Appendix C to Part 601
Prescribed Notice of User
Responsibilities
This appendix prescribes the content of the required
notice.
NOTICE TO USERS OF CONSUMER
REPORTS:
OBLIGATIONS OF USERS UNDER THE FCRA
The federal Fair Credit Reporting Act (FCRA) requires
that this notice be provided to inform users of consumer
reports of their legal obligations. State law may impose
additional requirements. This first section of this
summary sets forth the responsibilities imposed by the
FCRA on all users of consumer reports. The subsequent
sections discuss the duties of users of reports that
contain specific types of information, or that are used
for certain purposes, and the legal consequences of
violations. The FCRA, 15 U.S.C. 1681-1681u, is set forth
in full at the Federal Trade Commission's Internet web
site (http://www.ftc.gov).
I. OBLIGATIONS OF ALL USERS OF CONSUMER
REPORTS
A. Users Must Have a
Permissible Purpose
Congress has limited the use of consumer reports to
protect consumers' privacy. All users must have a
permissible purpose under the FCRA to obtain a consumer
report. Section 604 of the FCRA contains a list of the
permissible purposes under the law. These are:
- As ordered by a court or a federal grand jury
subpoena. Section 604(a)(1)
- As instructed by the consumer in writing. Section
604(a)(2)
- For the extension of credit as a result of an
application from a consumer, or the review or
collection of a consumer's account. Section
604(a)(3)(A)
- For employment purposes, including hiring and
promotion decisions, where the consumer has given
written permission. Sections 604(a)(3)(B) and
604(b)
- For the underwriting of insurance as a result of
an application from a consumer. Section
604(a)(3)(C)
- When there is a legitimate business need, in
connection with a business transaction that is initiated
by the consumer. Section 604(a)(3)(F)(i)
- To review a consumer's account to determine
whether the consumer continues to meet the terms
of the account. Section 604(a)(3)(F)(ii)
- To determine a consumer's eligibility for a
license or other benefit granted by a
governmental instrumentality required by law to
consider an applicant's financial responsibility
or status. Section 604(a)(3)(D)
- For use by a potential investor or servicer, or
current insurer, in a valuation or assessment of
the credit or prepayment risks associated with an
existing credit obligation. Section
604(a)(3)(E)
- For use by state and local officials in
connection with the determination of child
support payments, or modifications and
enforcement thereof. Sections 604(a)(4) and
604(a)(5)
In addition, creditors and insurers may obtain certain
consumer report information for the purpose of making
unsolicited offers of credit or insurance. The particular
obligations of users of this "prescreened"
information are described in Section V below.
B. Users Must Provide
Certifications
Section 604(f) of the FCRA prohibits any person from
obtaining a consumer report from a consumer reporting
agency (CRA) unless the person has certified to the CRA
(by a general or specific certification, as appropriate)
the permissible purpose(s) for which the report is being
obtained and certifies that the report will not be used
for any other purpose.
C. Users Must Notify
Consumers When Adverse Actions Are Taken
The term "adverse action" is defined very
broadly by Section 603 of the FCRA. "Adverse
actions" include all business, credit, and
employment actions affecting consumers that can be
considered to have a negative impact -- such as
unfavorably changing credit or contract terms or
conditions, denying or canceling credit or insurance,
offering credit on less favorable terms than requested,
or denying employment or promotion.
1. Adverse Actions Based on
Information Obtained From a CRA
If a user takes any type of adverse action that is
based at least in part on information contained in a
consumer report, the user is required by Section 615(a)
of the FCRA to notify the consumer. The notification may
be done in writing, orally, or by electronic means. It
must include the following:
- The name, address, and telephone number of the
CRA (including a toll-free telephone number, if
it is a nationwide CRA) that provided the report.
-
- A statement that the CRA did not make the adverse
decision and is not able to explain why the
decision was made.
-
- A statement setting forth the consumer's right to
obtain a free disclosure of the consumer's file
from the CRA if the consumer requests the report
within 60 days.
-
- A statement setting forth the consumer's right to
dispute directly with the CRA the accuracy or
completeness of any information provided by the
CRA.
2. Adverse Actions Based on Information
Obtained From Third Parties Who Are Not
Consumer Reporting Agencies
If a person denies (or increases the charge for)
credit for personal, family, or household purposes based
either wholly or partly upon information from a person
other than a CRA, and the information is the type of
consumer information covered by the FCRA, Section
615(b)(1) of the FCRA requires that the user clearly and
accurately disclose to the consumer his or her right to
obtain disclosure of the nature of the information that
was relied upon by making a written request within 60
days of notification. The user must provide the
disclosure within a reasonable period of time following
the consumer's written request.
3. Adverse Actions Based on Information
Obtained From Affiliates
If a person takes an adverse action involving
insurance, employment, or a credit transaction initiated
by the consumer, based on information of the type covered
by the FCRA, and this information was obtained from an
entity affiliated with the user of the information by
common ownership or control, Section 615(b)(2) requires
the user to notify the consumer of the adverse action.
The notification must inform the consumer that he or she
may obtain a disclosure of the nature of the information
relied upon by making a written request within 60 days of
receiving the adverse action notice. If the consumer
makes such a request, the user must disclose the nature
of the information not later than 30 days after receiving
the request. (Information that is obtained directly from
an affiliated entity relating solely to its transactions
or experiences with the consumer, and information from a
consumer report obtained from an affiliate are not
covered by Section 615(b)(2).)
II. OBLIGATIONS OF USERS WHEN CONSUMER REPORTS
ARE OBTAINED FOR EMPLOYMENT PURPOSES
If information from a CRA is used for employment
purposes, the user has specific duties, which are set
forth in Section 604(b) of the FCRA. The user must:
- Make a clear and conspicuous written disclosure
to the consumer before the report is obtained, in
a document that consists solely of the
disclosure, that a consumer report may be
obtained.
-
- Obtain prior written authorization from the
consumer.
-
- Certify to the CRA that the above steps have been
followed, that the information being obtained
will not be used in violation of any federal or
state equal opportunity law or regulation, and
that, if any adverse action is to be taken based
on the consumer report, a copy of the report and
a summary of the consumer's rights will be
provided to the consumer.
Before taking an adverse action, provide a copy of the
report to the consumer as well as the summary of the
consumer's rights. (The user should receive this summary
from the CRA, because Section 604(b)(1)(B) of the FCRA
requires CRAs to provide a copy of the summary with each
consumer report obtained for employment purposes.)
III. OBLIGATIONS OF USERS OF INVESTIGATIVE
CONSUMER REPORTS
Investigative consumer reports are a special type of
consumer report in which information about a consumer's
character, general reputation, personal characteristics,
and mode of living is obtained through personal
interviews. Consumers who are the subjects of such
reports are given special rights under the FCRA. If a
user intends to obtain an investigative consumer report,
Section 606 of the FCRA requires the following:
- The user must disclose to the consumer that an
investigative consumer report may be obtained.
This must be done in a written disclosure that is
mailed, or otherwise delivered, to the consumer
not later than three days after the date on which
the report was first requested. The disclosure
must include a statement informing the consumer
of his or her right to request additional
disclosures of the nature and scope of the
investigation as described below, and must
include the summary of consumer rights required
by Section 609 of the FCRA. (The user should be
able to obtain a copy of the notice of consumer
rights from the CRA that provided the consumer
report.)
-
- The user must certify to the CRA that the
disclosures set forth above have been made and
that the user will make the disclosure described
below.
-
- Upon the written request of a consumer made
within a reasonable period of time after the
disclosures required above, the user must make a
complete disclosure of the nature and scope of
the investigation that was requested. This must
be made in a written statement that is mailed, or
otherwise delivered, to the consumer no later
than five days after the date on which the
request was received from the consumer or the
report was first requested, whichever is later in
time.
IV. OBLIGATIONS OF USERS OF CONSUMER REPORTS
CONTAINING MEDICAL INFORMATION
Section 604(g) of the FCRA prohibits consumer
reporting agencies from providing consumer reports that
contain medical information for employment purposes, or
in connection with credit or insurance transactions,
without the specific prior consent of the consumer who is
the subject of the report. In the case of medical
information being sought for employment purposes, the
consumer must explicitly consent to the release of the
medical information in addition to authorizing the
obtaining of a consumer report generally.
V. OBLIGATIONS OF USERS OF
"PRESCREENED" LISTS
The FCRA permits creditors and insurers to obtain
limited consumer report information for use in connection
with unsolicited offers of credit or insurance under
certain circumstances. Sections 603(l), 604(c),
604(e), and 615(d) This practice is known as
"prescreening" and typically involves obtaining
a list of consumers from a CRA who meet certain
preestablished criteria. If any person intends to use
prescreened lists, that person must (1) before the offer
is made, establish the criteria that will be relied upon
to make the offer and to grant credit or insurance, and
(2) maintain such criteria on file for a three-year
period beginning on the date on which the offer is made
to each consumer. In addition, any user must provide with
each written solicitation a clear and conspicuous
statement that:
- Information contained in a consumer's CRA file
was used in connection with the transaction.
-
- The consumer received the offer because he or she
satisfied the criteria for credit worthiness or
insurability used to screen for the offer.
-
- Credit or insurance may not be extended if, after
the consumer responds, it is determined that the
consumer does not meet the criteria used for
screening or any applicable criteria bearing on
credit worthiness or insurability, or the
consumer does not furnish required collateral.
The consumer may prohibit the use of information in
his or her file in connection with future prescreened
offers of credit or insurance by contacting the
notification system established by the CRA that provided
the report. This statement must include the address and
toll-free telephone number of the appropriate
notification system.
VI. OBLIGATIONS OF RESELLERS
Section 607(e) of the FCRA requires any person who
obtains a consumer report for resale to take the
following steps:
- Disclose the identity of the end-user to the
source CRA.
-
- Identify to the source CRA each permissible
purpose for which the report will be furnished to
the end-user.
-
- Establish and follow reasonable procedures to
ensure that reports are resold only for
permissible purposes, including procedures to
obtain:
(1) the identity of all end-users;
(2) certifications from all users of each purpose
for which reports will be used; and
(3) certifications that reports will not be used
for any purpose other than the purpose(s) specified
to the reseller. Resellers must make reasonable
efforts to verify this information before selling the
report.
VII. LIABILITY FOR VIOLATIONS OF THE FCRA
Failure to comply with the FCRA can result in state or federal enforcement
actions, as well as private lawsuits. Sections 616, 617, and 621. In
addition, any person who knowingly and willfully obtains a consumer report under
false pretenses may face criminal prosecution. Section 619
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