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FCRA Permissible Purpose Rule Violation

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Question: 
If a person is a grantor of collateral on a loan and is not otherwise a maker, co-maker or guarantor, would pulling a credit report on the grantor be considered permissible or would this be a violation of FCRAs Permissible Purpose rule as it does not relate to the consumer applying for credit?
Answer: 

If a consumer is not going to be liable on the credit, you would need written permission. I would equate it to this statement by the FTC whether this involved a consumer or business purpose transaction:

"A lender has a permissible purpose to obtain a consumer report on a consumer in connection with a business credit transaction when the consumer is or will be personally liable on the loan as a co-signer or guarantor, because such a transaction involves the “extension of credit to … the consumer” by virtue of the individual’s liability. A lender would not have a permissible purpose to obtain a consumer report on a consumer who will not be personally liable for repayment of the credit (even an individual proprietor, shareholder, director, or officer of a corporation), because this section does not include the extension of credit to commercial entities."

First published on 10/28/2013

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