Question & Answer

Question: One of our directors is in the medical profession. This individual is particularly helpful in evaluating business loan applications from members of the medical profession. If he or she provides information that causes the bank to decline the loan, is this third party information that should trigger an FCRA notice? Also, what reason would we give on the ECOA adverse action notice?

Answer: Interesting question! There is an inside and an outside aspect to this. However, we come down on the inside. The board member is a part of the bank's decision making process. Also, the director was chosen for certain business expertise. The directors together should bring the bank the breadth of their business knowledge and experience. That, after all, is why they were chosen to be board members.

So when the director brings his or her medical expertise to the evaluation of an application from another member of the medical community, the director is a part of the bank participating in the underwriting of that loan application. This is part of the bank, not a third party information source. This would therefore not be information from an outside source would not trigger an FCRA notice. To conclude that a director is an outside source of information would mean that any loan decision in which a director played a role would trigger an FCRA notice.

Also, note that this is business purpose credit. To that end, only information about the borrower as an individual would be subject to the FCRA. The business itself would not be.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 2, 4/97