible use of their personal and financial information.
