Are Credit Reports Top Secret?

By James T. Bork, J.D., LL.M., editor, CCH BANKING COMPLIANCE LIBRARY.  Bork has practiced banking law and served as in-house bank counsel. He also has written articles and spoken on bank regulatory and compliance issues. 

Most bankers and compliance professionals are aware that consumer reporting agencies may furnish credit reports for certain permissible purposes listed in the FCRA and for no other purposes. They also generally know that when they take adverse action with respect to a credit application based in part on information in a consumer report, they must inform the consumer of his or her right to obtain a copy of the credit report from the consumer reporting agency.

BANKS MAY PROVIDE COPIES OF CREDIT REPORTS

With so much attention on permissible purposes and consumers’ rights to obtain their credit reports from the consumer reporting agency, many bankers believe that they, as users of credit reports, are prohibited by law from providing customers with copies of their own credit reports. This is a mistaken belief.

The FCRA expressly allows banks or others to give a copy of a credit report to a customer when adverse action is based on information in the report. In some other situations, the law requires them to do so.

Adverse Action. When a bank takes adverse action against a credit applicant based in part on information in a credit report, it must provide certain notices to the applicant. These notices fall into the following three categories:

• a notice of the adverse action;
• information about the consumer reporting agency that furnished the report, including a statement that it did not make the decision to take adverse action and is therefore unable to provide specific reasons why the adverse action was taken; and
• notice of the applicant’s right to obtain a copy of the credit report from the consumer reporting agency and to dispute with that agency the accuracy or completeness of any information in the report.

It is easy to read the third category to mean that consumer reporting agencies are the only ones permitted to provide copies of credit reports. Under this erroneous interpretation, banks might assert that the consumer reporting agencies own the credit reports, and banks cannot simply “give away” the agencies’ property.

That interpretation is at odds with FCRA §607(c), which says in part:

“A consumer reporting agency may not prohibit a user of a consumer report furnished by the agency on a consumer from disclosing the contents of the report to the consumer, if adverse action against the consumer is based . . . on the report.”

FCRA Commentary. The commentary states that a user of credit reports “does not become a consumer reporting agency by regularly giving a copy of or the report, or otherwise disclosing it, to the consumer who is the subject of the report, because it is not disclosing the information to a ‘third party.’” Comment 603(f)-3.

FTC Staff Opinion. In an October 27, 1997, staff opinion the FTC notes that “The FCRA does not forbid companies that take adverse action against a consumer, based on information in their consumer report, from providing a copy of the report to the consumer.”

MANDATORY DISCLOSURE OF CREDIT REPORTS

In addition to the circumstances where a bank has the option to provide a credit report to a consumer, there is one situation where disclosure is required. If a bank or anyone else uses a credit report for employment purposes and will take adverse action based on information in the report, it must provide a copy of the report to the consumer before taking the action. There is no comparable mandatory disclosure provision in the context of credit decisions.