Beer and Basics: Overview of the FCRA

Transcription

1 Beer and Basics: Overview of the FCRA Consumer Financial Services Committee ABA Business Law Section August 8, 2013 Andrew Owens Davis Wright Tremaine LLP

2 Roadmap What is a Consumer Report? What is a Consumer Reporting Agency? Obligations CRA Users Furnishers Selected FCRA topics Other FCRA-related laws 2

3 What is a Consumer Report? 1. Written, oral or other communication 2. By a consumer reporting agency 3. Bears on a consumer s: Creditworthiness Credit standing Credit capacity Character General reputation Personal characteristics Mode of living 3

4 What is a Consumer Report? 4. Used or expected to be used or collected in whole or in part For the purpose of serving as a factor in establishing the consumer s eligibility for: Credit or insurance used primarily for personal, family or household purposes Employment purposes Any other authorized purpose (ie, a permissible purpose ) 4

5 When is a report not a Consumer Report? Exceptions to consumer report include: Transaction or experience information (T&E) Information shared between affiliates, subject to notice and opt-out Authorization or approval of credit issued by credit card issuer or of similar device Authorization (or rejection) from creditor to third party requesting approval for credit (eg, retailer at the POS) 5

6 What is a Consumer Reporting Agency? Any person that, for a fee, dues or on a cooperative nonprofit basis Regularly engages in assembling or evaluating consumer credit information or other consumer information For the purpose of furnishing consumer reports to third parties Uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports 6

7 A CRA does not include A entity that transmits information to: Service provider acting on creditor s behalf Necessary participant to consummate a loan (e.g., insurer) Comply with law or for legal assistance Successor-in-interest Third party at consumer s specific request to obtain specific product or service Agent or employee Law enforcement regarding dishonored checks 7

8 CRA obligations include Maintain reasonable procedures to: Avoid violations of FCRA Furnish consumer reports to persons with a permissible purpose Assure maxium possible accuracy of consumer information Not prohibit users to disclose contents of consumer reports to consumers upon adverse action Include fraud alert in consumer file, offer free copy of file, block reporting of information resulting from alleged identity theft, Fraud alerts, information blocking, restrict issuance of credit, increasing credit limits 8

9 CRA obligations to consumers include Disclose to consumer, upon request, information in consumer s file, as well as: Sources of information in the file Identification of users Check information related to adverse characterization Inquiries received by CRA Disclose to consumer, upon request, the consumer s credit score for a reasonable fee Free annual credit report rule 9

10 User of Consumer Reports Person or entity that receives a consumer report Uses report for a permissible purpose Obligations include: certify to CRA permissible purpose; provide adverse action notices Involving credit, employment, and any other action taken or determination made in connection with (1) a consumerinitiated application or transaction or (2) an account review, adverse to the consumer s interests 10

11 User may procure Consumer Reports Permissible purposes include: Upon consumer s written instructions In connection with Credit transaction or extension of credit Account review Legitimate business need E.g., consumer-initiated transaction for expected benefit not more specifically covered by above, eg, applying for apartment, applying for brokerage account, paying with personal check Prescreens 11

12 Furnisher of consumer information Person that regularly provides information to CRAs Obligations include: Providing accurate information Notifying CRAs of incomplete or inaccurate information Submitting corrected or additional information Responding to identity theft blocks Reviewing and investigating dispute notices received from CRAs Informing CRAs of account information, including voluntary account closure and delinquencies 12

13 Selected FCRA topics Agency Jurisdiction FTC and CFPB authorized to enforce FCRA, but CFPB has exclusive interpretative and rulemaking authority Red Flag Rules Require financial institutions and creditors (broadly construed) holding covered accounts to establish written Identity Theft Prevention Programs Affiliate Sharing Restrictions on affiliate sharing for marketing purposes, requires notice and opt-out Risk-Based Pricing Notice if user in connection with credit transaction provides less favorable terms based on consumer report 13

14 FCRA-related laws State FCRA laws State law superseded if inconsistent with FCRA Certain FCRA provisions may not be affected by state law (eg, prescreening, affiliate sharing) GLBA implications CFPB larger nonbank participant rule (July 2012) CFPB established supervisory authority over CRAs with annual receipts over $7 million Supervisory authority supplements existing federal and state enforcement authorities 14

15 Andrew Owens Davis Wright Tremaine LLP