In this scenario, we have a borrower applying for a CD secured loan, for personal purposes. The CD is owned by a third party, who is willing to put up the CD, if we approve the loan. Does the FCRA allow a bank to share the credit decision with a third party that is putting up a CD as collateral for a borrower? Furthermore, what if a borrower falls behind, is the bank permitted under the FCRA to notify the third party that put up the CD, that the borrower has missed a payment or two? Finally, if the borrower defaults and we have to use the CD to pay off the loan, what is allowed then?

Can we cover all this with an agreement between the borrower and the grantor? Or am I way off base and the FCRA doesn’t apply at all? Does anyone have any experience with this?

FCRA covers information sharing with affiliates of your financial institution.

Sharing customer information with non-affiliates is covered by Gramm-Leach-Bliley privacy which does have an exception for disclosures to persons holding a legal or beneficial interest relating to the consumer.

Thanks for the direction on the GLBA Privacy exception - I think that relates well to this scenario.

I still am questionning the applicability of the FCRA though. If we communicate our credit decision and/ or whether someone is past due on a loan with us - aren't these examples of information that bears on the creditworthiness of a customer? Do we become a consumer reporting agency - unless this type of sharing falls within one of the exceptions? I couldn't see where it falls within one of the exceptions. I can see where sharing "transaction and experience information" with an affiliate falls within one of the exceptions (unless of course the affiliate uses it for marketing.)

You are dealing with a guarantor here who has the right to know what is happening on the account they are guaranteeing.

That's the logical way to look at it and it makes sense to me but I've known the regulations not to make sense! In this scenario - the third party is putting up the CD and signing the Assignment of Deposit agreement, but not signing a guarantee. For practical purposes - it's accomplishing the same thing - but I'm wondering if it mattters for the FCRA?