Compliance Alliance Question of the Week
Our bank has an affiliate that purchases account receivables. The affiliate orders consumer reports in order to conduct their business.
One of their customers applied to our bank for a commercial loan. The affiliate, having obtained a credit report on the guarantor, provided our bank the report.
Is there an FCRA violation in their sharing the credit report with the Bank, even though there is no consumer purpose on either end? And has the Bank violated FCRA by using the credit report rather than obtaining its own report from a CRA?
The violation isn't in the receipt of the credit report, the violation comes in the using it to make a solicitation to the consumer about products and services. You are not prohibited from receiving the report, you're prohibited from using it for solicitation of products and services when this information hasn't been properly disclosed to the consumer and they have not had option to opt-out of such solicitations.
The exception to this is if you already had an existing business relationship with the consumer, the FCRA would allow the use of the report for solicitation purposes.
Also note that the consumer reporting agency itself may have restrictions on this use in its agreement, so the bank would want to check that as well.
Any person that receives from another person related to it by common ownership or affiliated by corporate control a communication of information that would be a consumer report, but for clauses (i), (ii), and (iii) of section 603(d)(2)(A), may not use the information to make a solicitation for marketing purposes to a consumer about its products or services, unless – (A) it is clearly and conspicuously disclosed to the consumer that the information may be communicated among such persons for purposes of making such solicitations to the consumer; and (B) the consumer is provided an opportunity and a simple method to prohibit the making of such solicitations to the consumer by such person. FCRA § 624(a)(1)-(2), p. 97 https://www.ftc.gov/system/files/545a_fair-credit-reporting-act.pdf
This section shall not apply to a person – (A) using information to make a solicitation for marketing purposes to a consumer with whom the person has a pre-existing business relationship; FCRA § 624(a)(4)(A), p. 98 https://www.ftc.gov/system/files/545a_fair-credit-reporting-act.pdf
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