Mgmt wants to take cr scores obtained when processing loan applications for cr and put them into our system. They want to "use" the cr score to see if existing cust would be good candidates for other products, including deposit products. In light of the Gowen letter, I think not. They disagree because we are using info we already have on file, which was obtained for a permissible purpose. Are they right?

No they are not. You need to point out the following section of the Gowen letter to them.


. . . Second, the credit bureau must, pursuant to Section 607(a), require the creditor to "certify the purposes for which the information is sought, and certify that the information will be used for no other purpose." (emphasis added). Because Section 604(a) provides no authority for a creditor (or any party) to use a consumer report for marketing purposes,(4) a creditor would violate its certification by using an existing report in such a manner . . . . .



You can not use the credit report for any purpose other than what is was obtained for. If you are going to use the reports for marketing (pre-screening) other products then you must follow those guidelines including the opt out requirements.

Thanks Dan, they are wearing me out!

Little different twist. If I have a permissible purpose for pulling a credit report that is part of our written procedures, i.e. to review prior to opening a deposit account. Can I use information in that credit report to cross sell other bank products? For example, a home equity line of credit, mortgage, car loan, etc.

Technically that is pre-screening, but it is done all the time at account openings. It is one of those "low risk" bending of the rules, but there is risk of being cited.

I might not clasify it as "low risk" with the emphasis that we are going to see the regulators now place on FCRA compliance. It use to fall through the cracks, but I am not so sure about that in the future since they are even asking about preparations for the Red Flag regulations in current exams when it is not even effective until later this year.

Good point Randy.

On the subject of permissible purpose.

Our bank routinely does account reviews on previous customers, who once had an account with us, i.e. credit card, car loan, etc., and have closed the account and paid it in full. We do it to see if the former customer qualifies for a new or currrent product, without having to make a firm offer of credit.

I think this violates 604(f), as the account is closed, PIF and there's no longer a permissible purpose. My GM thinks that we do have a valid reason given they had an account with us.

Any thoughts?

You are using the report for marketing/pre-screening purposes and must follow those guidelines.

Have your GM read the Isaac - Gowen letter.

http://www.ftc.gov/os/statutes/fcra/gowen.htm

You might want to share this also:

§ 619. Obtaining information under false pretenses [15 U.S.C. § 1681q]
Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined under title 18, United States Code, imprisoned for not more than 2 years, or both.

Thanks to both of you.

I showed the GM the aforementioned, who in turn contacted our regional legal counsel. The attorney said that due to a case in our area, Levine v World Financial Network Bank, we had a right to obtain an account review on a former customer.

Still, to me, it seems wrong to do this without making a firm offer.

How did that case eventually come out?? The Eleventh Circuit Court of Appeals reversed and remanded that case back to trial in 2006?? I never saw an outcome, so they may have reached an out of court settlement. If someone has a link to it, I would appreciate reading it.

Otherwise, I believe you are trend on very shakey ground.

Good question.

After looking that case up it only said that credit bureau could be liable, nothing about a user of credit info. It looks like World Financial and the others settled, except Experian.