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Notification Requirements When Pulling Credit Reports

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Question: 
Our Consumer Lending unit received the following response to a recent audit. "According to the regulation, a bank may pull a credit report on a person if they have a permissible purpose. An application for credit is considered a permissible purpose. When the Contact Centers take applications over the telephone (he doesnt mention anything about the Internet) they are only speaking with one of the applicants, but if the application is joint, credit bureaus aer obtained for both applicants. Without talking to the joint applicant, the bank can not be sure that the second individuaal is aware of, or wants to apply for a loan. If a co-applicant does not want to be an applicant on the loan, the Bank would not have a permissible purpose for obtaining the credit bureau. It is recommended that the Consumer Lending Dept require that all parties on a loan application be made aware that a credit bureau will be obtained." I realize that this is only a recommendation, but this team believes because a compliance auditor wrote this, they need to act on this recommendation. Is there some litigation that suggests we need to do this? I simply can not find anything, anywhere that states we are required to verbally inform a co-app that we are going to pull a cbr. What am I missing here? Is this a business decision and if so, based on what? If its written somewhere, I would like to see it. What are other institutions doing?
Answer: 

I see this as a customer service issue and I would access the credit reports based on a joint application. I do not believe it is practical to contact the applicants individually prior to processing the application. In some cases, this is quite impractical as the applicants may be out of country.

I have never had a complaint involving this issue. While it would be a good practice, the risk is minimal at best, in my experience.

First published on BankersOnline.com 7/15/02

First published on 07/15/2002

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