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Credit Scoring for New Accounts
Answer by Lucy Griffin, BOL Guru

Question: I would like to know your thoughts and/or concerns on credit scoring at the new accounts desk. Meaning, a customer opens a checking or savings account, the bank pulls a credit report to see if the customer would meet a pre-determined criteria for cross-selling purposes, for example, overdraft protection. In a nut shell, this is prescreening. My initial concern is that the bank does not have a permissable purpose to obtain a credit report, unless the customer is informed and provides written permission. My second thought is if the customer does not meet the pre-determined criteria and is not offered a credit product based on information contained in the report, the bank would be required to provide an adverse action notice. Do you see any additional concerns/prohibitions, or know if this type of practice is acceptable?

Answer: You have a legitimate business purpose for pulling the credit report when the customer opens the account. It is entirely within the scope of the bank's interests to verify the credit performance of the potential customer. While you have the report, you may also review it to cross-sell. This activity is not prescreening as contemplated by the FCRA. Under Regulation B, this could possibly be construed as a screening activity. But the critical test under Regulation B is whether the screening method is the exclusive way to obtain the product or whether the customer could obtain it another way -- such as by filing an application.

First published on 12/1/03

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