Attention! New Accounts!You Need To Know About The Fair Credit Reporting Act

Attention! New Accounts !You Need To Know About The Fair Credit Reporting Act
by Lucy Griffin

For more than a year now, the Fair Credit Reporting Act has regulated certain aspects of deposit accounts.

Specifically, it requires the bank to notify the would-be customer when the bank decides not to open an account for a customer because of information that it has learned about them from a consumer reporting agency.

When refusing to open an account because of information received from a consumer reporting agency, the bank needs to tell the customer 1) It will not open the account requested; 2) that the bank made the decision because of information received from a consumer reporting agency; and 3) the name, address and phone number of the consumer reporter.

Don't confuse this deposit adverse action notice with the notice that is sent to loan applicants. Loan applicants have to be given a reason for the denial because of the Equal Credit Opportunity Act. You do not have to give any reasons to the deposit customer. You only have to give them the information outlined above.

So what is a consumer reporting agency? The Act defines a consumer reporter as any entity that compiles and sells information about consumers. Although the act has the word "credit" in its name, neither the act itself nor consumer reporters are restricted to credit. That is how deposit accounts got into the act.

Clearly included in the definition of consumer reporting agency are the companies that provide information about possible check fraud or other problems with potential deposit customers. So when you tap into that service that tells you whether the customer looks ok or has a red flag beside the name, you are using a consumer report from a consumer reporting agency. When the red flag comes up and you refuse to open the account, you need to give the would-be customer the FCRA notice.
Where's the regulation on this? There isn't one. FCRA is a "non-regulatory statute." That means that Congress did not authorize any agency to issue regulations. The law is supposed to stand by itself. However, authority to interpret the FCRA is assigned to the Federal Trade Commission. This means that interpretations on FCRA don't come from the sources you are used to - your bank regulators. However, bank examiners do check for compliance with FCRA, so it is important to get it right!

When did this happen? Congress made major revisions to the Fair Credit Reporting Act in September, 1996. The changes, including this requirement for adverse action notices on deposit accounts, took effect on September 30, 1997.

Lucy Griffin is the Principal of Compliance Resources, Inc. and Editor of ComplianceAction, a newsletter covering all aspects of Bank Compliance (18 issues per year, $289). As a consultant, she provides compliance management, information, support and audits (on and off-site). As a trainer, she presents seminars and workshops nationally on compliance issues. Lucy is also a compliance advisor to the BANKERS HOTLINE. She can be reached at 703.295.9300 or at lhgriff@erols.com.

Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 1, 1/99