Authorization to Pull Credit

Posted By: Comply101

Authorization to Pull Credit - 02/09/06 06:15 PM

I am trying to find a way to comply with reg requirements for obtaining customer authorization when pulling credit reports as well as certifying that they intend to apply for joint credit. Obviously, our applications usually take care of this problem except for the isolated times that the customer doesn't sign the application or the lender takes the request over the phone and the borrower never sends the application back. Does anyone have any input on how you handle these instances? (surely I'm not the only institution with these exceptions).

Would a form signed by the lender certifying that they obtained authorization be in compliance?
Posted By: rlcarey

Re: Authorization to Pull Credit - 02/09/06 06:23 PM

There is no regulatory requirement to obtain a written authorization if you have an application for credit.
Posted By: RR Joker

Re: Authorization to Pull Credit - 02/09/06 06:31 PM

In regard to intent to apply...you could use a form..state that the application was taken over phone and verify each intended applicant.
Posted By: Marty McKay

Re: Authorization to Pull Credit - 02/09/06 10:22 PM

You cannot pull credit for guarantors without written authorization because they have not applied for credit (they are not borrowers).
Our commercial loan applications include authorization for credit investigation for guarantors, officers, partners, etc. so we ask guarantors to sign the application and fax it back prior to pulling credit.
Posted By: David Dickinson

Re: Authorization to Pull Credit - 02/09/06 11:28 PM

615(c)(2) of the FCRA states:
The section does not require that the user provide any kind of advanced notification to consumers before a consumer report is obtained.

Also, review 604 [Permissible purposes of reports]. A bank can obtain a consumer report for any legitimate business need that is initiated by the consumer or to review an account to determine whether the consumer continues to meet the terms of the account.
Posted By: rlcarey

Re: Authorization to Pull Credit - 02/10/06 12:17 AM

Quote:

You cannot pull credit for guarantors without written authorization because they have not applied for credit (they are not borrowers).




That is not a correct statement. You need to read the FTC's Tatelbaum II letter - excerpt below.

"Your letter advocates an alternative interpretation of Section 604(a)(3)(A), concluding that "the FCRA would permit a lender to obtain a consumer report in connection with a business credit transaction where the consumer in question is or will be personally liable on the loan, such as in the case of an individual proprietor, co-signer, or guarantor." We agree that it is reasonable to view a business transaction in which an individual has accepted personal liability for the business debt as involving the consumer, thus providing a permissible purpose for the lender to obtain a consumer report under Section 604(a)(3)(A)."
Posted By: Marty McKay

Re: Authorization to Pull Credit - 02/10/06 12:29 AM

Thank you both for the correction and the references!
Long live BOL!
Posted By: 02bonne

Re: Authorization to Pull Credit - 02/13/06 10:07 PM

Quote:

There is no regulatory requirement to obtain a written authorization if you have an application for credit.




Does this also apply to deposit accounts? We require CB's to be pulled before opening a deposit account and our account opening documents includes a statement that a cb may be pulled. In the case of a decline the customer wouldn't receive this notification. Also, would we have to send out a notification on declines per section 606 (a)(1)of FCRA?
Posted By: rlcarey

Re: Authorization to Pull Credit - 02/14/06 02:34 AM

Yes - it is true for opening deposit accounts:

604. Permissible purposes of consumer reports [15 U.S.C. 1681b]
(a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
(3) To a person which it has reason to believe
(F) otherwise has a legitimate business need for the information
(i) in connection with a business transaction that is initiated by the consumer;

Adverse action is defined in the FCRA to include any action taken or determination that is adverse to the interests of the consumer. Once that happens, it triggers the FCRA Adverse Action Notification requirements.
Posted By: 02bonne

Re: Authorization to Pull Credit - 02/14/06 01:27 PM

I probably should have phrased that second part better. The notice i'm referring to in 606 is the following...

a) A person may not procure or cause to be prepared an investigative consumer report on any consumer unless--
(1) it is clearly and accurately disclosed to the consumer that an investigative consumer report including information as to his character, general reputation, personal characteristics, and mode of living, whichever are applicable, may be made, and such disclosure (A) is made in a writing mailed, or otherwise delivered, to the consumer, not later than three days after the date on which the report was first requested, and (B) includes a statement informing the consumer of his right to request the additional disclosures provided for under subsection (b) of this section and the written summary of the rights of the consumer prepared pursuant to section 609(c);

We disclose this on our deposit account information sheet filled out after the CB is pulled. If the individual is declined for an account because of the CB they wouldn't fill out the deposit account information sheet and therefore wouldn't receive the notification. In the case of a decline would we still have to issue this notification in writing separately? Or would the adverse action letter serve this function if mailed within three days?
Posted By: rlcarey

Re: Authorization to Pull Credit - 02/14/06 01:44 PM

You perform "investigative consumer reports" on all your deposit accounts? That is highly unusual and has to be awful expensive.
Posted By: 02bonne

Re: Authorization to Pull Credit - 02/14/06 02:48 PM

Your comment promted me to look up the difference between an investigative and regular consumer report. We pull a consumer report versus investigative consumer report. Thanks for the help.
Posted By: Norman Paperman

Re: Authorization to Pull Credit - 04/01/19 05:02 PM

Hi Kids,

Welcome back from 2006. We've recently received a number of spot-check audits from our credit vendor requesting evidence of written authorizations before pulling credit. This has been on new credits as well as renewals and modifications.

While we always obtain an application on consumer credit, it's sometimes via email (I need a loan) or another form for commercial or renewal credits.

I've always hung my hat on the "permissible purpose" rule, but the vendor is hammering us for written authorization.

Any thoughts?
Posted By: John Burnett

Re: Authorization to Pull Credit - 04/01/19 06:40 PM

Since there doesn't need to be a written application for many transactions that might involve a consumer report (including consumer loans), a written authorization to pull credit is an overreach by your vendor. Certainly, a written authorization satisfies the law, but all that is required (FCRA §604(a)(3)) is that the CRA has reason to believe that you

(A) intend to use the info in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or
* * * *
(F) otherwise have a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

Thus, there doesn't even have to be a consent by the consumer for the pulling of the report for such purposes, assuming the record isn't frozen or otherwise access-blocked.
Posted By: rlcarey

Re: Authorization to Pull Credit - 04/01/19 07:00 PM

Norman - read your CB contract with a fine tooth comb regardless of what the FCRA says.
Posted By: Norman Paperman

Re: Authorization to Pull Credit - 04/01/19 08:25 PM

Thank you both; John I didn't think anything had changed. Randy, that's the tack I'm going to take next.