FACT Act Requirements for Credit Reports
Question: We have some questions about what requirements the FACT Act imposes when we pull a credit report to review on an existing line of credit. Do we have to send any notices to the customer? Does it make a difference how the credit bureau reports our request?
Answer: When it comes to using credit reports to evaluate an ongoing credit agreement with a customer, whether a line of credit or an installment loan, you have a legitimate business purpose under FCRA for obtaining the report. Both FCRA and ECOA apply to actions that you might take. Both laws are concerned primarily with any adverse action that you take as a result of the credit review. The FACT Act does not make any changes to the existing rules on this use of credit reports. Thus, if you make no changes or increase the line of credit based on the review, you do not need to take any additional action. However, if you take any adverse action, such as reducing the credit line or closing the account, you would have to provide an adverse action notice explaining your action.
There is one way that the FACT Act might affect this review of existing credit. If the credit report that you obtain contains an identity theft warning, you are obligated to follow the restrictions that the FACT Act places on credit - no line increases, no new cards, and no address changes - without customer verification. If you are a credit reporter, you should already know about the identity theft issue. However, if you are not a credit reporter, the credit review is how you would learn about the identity theft problem.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 1, 1/05
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