FCRA Flashcards
1
Q
FCRA applies to financial institutions that operate in what types of capacities? (5)
A
Financial institutions that:
-Act as consumer reporting agencies
-Are procurers and users of information (credit grantors, purchasers of dealer paper, or when opening deposit accounts)
-Are furnishers and transmitters of information (reporting info to consumer reporting agencies or third parties)
-are marketers of credit or insurance products
-are employers
2
Q
What is the definition of a consumer report under FCRA?
A
any written, oral, or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used in establishing the consumer’s eligibility for:
-Credit or insurance to be used primarily for personal, family or household purposes
-employment purposes
-any other purpose authorized under section 604
3
Q
The term consumer report does NOT include what types of information sharing? (6)
Exceptions for financial institutions so they can share information without becoming a consumer reporting agency.
A
-any report containing information solely about transactions or experiences between a consumer and the institution making the report
-any communication of that transaction or experience among entities related by common ownership, affiliation (different banks that are members of the same holding company)
-communication of other info among persons related by common ownership if it is disclosed to the consumer and the consumer is given the opportunity beforehand to direct the info not be communicated among such persons.
-any authorization or approval of a specific extension of credit by the issuer of a credit card
-Any report in which a institution who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer, such as a lender who has received a request from a broker, conveys his or her decision with respect to such request, if the third party advises the consumer of the name and address of the financial institution that made the credit decision, and the institution makes the adverse action disclosures to the consumer; or
-Joint user rule, where users of consumer report may share information if they are jointly involved in the decision to approve a consumers request for a product or service.
4
Q
What is the definition of a person under FCRA?
A
means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.
5
Q
What is an investigative consumer report?
A
means a consumer report or portion thereof in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information.
However, such information does not include specific factual information on a consumer’s credit record obtained directly from a creditor of the consumer or from a consumer reporting agency when such information was obtained directly from a creditor of the consumer or from the consumer.
6
Q
What is the definition of an Adverse Action under FCRA? (5)
A
Same meaning as under ECOA:
A denial or revocation of credit, a change in terms of an existing credit arrangement, or refusal to grant credit in substantially the same amount or on terms substantially similar to those requested.
Under FCRA there are additional meanings:
-denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of any insurance when underwriting insurance
-denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee
-A denial or cancellation of, an increase in any charge for, or other adverse change in the terms of any license or benefit described in section 604(a)(3)(D)
- An action taken or determination that is (a) made in connection with an application made by, or transaction initiated by, any consumer, or in connection with a review of an account to determine whether the consumer continues to meet the terms of the account, and (b) adverse to the interests of the consumer.
7
Q
What is the definition of a consumer reporting agency?
A
means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
8
Q
FCRA allows a consumer reporting agency to legally furnish a consumer report under what circumstances?
-General (4)
-Sub categories for institutions (6)
A
-Response to a court order of subpoena
-accordance with written instructions of consumer
-to a financial institution which has reason to believe:
–intends to use report in connection with credit transaction (extending, reviewing, and collecting credit)
–intents to use for employment
–in underwriting of insurance
–in determining consumer eligibility for a license or other benefit granted by gov that is required by law to consider an applicants financial responsibility.
–intends to use info, as a potential investor/servicer, or current issuer in connection with a valuation of the credit or prepayment risks associated with an existing credit obligation
–otherwise has a legitimate business need for the info in connection with a transaction initiated by the consumer OR to review an account to determine if consumer continues to meet the terms of the account.
-in response to a request by the head of a state or local child support agency if the person certifies various information to the agency regarding the need to obtain the report
9
Q
The financial institution must meet what requirements to procure an investigative consumer report? (4)
A
- The institution clearly and accurately discloses to the consumer that an investigative consumer report may be obtained.
- The disclosure contains a statement of the consumer’s right to request other information about the report, and a summary of the consumer’s rights under the FCRA.
- The disclosure is in writing and is mailed or otherwise delivered to the consumer not later than three business days after the date on which the report was first requested.
- The financial institution procuring the report certifies to the consumer reporting agency that it has complied with the disclosure requirements and will comply in the event that the consumer requests additional disclosures about the report.
10
Q
Are financial institutions required to maintain FCRA procedures?
A
Yes.
Financial institutions should employ procedures, controls, or other safeguards to ensure that consumer reports are obtained and used only in situations for which there are permissible purposes.
11
Q
True or false:
All financial institutions are consumer reporting agencies
A
False.
By their very nature, banks, credit unions, and thrifts have a significant amount of consumer information that could constitute a consumer report, and thus communication of this information could cause the institution to become a consumer reporting agency.
The FCRA contains several exceptions that enable a financial institution to communicate this type of
information, within strict guidelines, without becoming a consumer reporting agency.
12
Q
Would the financial institution be considered a consumer reporting agency in the following circumstance?
GLBA permits a financial institution to share a list of its customers and information such as their credit scores with another financial institution to jointly market or sponsor other financial products or services
A
This communication may be considered a consumer report under FCRA and could potentially cause the sharing financial institution to become a consumer reporting agency.
the FCRA may also restrict activities that the GLBA permits.
13
Q
Would the financial institution be considered a consumer reporting agency in the following circumstance?
Financial institution shares information related to its own transactions or experiences with a consumer (payment history, account with the institution) with a non-affiliated third party
A
This information sharing would not be considered a consumer report, therefore the institution is not a consumer reporting agency.
HOWEVER, this type of information sharing may be restricted under the Privacy Regulations (GLBA) because it meets the definition of non-public personal information; therefore, sharing it with a non-affiliated third party may be subject to an opt out under the privacy regulations.
14
Q
Would the financial institution be considered a consumer reporting agency in the following circumstance?
Institution shares a consumer’s credit score with an affiliate without providing a notice to the consumer or an opportunity to opt out.
A
Yes, the financial institution may become a consumer reporting agency under FCRA if they share this information without notifying the consumer beforehand and giving them the chance to opt out.
This opt out right must be contained in the institutions Privacy notice.
15
Q
Where would a financial institution need to disclose the opt out information for a consumer if they do not want the institution to share information with affiliates?
A
This opt out notice must be contained in the institutions Privacy notice.
16
Q
Would the financial institution be considered a consumer reporting agency in the following circumstance?
A consumer applies for a mortgage loan that will have a high loan-to-value ratio, and thus the lender will require private mortgage insurance (PMI) in order to approve the application. The PMI will be provided by an outside company. The lender and PMI company share consumer report information to decide whether to grant products to the consumer.
A
No. The lender and the PMI company can share consumer report information about the consumer because both entities have permissible purposes to obtain the information and both are jointly involved in the decision to grant the products to the consumer. This exception applies to entities that are affiliated or non-affiliated third parties.
It is important to note that the GLBA will still apply to the sharing of nonpublic, personal information with non-affiliated third parties; therefore, financial institutions should be aware that sharing under the FCRA joint user rule may still be limited or prohibited by the GLBA.
17
Q
A creditor is generally prohibited from using medical information in connection with any determination of a consumer’s eligibility for credit. However a creditor does not violate this prohibition if it receives the medical info in connection with any determination for credit without specifically requesting ______ ______.
However, a creditor may only use this medical info with either the ________ ________ exception or one of the other _______ _________ provided in the rules.
A
Medical information.
Financial Information Exception
Other Specified Exceptions
18
Q
What is the Financial Information Exception to using medical information in connection with any determination of a consumer’s eligibility for credit? (3)
A
The rules allow a creditor to obtain and use medical information pertaining to a consumer in connection with any determination of the consumer’s eligibility or continued eligibility for credit, so long as:
- The information is the type of information routinely used in making credit eligibility determinations, such as information relating to debts, expenses, income, benefits, assets, collateral, or the purpose of the loan, including the use of the loan proceeds;
- The creditor uses the medical information in a manner and to an extent that is no less favorable than it would use comparable information that is not medical information in a credit transaction; AND
- The creditor does not take the consumer’s physical, mental, or behavioral health, condition or history, type of treatment, or prognosis into account as part of any such determination.
19
Q
How should a creditor consider the debt in the following example?
Consumer includes on an application for credit information about two $20,000 debts. One debt is to a hospital; the other is to a retailer.
A
The creditor may use the medical information in a manner and to an extent that is no less favorable than it would use comparable, non-medical information.
i.e. The creditor may use and consider the debt to the hospital in the same manner in which they consider the debt to the retailer, such as including the debts in the calculation of the consumer’s proposed debt-to-income ratio. In addition, the consumer’s payment history of the debt to the hospital may be considered in the same manner as the debt to the retailer.
20
Q
Is the following example allowed under FCRA’s Financial information exception to medical information?
If a creditor has a routine policy of declining consumers who have a 90-day past due installment loan to a retailer, but does not decline consumers who have a 90-day past due debt to a hospital. Is the creditor allowed to continue this policy without violating FCRA medical information rules?
A
the financial information exception would allow a creditor to continue this policy without violating the rules because in these cases, the creditor’s treatment of the debt to the hospital is more favorable to the consumer.
21
Q
True or false:
A creditor may take a consumer’s physical, mental, or behavioral health, condition or history, type of treatment, or prognosis into account as part of any determination regarding the consumer’s eligibility, or continued eligibility of credit.
A
False.
The creditor may only consider the financial implication, such as the status of the debt with the hospital, continuance of disability income, etc.
22
Q
In addition to the financial information exception, the rules also provide for what nine specific exceptions under which a creditor can obtain and use medical information in its determination of the consumer’s eligibility, or continued eligibility for credit?
A
- To determine if the use of a power of attorney is necessary, of if the consumer has legal capacity to contract when a person seeks to exercise a power of attorney based on a medical condition.
-to comply with local, state, or federal laws
-to determine, at the customers request, if they qualify for a special credit program or credit assistance program that is designed to meet the needs of the consumers medical condition and is established and administered based on a written plan (w/ credit standards/procedures and identified benefitting class).
-for fraud prevention/ detection
-for the purpose of financing medical products/services to verify purpose of the loan
-if consumer/legal rep requests creditor use medical info in determining eligibility to accommodate consumer’s circumstances and as long as it is documented by creditor.
-determine if provisions of a forbearance program is triggered by a medical condition or event apply to the consumer
-determine eligibility for a debt cancellation/ suspension contract if a medical condition/ event is a triggering event for the provisions of benefits under the contract.
-determine eligibility for credit insurance product if a medical condition/ event is a trigger for the provision of benefits under the product.
23
Q
Can a creditor use medical records to determine a consumer’s eligibility for credit in the following scenario:
Person A is attempting to act on behalf of Person B under a Power of Attorney that is invoked based on a medical event, a creditor obtains and uses medical information to verify that Person B has experienced a medical condition or event such that Person A is allowed to act under the Power of Attorney.
A
Yes, a creditor is allowed to obtain and use medical information in this situation as it qualifies as a specific exception under FCRA.
24
Q
Can a creditor use medical records to determine a consumer’s eligibility for credit in the following scenario:
At consumer’s request, a creditor grants an exception to its ordinary policy to accommodate a medical condition the consumer has experienced.
A
Yes, an exception allows a creditor to consider medical information in this context, but it does not require
a creditor to make such an accommodation nor does it require a creditor to grant a loan that is unsafe or unsound.
25
Can a creditor use medical records to determine a consumer's eligibility for credit in the following scenario:
Creditor has a policy of delaying foreclosure in cases where a consumer is experiencing a medical hardship.
Yes, an exception allows the creditor to use medical information to determine if the policy would apply to the consumer. This exception does not require a creditor to grant forbearance, it merely provides an exception so that a creditor may consider medical information in these instances.
26
If a creditor shares with an affiliate any of the following:
-medical information
-individualized list or description based on the payment transactions of the consumer for medical products/ services
-aggregate list of identified consumers based on payment transaction for medical products/ services
is this considered a consumer report, or an exception to that definition?
This would be considered a consumer report shared with an affiliate, as sharing any of this information does not apply to the exclusions under the definition of a "consumer report"
Effectively, this means that if a person shares medical information, that person becomes a consumer reporting agency, subject to all of the other substantive requirements of the FCRA.
However there are some exceptions.
27
What are the exceptions to sharing medical information with affiliates? (6)
To avoid becoming a consumer reporting agency.
A creditor may share medical information with affiliates without becoming a consumer reporting agency under the following circumstances:
-in connection w/ business of insurance or annuities
-for any purpose permitted without authorization under HIPAA
-for any purpose described in section 1179 of HIPAA
-for any purpose described in 502(e) of GLBA
-in determining a consumer's eligibility for credit consistent with the financial information exceptions or specific exceptions
-as otherwise permitted by order of an FFIEC agency
28
What is the definition of eligibility information?
Includes transaction and experience information, also the type of information found in consumer reports (third party info, credit scores). This does not include aggregate or blind data that does not contain personal identifiers such as account number, name or address.
29
What is the definition of a pre-existing business relationship? (3)
Relationship between a financial institution (or a person’s licensed agent), and a consumer based on:
a. A financial contract between the person and the consumer which is in force on the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation;
b. The purchase, rental, or lease by the consumer of the person’s goods or services, or a financial transaction (including holding an active account or a policy in force, or having another continuing relationship) between the consumer and the person, during the 18- month period immediately preceding the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation; or
c. An inquiry or application by the consumer regarding a product or service offered by that person during the three-month period immediately preceding the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation.
30
What is the definition of a solicitation? (2)
means the marketing of a product or service initiated by a person, such as a financial institution, to a particular consumer that is:
a. Based on eligibility information communicated to that person by its affiliate; and
b. Intended to encourage the consumer to purchase or obtain such product or service.
Ex: telemarketing call, direct mail, email.
Does not include marketing communications directed at the general public (TV, magazine, billboard)
31
A creditor and its subsidiaries may not use eligibility information about a consumer that it receives from an affiliate to make a solicitation for marketing purposes, unless what? (3)
1. It is clearly and conspicuously disclosed to the consumer in writing or, if the consumer agrees, electronically, in a concise notice that the financial institution may use eligibility information about that consumer that it received from an affiliate to make solicitations for marketing purposes to the consumer;
2. The consumer is provided a reasonable opportunity and a reasonable and simple method to “opt out” (that is, the consumer prohibits the financial institution from using eligibility information to make solicitations for marketing purposes to the consumer); and
3. The consumer has not opted out.
32
Can the bank use information shared with its affiliates for marketing in the following example?
A consumer has a homeowner’s insurance policy with an insurance company. The insurance company shares eligibility information about the consumer with its affiliated depository institution. Based on that eligibility information, the depository institution wants to make a solicitation to the consumer about its home equity loan products. The depository institution does not have a pre-existing business relationship with the consumer and none of the other exceptions apply.
The depository institution may not use eligibility information it received from its insurance affiliate to make solicitations to the consumer about its home equity loan products unless the insurance company gave the consumer a notice and opportunity to opt out and the consumer does not opt out.
33
In what circumstances is a creditor considered making a solicitation for marketing purposes? (3)
If:
-The bank receives eligibility info from an affiliate, including placing it in a common database
-the bank uses the info to do one of the following:
--identify consumer/ type to receive solicitation
--establish criteria used to select consumer for solicitation
--decide which of creditor's products or services to market/ tailor to that consumer
AND
-as a result the consumer is provided a solicitation
34
What is constructive sharing?
Constructive sharing occurs when a financial institution provides criteria to an affiliate to use in marketing the financial institution’s product and the affiliate uses the criteria to send marketing materials to the affiliate’s own customers that meet the criteria.
35
In what situations, is a creditor considered to be participating in Constructive Sharing and is not considered to be using shared eligibility info to make solicitations? (2)
Second situation has 5 sub items
-Creditor provides criteria for consumer to whom it would like its affiliate to market the Creditor's products. Then based on this criteria, affiliate uses eligibility info in connection with its own pre-existing business relationship w/ consumer to market the creditor's products/services.
-A service provider, applying the creditor's criteria, uses info from an affiliate (shared database) to market the creditor's products or services as long as:
--affiliate controls access and use of eligibility info under written agreement
--agreement establishes specific T&C under which servicer provider can access and use data for marketing
--agreement requires service provider to implement policies and procedures to ensure data is used in accordance with T&C on marketing
--affiliate is identified on or with marketing materials provided to the consumer
--creditor does not directly use its affiliate's eligibility info in a manner described as "making solicitations" under FCRA
36
In what situations do the initial notice and opt out requirements for affiliate marketing not apply to a financial institution that uses eligibility information it receives from an affiliate? (6)
1. To make a solicitation for marketing purposes to a consumer with whom the financial institution has a preexisting business relationship;
2. To facilitate communications to an individual for whose benefit the financial institution provides employee benefit or other services pursuant to a contract with an employer;
3. To perform services on behalf of an affiliate (but this would not allow solicitation where the consumer has opted out);
4. In response to a communication about the financial institution’s products or services initiated by the consumer;
5. In response to a consumer’s authorization or request to receive solicitations; or
6. If the financial institution’s compliance with the affiliate marketing regulation would prevent it from complying with State insurance laws pertaining to unfair discrimination in any state in which the financial institution is lawfully doing business.
37
Regarding affiliate marketing, a financial institution must provide to the consumer a reasonable and simple method to ____ ____. The opt-out notice must be ____, _____, ___, and must accurately disclose the consumer may elect to limit the use of ______ ______ to make solicitations to the consumer.
Opt-out
Clear, Conspicuous, and concise
Eligibility information
38
True or false:
Affiliate marketing opt out notices cannot be coordinated and consolidated with any other notice or disclosure such as the GLBA notices.
False, The opt out notice can be coordinated and consolidated with any other notice or disclosure required under Law.
39
In an affiliate marketing opt out notice, a consumer may be given the opportunity to choose from a menu of alternatives when electing to prohibit solicitation, such as? (3)
1. Electing to prohibit solicitations from certain types of affiliates covered by the opt-out notice but not other types of affiliates covered by the notice,
2. Electing to prohibit solicitations based on certain types of eligibility information but not other types of eligibility information, or
3. Electing to prohibit solicitations by certain methods of delivery but not other methods of delivery.
One of the options however, must allow the consumer to prohibit all solicitations from all of the affiliates that are covered by the notice.
40
Does an affiliate marketing opt- out notice apply to continuing relationships?
i.e a consumer opts out from a notice received in relation to their mortgage account, but later they open a deposit account. Does the opt out notice apply across all account types?
Yes, the opt out notice may apply to eligibility information obtained from one or more continuing relationships as long as the notice adequately describes the continuing relationships covered.
if there is a lapse in the relationship, the consumer would need to receive a new opt out notice after that relationship is established again and the creditor plans to use the eligibility information on the consumer.
41
How long does an opt-out of affiliate marketing last?
Must be effective for a period of at least 5 years.
42
After the affiliate marketing opt-out period expires (5yrs), a financial institution may not make solicitations based on eligibility information it receives from an affiliate to a consumer who previously opted-out, Unless what? (2)
Unless:
1. The consumer receives a renewal notice and opportunity to opt out, and the consumer does not renew the opt-out;
or
2. An exception to the notice and opt-out requirements
applies.
43
What elements are required as part of an affiliate marketing opt-out renewal notice? (5)
-Elements of the original opt-out notice
-that the consumer previously elected to limit the use of certain info to make solicitations to the consumer
-the consumer's election has expired or is about to expire
-consumer may elect to renew the consumer's previous election
-if applicable, that the election to renew will apply for a specified period of time stated in the notice and that the consumer will be allowed to renew the election once that period expires.
44
Who is required to provide the affiliate marketing opt out notice to consumers?
Who is required to provide the renewal notice at expiration?
The affiliate solicitor or an affiliate group
The same affiliate who provided the previous opt out notice, its successor or an affiliate group that provided the previous notice.
45
What are the requirements under FCRA regarding the use of consumer reports for employment purposes? (2)
not including adverse action requirements
-FCRA requires written permission of the consumer to procure a consumer report for "employment purposes:
-Prior to procuring the report, required to provide a clear and conspicuous disclosure that a consumer report may be obtained for employment purposes
46
Prior to taking any adverse action involving employment that is based in whole or in part on the consumer report, the user generally must provide to the consumer with what? (2)
What about at the time of adverse action? (1)
Prior to:
1. A copy of the report; and
2. A description in writing of the rights of the consumer
under this title, as prescribed by the FTC under section
(609)(c)(3).
At the time of AA:
-the consumer must be provided with an adverse action notice
47
What is prescreening?
When a financial institution obtains a list from a consumer reporting agency of consumers who meet certain predetermined creditworthiness criteria and who have not elected to be excluded from such lists.
48
What information is permitted to be included on a prescreening list? (3)
1. The name and address of a consumer;
2. An identifier that is not unique to the consumer and that is used by the person solely for the purpose of verifying the identity of the consumer; and
3. Other information pertaining to a consumer that does not identify the relationship or experience of the consumer with respect to a particular creditor or other entity.
49
In order for an institution to obtain and use a prescreening list they must do what?
The institution must make a "firm offer of credit or insurance" to each person on the list.
50
Is a creditor required to grant the credit to the consumer in the following example?
Assume a home mortgage lender obtains a list from a consumer reporting agency of everyone in County
X, with a current home mortgage loan and a credit score of 700. The lender will use this list to market a 2nd lien home equity loan product. The lender’s other non-consumer report criteria, in addition to those used in the prescreened
list for this product, include a maximum total debt-to income ratio (DTI) of 50% or less. Some of the criteria can be screened by the consumer reporting agency, but others, such as the DTI, must be determined individually when consumers respond to the offer.
A consumer responds with a DTI of 60%.
The lender does not have to grant the loan.
An institution is not required to grant credit or insurance if
the consumer is not creditworthy or insurable, or cannot furnish required collateral, provided that the underwriting criteria are determined in advance, and applied consistently.
51
Does the financial institution have to grant the loan in the following example?
On January 1, a credit card lender obtains a list from a consumer reporting agency of consumers in County Y who have credit scores of 720, and no previous
bankruptcy records. The lender mails solicitations offering a pre-approved credit card to everyone on the list on January 2. On January 31, a consumer responds to the offer and the lender obtains and reviews a full consumer report which shows that a bankruptcy record was added on January 15.
No, since the consumer no longer meets the predetermined criteria, the lender is not required to issue the credit card.
52
True or false:
A financial institution is allowed to obtain a full consumer report on anyone responding to a prescreened offer to verify that the consumer continues to meet the creditworthiness criteria.
True
53
What is a creditor required to provide to consumers if they use prescreened offers of credit or insurance?
They must provide consumers with a prescreened opt out notice with the offer of credit or insurance. Both a short notice and a long notice must be included.
54
What is the required content (3), form, and location (2) of the short notice on the prescreened opt out notice included with offers of credit or insurance?
The short notice must be a clear and conspicuous, simple, and easy-to-understand statement as follows:
Content:
-Consumer has the right to opt out of receiving prescreened solicitations
-toll-free number to opt out
-give the title of the long notice and direct consumers to its location
Form:
-must be in type size larger than the principal text on the same page, but no smaller than 12 pt
Location:
-must be on the front side of the first page of the principal promotional document
-must be located so it is distinct from other info (different color, bold, in a box, etc)
55
What is the required content (3), and form (4) of the long notice on the prescreened opt out notice included with offers of credit or insurance?
The long notice must also be a clear and conspicuous, simple, and easy to understand statement as follows:
Content:
-This “prescreened” offer of [credit or insurance] is based on information in your credit report indicating that you meet certain criteria.
-This offer is not guaranteed if you do not meet our criteria [including providing acceptable property as collateral].
-If you do not want to receive prescreened offers of [credit or insurance] from this and other companies, call the consumer reporting agencies [or name of consumer reporting agency] toll-free, [toll-free number]; or write: [consumer reporting agency name and mailing address].
Form:
-Must appear in the solicitation in type size not smaller that that of the same page, no smaller than 8 pt.
-notice must begin with the heading in all caps and underlined as “PRESCREEN & OPT OUT NOTICE.”
-in a type style distinct and different than that of the principal txt (bolded, italix, colored)
-set apart from other text on page (blank line above or below or indented)
56
True or False:
FCRA requires financial institutions that make or arrange mortgage loans using credit scores to provide the score with accompanying information to the applicants.
True under Section 609 (g)
57
Does a credit score include a mortgage score or rating by an automatized underwriting system?
What about any other elements of the underwriting process?
No both of these items are not included in the definition of a credit score.
58
What transactions are covered under 609(g) the requirement for mortgage lenders to disclose to applicants the credit score used to underwrite the loan?
(notice to home loan applicant)
Must meet all three elements:
-Closed end or open end loans
-have a consumer purpose
-secured by 1-4 family residential real properties
This requirement does not apply to loans that don't have a consumer purpose, such as when a borrower obtains a loan secured by their residence to finance a small business.
59
For financial institutions that are required to disclose to consumers the credit score used in underwriting, what are they required to provide to the consumer? (5)
They must provide the applicant the following, regardless of the action taken:
-Notice to The home loan applicant (along with name, address, and tele # of each consumer reporting agency used)
-Credit score (must disclose all scores used ex: joint app)
-range of possible scores
-date score was created and
-"key factors" used in the score calculation. (Total factors shall not exceed 4 or 5 if one of the factors is the number of inquiries)
60
What is the definition of a "key factor" used to calculate a credit score?
all relevant elements or reasons adversely affecting the credit score for the particular individual, listed in the order of their importance based on their effect on the credit score.
61
If a mortgage lender used 2 credit scores on a joint application to make the credit decision, do they have to provide two separate disclosures regarding the use of the scores?
Both yes and no.
They do not need to physically provide disclosures to both applications (they need only provide one.)
However, in the disclosures they must disclose each score used.
62
When are the credit score disclosures required to be provided to an applicant?
As soon as reasonably practicable after the creditor uses the credit score.
63
Under FCRA, when are creditors required to adhere to adverse action procedures?
When they take an adverse action on a consumer based whole or in part on any information contained in a consumer report.
64
Under adverse action procedures a financial institution must provide what to the consumer? (4)
-notice of adverse action (oral, written or electronic)
-provide consumer the name address and telephone number of consumer reporting agency
-and a statement that the agency did not make the decision to take adverse action and is unable to provide the consumer with specific reasons for the action
-provide consumer with notice of their right to obtain a free copy of the consumer report from the consumer reporting agency, within 60 days of receiving notice of adverse action, and the consumer's right to dispute the accuracy or completeness of any information on the consumer report with the agency.
65
What are the procedures for the following:
If credit for personal, family, or household purposes involving a consumer is denied or the charge for such credit is increased, partially or wholly on the basis of information obtained from a person other than a consumer reporting agency and bearing upon the consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, the financial institution must follow what procedures? (2)
-At the time of adverse action must clearly disclose the consumer's right to file a written request for the reasons for the adverse action
-if it receives a request within 60 days after the consumer learns of the adverse action, they must disclose, within a reasonable period, the nature of the adverse information. (source of info can be disclosed but does not have to be)
66
A creditor must notify a consumer of what, if they take an adverse action involving credit, insurance, or employment based on information provided by an affiliate? (4)
They must notify the consumer that the information:
1. Is furnished to the person taking the action by a person related by common ownership or affiliated by common corporate control, to the person taking the action;
2. Bears upon the consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living;
3. Is not information solely involving transactions or experiences between the consumer and the person
furnishing the information; and
4. Is not information in a consumer report.
The notification must inform the consumer of the action and that the consumer may obtain a disclosure of the nature of the information relied upon by making a written request within 60 days of transmittal of the adverse action notice. If the consumer makes such a request, the user must disclose the nature of the information received from the affiliate not later than 30 days after receiving the request.
67
Generally, what is the purpose of the risk based pricing notice requirement under FCRA?
The risk-based pricing notice requirement is designed primarily to improve the accuracy of consumer reports by alerting consumers to the existence of negative information in their consumer reports so that the consumers can, if they choose, check their consumer reports for accuracy and correct any inaccurate information.
This generally requires a user of consumer reports to provide a risk based pricing notice to a consumer when the creditor, based on a consumer report, extends credit to a consumer on terms that are "materially less favorable" than the terms the creditor has extended to other consumers.
68
What is the definition of material terms?
for each type of credit (4)
Open end: The APR required to be disclosed in the account opening disclosures. (does not include a temp interest rate, any penalty rate, or fixed APR option for a HELOC)
Credit Card: The APR that applies for purchases. For cards w/o a purchase APR, the APR that varies based on consumer report information
closed-end: APR required to be disclosed prior to consummation under Reg Z
Credit card w/o APR: financial term that varies based on consumer report information an has most significant financial impact on consumer (annual membership fee for charge card)
69
What is the definition of materially less favorable?
Cost of credit to a consumer would be significantly greater than the cost of credit to another consumer from or through the same creditor.
Relevant factors in determining the significant of a difference in cost include product type, term, and extent of difference.
70
A creditor must provide the risk based pricing notice to a consumer if...?
-creditor uses a consumer report in connection with the application for credit to a consumer for personal, family or household use
AND
-based in whole or in part on the consumer report, the creditor provides credit to the consumer on term's materially less favorable than the most favorable material terms available to a substantial proportion of consumers from that creditor.
71
What methods can a creditor use to determine which consumers must receive a risk based pricing notice? (2)
Creditor may determine on a case-by-case basis whether a consumer has received terms that are materially less favorable by:
-comparing the material terms offered to the consumer with the material terms offered to other consumer of a specific product type
Or if the direct comparison is not feasible:
-The credit score proxy method (creditor may determine a cutoff score at which approx. 40% of consumers have higher credit scores and 60% have lower credit scores. Then provide the notice to consumers who have a score lower than the cutoff score)
-alternative to 40/60 cutoff where a higher percentage of the bank's consumers receive the most favorable terms. Creditor may set a different cutoff score based on historical experience. The cutoff score would be set at a point which the approx percentage of consumers who historically have received the most favorable material terms based on their credit score would not receive a notice in the future. i.e. notices would be provided to approx % of consumer who historically have been granted credit on material terms other than the most favorable terms.
72
For the risk based pricing notice procedures, what credit score should the creditor select as its "cutoff score" in the example, and what group would receive the risk based pricing notice?:
Based on a sample of credit extended in the past six months, a creditor may determine that approximately 80 percent of its consumers received credit at its lowest APR (i.e., the most favorable material terms), and 20 percent of its consumers received credit at a higher APR (i.e., material terms other than the most favorable). Approximately 80 percent of the sampled consumers had a credit score at or above 750, and 20 percent had a credit
score below 750.
750
customers who have credit scores lower than 750 would receive the risk-based pricing notice.
73
How often must a creditor recalculate the credit score cutoff they use for risk based pricing procedures?
No less than every 2 years for each product type.
They can do this through taking a representative sample or considering the scores of all applicants.
74
How can a financial institution determine the cutoff score for risk based pricing when they create a new product type or acquire a new credit portfolio?
initially, they can determine the cutoff score based on information from market research or other third-party sources.
However, within 1 year the institution must recalculate the new cutoff score using the scores of its own consumers. If there is still not enough data after a year they can wait to recalculate till 2 years from acquiring the new product/portfolio.
75
If a creditor grants credit for a consumer that does not have a credit score, are they required to provide the risk based pricing notice?
Yes, if no credit score is available, the creditor must assume they are granting credit on materially less favorable terms and thus must provide the risk based pricing notice.
76
In the below example, the creditor uses a tiered pricing method, which tiers should receive the risk based pricing notice?
Top tier = best rate
Tier 1 (top) APR 8%
Tier 2 APR 10%
Tier 3 APR 12%
Tier 4 APR 14%
Risk-based pricing notice required for Tiers 2-4.
If the financial institution uses four or fewer pricing tiers, it complies by providing risk-based pricing notices to all consumers who do not qualify for the top, best-priced tier.
77
In the below example, the creditor uses a tiered pricing method, which tiers should receive the risk based pricing notice?
Tier 1 (top) APR 8%
Tier 2 APR 10%
Tier 3 APR 12%
Tier 4 APR 14%
Tier 5 APR 16%
No risk-based pricing notice required for top 30% to 40% of tiers. Top two tiers comprise 2 out of 5 (40%) of the number of tiers.
Risk-based notices required for Tiers 3–5.
If the institution uses five or more pricing tiers, it complies by providing the notices to all consumers who do not qualify for the two top, best-priced tiers and any other tier that, combined with the top two tiers, equal no less than the top 30 percent and no more than the top 40 percent of the total number of tiers.
78
In the below example, the creditor uses a tiered pricing method, which tiers should receive the risk based pricing notice?
Tier 1 (top) APR 8%
Tier 2 APR 10%
Tier 3 APR 12%
Tier 4 APR 14%
Tier 5 APR 16%
Tier 6 APR 18%
Tier 7 APR 20%
Tier 8 APR 22%
Tier 9 APR 24%
No risk-based pricing notice required for top 30% to 40% of tiers. Top three tiers comprise 3 out of 9 (33%) of the number of tiers.
Risk-based notices required for Tiers 4–9.
79
In reference to credit card issuers, they may provide the risk based pricing notice when? (2)
Any of the standard methods (credit score cut off or comparative method) or when:
-a consumer applies for a card in response to an application program/ solicitation and more than one purchase APR may apply under the program/ solicitation.
-based in whole or in part on a consumer report, the credit card issued has an APR higher than the lowest APR available in connection with the application/ solicitation.
The risk-based pricing requirements do not apply to a card issuer if the credit card program offers only a single annual APR (other than temporary initial rates or penalty rates) or if the issuer offers the consumer the lowest possible APR under the credit card program.
80
The risk based pricing notice must include what 8 elements?
1. A statement that a consumer report (or credit report) includes information about the consumer’s credit history and the type of information included in that history;
2. A statement that the consumer is encouraged to verify the accuracy of the information contained in the consumer report and has the right to dispute any inaccurate information in the report;
3. The identity of each consumer reporting agency that furnished a consumer report used in the credit decision;
4. A statement that federal law gives the consumer the right to obtain a copy of a consumer report from the consumer reporting agency or agencies identified in the notice without charge for 60 days after receipt of the notice;
5. A statement informing the consumer how to obtain a consumer report from the consumer reporting agency or agencies identified in the notice and providing contact information (including a toll-free telephone number, where applicable) specified by the consumer reporting agency or agencies;
6. A statement directing consumers to the web site of the Bureau to obtain more information about consumer reports;
7. A statement that the terms offered, such as the APR, have been set based on information from a consumer report; and
8. A statement that the terms offered may be less favorable than the terms offered to consumers with better credit histories.
81
When is a creditor required to provide a risk based pricing notice in regard to an account review?
If the creditor, based in whole or in part on a consumer report, increases the consumer's APR after a review of the consumer's account. There are some exceptions.
82
What are the content requirements of the account review risk-based pricing notice? (8)
1. A statement that a consumer report (or credit report) includes information about the consumer’s credit history and the type of information included in that history;
2. A statement that the consumer is encouraged to verify the accuracy of the information contained in the consumer report and has the right to dispute any inaccurate information in the report;
3. The identity of each consumer reporting agency that furnished a consumer report used in the account review;
4. A statement that federal law gives the consumer the right to obtain a copy of a consumer report from the consumer reporting agency or agencies identified in the notice without charge for 60 days after receipt of the notice;
5. A statement informing the consumer how to obtain a consumer report from the consumer reporting agency or agencies identified in the notice and providing contact information (including a toll-free telephone number, where applicable) specified by the consumer reporting agency or agencies;
6. A statement directing consumers to the web site of the Bureau to obtain more information about consumer reports;
7. A statement that the financial institution has conducted a review of the account using information from a consumer report; and
8. A statement that as a result of the review, the APR on the account has been increased based on information from a consumer report.
NOTE: Items 1 through 6 for account review risk-based pricing notice are substantially the same as items 1 through 6 for the risk-based pricing notice. only the last two items in each list are different.
83
What is the timing requirement for sending the risk based pricing notice for closed end credit and open end credit?
• For closed-end credit, a risk-based pricing notice must be provided to the consumer after the decision to approve a credit request is communicated to the consumer, but before consummation of the transaction.
• For open-end credit, the notice must be provided after the decision to grant credit is communicated to the consumer, but before the first transaction under the plan has been made.
84
What is the timing requirement for sending the risk based pricing notice for account reviews?
For account reviews, the notice must be provided at the time that the decision to increase the APR is
communicated to the consumer. If no notice of the increase in the APR is provided to the consumer prior to the effective date of the APR change, the notice must be provided no later than five days after the effective date of the APR change.
85
What is the timing requirement for sending the risk based pricing notice for automobile secured transactions made through an auto dealer unaffiliated with the institution?
For automobile lending transactions made through an auto dealer that is unaffiliated with the institution, the institution may provide a risk-based pricing notice in the time periods described above for closed-end credit.
Alternatively, the institution may arrange to have the auto dealer provide a risk-based pricing notice to the consumer on its behalf within these time periods and maintain reasonable policies and procedures to verify that the auto dealer provides the notices to consumers within the applicable time periods.
86
What is the timing requirement for sending the risk based pricing notice for instant credit that is granted under an open-end credit plan to a consumer in person or by telephone?
For instant credit that is granted under an open-end credit plan to a consumer in person or by telephone, the risk based pricing notice may be provided at the earlier of:
° The time of the first mailing to the consumer after the decision is made to approve the credit, such as in a
mailing containing the account agreement or a credit card; or
° Within 30 days after the decision to approve the credit.
87
What exceptions are there to providing the risk based pricing notice? (6)
1. When a consumer applies for specific terms of credit, and receives them, unless those terms were specified by the creditor using a consumer report after the consumer applied for the credit and after the creditor obtained the consumer report (12 CFR 1022.74(a));
2. When a creditor provides a notice of adverse action (12 CFR 1022.74(b));
3. When a creditor makes a firm offer of credit in a prescreened solicitation (12 CFR 1022.74(c));
4. When an institution generally provides a credit score disclosure to each consumer that requests a loan that is or will be secured by residential real property (12 CFR 1022.74(d));
5. When an institution generally provides a credit score disclosure to each consumer that requests a loan that is not or will not be secured by residential real property (12 CFR 1022.74(e)):
6. When an institution, which otherwise provides credit score disclosures to consumers that request loans, provides a disclosure about credit scores when no credit score is available (12 CFR 1022.74(f)).
88
A creditor is not required to provide a risk-based pricing notice to a consumer for a loan that is secured by real property if? (2)
-The consumer request an extension of credit that is or will be secured by 1-4 units of residential real property
-The institution provides to each consumer a credit score disclosure
89
What are the required elements of the credit score disclosure? (9)
If a creditor is providing this notice, they are exempt from providing the risk based pricing notice for 1-4 family loans or other loans not secured by resi real property.
The credit score disclosure must contain:
-Statement that credit report is a record of consumer's credit history and includes info about whether the consumer pays their obligations on time and how much they owe to creditors
-Statement that a credit score is a number that takes into account info in a consumer report and that it can change over time based on changes in credit history
-statement that credit score can affect if the consumer can obtain credit and what the cost of that credit will be
-statement that consumer is encourages to verify accuracy of info contained in credit report and has right to dispute inaccurate info.
-statement that fed law gives the consumer right to obtain copy of credit report directly from consumer reporting agency including free once during 12 month period.
-contact info on where to obtain free annual credit report
-statement directing consumers to web site of bureau to obtain more info about consumer reports
-The current credit score of the consumer or the most recent credit score of the consumer that was previously calculated by the consumer reporting agency for a purpose related to the extension of credit; and
-distribution of credit scores among consumers who are scored under same model (either a graph or statement obtained from credit reporting agency)
90
When is the credit score notice required to be provided?
(Timing)
At the same time as the notice to home loan applicant, which must be provided as soon as reasonably practicable after the credit score has been obtained. At or before consummation for closed end credit or before the first transaction for open end credit.
91
What must be included in the credit score notice if the creditor uses multiple credit scores to set material terms of credit? (2)
the content of the Section 1022.74(d) notice varies depending upon whether the institution only relies upon one of the credit scores or relies upon multiple credit scores.
a. If an institution only relies upon one of those credit scores in setting the material terms of credit granted, extended, or otherwise provided to a consumer (for example, by using the low, middle, high, or most recent score), the notice must include that credit score and the other information required by Section 1022.74(d).
b. If an institution relies upon multiple credit scores in setting the material terms of credit granted, extended,
or otherwise provided to a consumer (for example, by computing the average of all the credit scores obtained), the notice must include one of those credit scores and the other information required by Section 1022.74(d).
At the institution’s option, the notice may include more than one credit score, along with the additional information required by Section 1022.74(d) for each credit score disclosed.
92
What score must a creditor disclose in the credit score notice based on the following example?
An institution uses consumer reports to set the material terms of mortgage credit granted, extended, or provided to consumers and regularly requests credit scores from several consumer reporting agencies. It relies upon the low score when determining the material terms it will offer to the consumer.
The institution must disclose the low score in the Section 1022.74(d) notice.
93
What score must a creditor disclose in the credit score notice based on the following example?
An institution uses consumer reports to set the material terms of mortgage credit granted, extended, or provided to consumers and regularly requests credit scores from several consumer reporting agencies. The institution takes an average of all of the credit scores obtained in order to determine the material terms it will offer to the consumer, and thus relies upon all of the credit scores that it receives.
The institution may choose one of these scores to include in the Section 1022.74(d) notice.
94
True or false:
The credit score notice for residential RE exceptions under risk based pricing procedures is the same as the one required for the open end-credit exception?
true. All elements are the same.
If this notice is provide the creditor is exempt from providing a risk based pricing notice.
95
A creditor is not required to provide a risk-based pricing notice to a consumer for a loan that is not secured by real property if? (2)
The consumer requests from an institution an extension of credit that is not or will not be secured by one to four units of residential real property; and
2. Institution provides the consumer a credit score notice.
96
A creditor is not required to provide a risk-based pricing notice to a consumer that does not have an available credit score if the creditor does what? (3)
1. Regularly obtains credit scores from a consumer reporting agency and provides credit score disclosures to consumers in accordance with Sections 1022.74(d) or (e), but a credit score is not available from the consumer reporting agency from which the institution regularly obtains credit scores for a consumer to whom the institution grants, extends, or provides credit;
2. Does not obtain a credit score from another consumer reporting agency in connection with granting, extending, or providing credit to the consumer; and
3. Provides the credit score notice to the consumer
97
What elements are required for the credit score notice provided to consumers without an available credit score? (9)
The credit score disclosure must contain:
-statement that a credit report includes information about the consumer’s credit history and the type of information included in that history;
-Statement that a credit score is a number that takes into account info in a consumer report and that it can change over time based on changes in credit history
-statement that credit scores are important because consumers with higher credit scores generally obtain more favorable credit terms;
-statement that not having a credit score can affect whether the consumer can obtain credit and what the cost of that credit will be;
-statement that a credit score about the consumer was not available from a consumer reporting agency,
which must be identified by name, generally due to insufficient information regarding the consumer’s credit history;
-statement that the consumer is encouraged to verify the accuracy of the information contained in the consumer report and has the right to dispute any inaccurate information in the consumer report;
-statement that federal law gives the consumer the right to obtain copies of his or her consumer reports directly from the consumer reporting agencies, including a free consumer report from each of the nationwide consumer reporting agencies once during any 12-month period;
-The contact information for the centralized source from which consumers may obtain their free annual consumer reports; and
-statement directing consumers to the web site of the Bureau to obtain more information about consumer
reports.
98
What are the timing requirements for providing the credit score notice?
Generally as soon as practicable after creditor has requested the credit score, but not later than consummation or the first transaction.
for automobile dealers the creditor can arrange for the dealer to provide the notice
For instant credit:
-at time of first mailing after decision to approve credit
-within 30 days after decision to approve credit.
99
Does a creditor need to provide one or more risk based pricing notices if there is a joint application?
What about for the credit score notice?
Separate unless the applicants live at the same address.
The credit score notice must always be provided separately to each consumer.
100
What is a notice of address discrepancy?
Notice sent to a NCRA that informs the user of a substantial difference between the address for the consumer in the requested consumer report and what the NCRA has on file for the customer.
101
What are the policy and procedure requirements regarding reasonable belief?
A user must develop and implement reasonable policies and procedures designed to enable the user to form a reasonable belief that the consumer report relates to the consumer whose report was requested, when the user receives a notice of address discrepancy in connection with a new or existing account.
Ex: comparing info on consumer report with records they have of the consumer
102
true or false:
FCRA requires when providing a consumer report to a person that requests the report (a user), a nationwide consumer reporting agency (NCRA) must provide a notice of address discrepancy to the user if the address "substantially differs" from the address the NCRA has in the consumer's file.
True
103
When is a user required to develop policies and procedures for furnishing to the NCRA an address for the consumer that the user has reasonably confirmed is accurate? (3)
When the user:
1. can form a reasonable belief that the report relates to the consumer whose report was requested;
2. establishes a continuing relationship with the consumer (i.e., in connection with a new account); and
3. regularly furnishes information to the NCRA that provided the notice of address discrepancy.
A user’s policies and procedures for furnishing a consumer’s address to an NCRA must require the user to furnish the confirmed address as part of the information it regularly furnishes to the NCRA during the reporting period when it establishes a continuing relationship with the consumer.
104
What are the two main requirements under FCRA regarding address discrepancies?
-Requirement to form reasonable belief procedures
-Requirement to develop policies and procedures regarding the requirement to furnish a consumer's address to an NCRA
105
What are the general requirements under FCRA regarding change of addresses?
Require card issuers (debit or credit) to have procedures to assess the validity of an address change if the the card issuer receives a notice of change of address for an existing account, and within at least 30 days receives a request for an additional replacement card for the same account.
In such situations, the card issuer cannot issue an additional replacement card until they have verified the validity of the change of address in accordance with its policies and procedures.
106
What elements are required to be included in the policies and procedures regarding change of address requests? (3)
The card issuer will:
-Notify the cardholder for the request for an additional/replacement card at the cardholders former address or by other means of communication
-provide to the cardholder a reasonable means of promptly reporting incorrect address changes
-assess the validity of the change of address according to the procedures the card issuer has established as part of its identity theft prevention program.
107
What is a furnisher of information under FCRA?
When are they not considered a furnisher? (4)
An entity that furnishes info relating to consumers to consumer reporting agency(ies) for inclusion in a consumer report.
An entity is not a furnisher when it:
-provides info to a consumer reporting agency solely to obtain a consumer report for a permissible purpose
-is acting as a consumer reporting agency
-is a consumer to whom the furnished info pertains
-is an associate of the consumer and who provides info about the consumer's character, reputation, mode of living, in response to a specific request from a CRA.
108
What is a direct dispute under FCRA?
a dispute submitted by a consumer directly to a furnisher (including a furnisher that is a debt
collector) concerning the accuracy of any information
contained in a consumer report and pertaining to an account or other relationship that the furnisher has or had with the consumer.
109
True or false:
When a financial institution furnishes information to a CRA and determines the information is not complete or accurate, it must promptly notify the consumer of that determination?
FALSE
They must promptly notify the CRA of the determination that the information is inaccurate under FCRA NOT the CONSUMER.
Additionally, any corrections to that information must be provided to the consumer reporting agency and any further incomplete or inaccurate information must not be given to the CRA.
110
True or false:
Each furnisher of information must establish reasonable written policies and procedures regarding the accuracy and integrity of consumer information that it furnishes to a CRA.
True
111
What are the required procedures for furnishing information to a CRA regarding account closures and delinquent accounts?
For voluntary closure of a credit account, the financial institution must notify the CRA of the voluntary closure by the consumer with information regularly furnished for the period in which the account was closed.
For delinquent accounts being placed in collection, charges off, the financial institution, no later than 90 days after furnishing the info to the CRA, notify the CRA of the month and year of the commencement of the delinquency.
112
What procedures must a financial institution follow upon receiving a notice of dispute from a CRA regarding the accuracy or completeness of information provided to the CRA? (5)
What is the timeframe for completing these procedures?
The institution must:
-Conduct an investigation
-review information provided by CRA along with notice
-report results to CRA
-If the information is found to be incomplete or inaccurate, notify all nationwide CRAs which the institution previously provided information
-If the information is incomplete, inaccurate, or not verifiable, the financial institution must modify the item, delete the item, or permanently block the reporting of that item to the CRA.
All of this must be completed within 30 days, but can be extended 15 days if the CRA receives additional relevant information from the consumer.
113
In what circumstances are furnishers of information required to conduct a investigation of a direct dispute from a consumer? (4)
(this would be opposed to the furnisher receiving notice of the dispute through the CRA)
They must conduct an investigation if the dispute relates to:
-The consumer's liability for a credit account or other debt (ex: fraud, identity theft, joint liability, or authorized users)
-the terms of a credit account or other debt (ex: type of account, principal balance, scheduled payment amount, credit limit)
-the consumer's performance or other conduct concerning an account. (ex: current payment status, high balance, payment date, payment amount, date acct open/close)
-any other information contained in a consumer report regarding an account or other relationship that bears consumer creditworthiness, credit standing, credit capacity, character, reputation, personal characteristics, or mode of living.
114
The direct dispute requirements to perform an investigation, do not apply to a furnisher of info, if the direct dispute is or relates to what? (9)
The direct dispute requirements do not apply to a furnisher if the direct dispute relates to:
1. The consumer’s identifying information such as name(s), date of birth, Social Security number, telephone number(s), or address(es);
2. The identity of past or present employers;
3. Inquiries or requests for a consumer report;
4. Information derived from public records, such as judgments, bankruptcies, liens, and other legal matters (unless the information was provided by a furnisher with an account or other relationship with the consumer);
5. Information related to fraud alerts or active duty alerts; or
6. Information provided to a consumer reporting agency by another furnisher.
The direct dispute requirements also do not apply if the furnisher has a reasonable belief that the direct dispute is:
1. submitted by a credit repair organization;
2. is prepared on behalf of the consumer by a credit repair organization; or
3. is submitted on a form supplied to the consumer by a credit repair organization.
115
A furnisher is only required to investigate a direct dispute if a consumer submits a dispute notice to the furnisher where? (3)
1. The address provided by a furnisher and listed on a consumer report relating to the consumer;
2. An address clearly and conspicuously specified by the furnisher that is provided to the consumer in writing or electronically (if the consumer has agreed to the electronic delivery of information from the furnisher); or
3. Any business address of the furnisher if the furnisher has not provided a specific address for submitting direct disputes.
116
A direct dispute notice from a consumer to a furnisher must include what elements? (3)
1. Sufficient information to identify the account or other relationship that is in dispute, such as an account number and the name, address, and telephone number of the consumer;
2. The specific information that the consumer is disputing and an explanation of the basis for the dispute; and
3. All supporting documentation or other information reasonably required by the furnisher to substantiate the basis of the dispute. This documentation may include, for example, a copy of the relevant portion of the consumer report that contains the allegedly inaccurate information; a police report; a fraud or identity theft affidavit; a court order; or account statements.
117
What procedures must a furnisher follow after receiving a direct dispute notice from a consumer? (4)
-conduct an investigation
-review all relevant info provided with the dispute notice
-complete its investigation of the dispute and report results to the consumer before the expiration of the period under section 611(a)(1) of the FCRA (15 U.S.C. 1681i(a)(1)).
-If the info is found to be inaccurate, promptly notify each CRA that received the inaccurate info of the investigation findings and provide a correction.
118
If a furnisher receives a direct dispute it determined to be frivolous or irrelevant when must it notify the consumer of its determination?
No later than 5 business days after making the determination. Through any available means. The notice must include the reasons for such determination and identify any info required to investigate the disputed info.
119
What are the requirements under FCRA regarding preventing the Re-Pollution of Consumer Reports? (2)
Upon notice to a CRA from a consumer that furnished info may be fraudulent as a result of identity theft. Consumer reporting agencies must notify furnishers that the information may be the result of identity theft, an identity theft report has been filed, and that a block has been requested.
Upon receiving such notice, financial institutions must establish and follow reasonable procedures to ensure that this information is not re-reported to the consumer reporting agency, thus “re-polluting” the victim’s consumer report.
120
True or false:
FCRA requires financial institutions to provide consumers with a notice either before negative information is provided to a nationwide CRA, or within 30 days after reporting the negative info.
True
There a two forms of model text that can be used depending on how the institution determines to notify the consumer. See model B-1 or B-2
121
What is considered negative information, which requires notification to a consumer when reporting to a CRA?
Information furnished regarding delinquencies, late payments, insolvency, or any form of default.
122
What are the two primary requirements under FCRA regarding Consumer Alerts and Identity theft protections?
-User of a consumer report that contains a fraud or active duty alert must take steps to verify the identity of the individual
-Financial institution must disclose certain info when consumers allege that they are the victims of identity theft.
123
How long must a fraud alert remain on a consumer report after a consumer requests it?
What about an active duty alert?
Fraud alerts must remain in a consumer report for no less than 90 days.
Active duty alerts must remain in the file for no less than 12 months.
124
Can a creditor extend credit, issue additional cards, or increase credit limits for a consumer with an active duty or fraud alert on their credit report?
Not unless the creditor uses reasonable policies and procedures to form a reasonable belief that they know the identity of the person making the request.
This is because users of consumer reports are required to verify the consumer's identity if one of these alerts is present in the report.
125
How long does an extended alert last on a consumer report?
Can a creditor extend credit, add cards, or increase credit limits with an extended alert present on the report?
A consumer who is a victim of idenity theft can submit identity theft reports and proof of identity to a CRA to get an extended alert that lasts 7 years.
A creditor must contact the consumer in person prior to performing any action.
126
When are financial institutions required to provide record of fraudulent transactions to victims of identity theft?
What must they provide?
And who else do they need to provide it to?
financial institutions must provide records of fraudulent transactions to victims of identity theft
within 30 days after the receipt of a request for the records.
These records include the application and business transaction records under the control of the financial institution whether maintained by the financial institution or another person on behalf of the institution (such as a service provider).
They should also provide the information to law enforcement where the victim requested, and to law enforcement where the fraud took place.
127
What must a consumer provide to a financial institution when requesting information from an institution on identity theft? (3)
-A written request for records
-proof of identity if requested
-proof of identity theft complaint (affidavit, police report), if requested
