On July 20, the Federal Trade Commission issued a staff report updating the agency’s guidance on the Fair Credit Reporting Act (FCRA). The guidance, entitled “Forty Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report and Summary of Interpretations,” provides an overview of the FTC’s role in enforcing the FCRA and includes a summary of the agency’s interpretations of the Act. The report can be found here.
As part of the update, the FTC withdrew its 1990 Commentary on the FCRA, which has become outdated over the years. The FRCA has been amended several times since 1990, most significantly by the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003, known as the FACT Act. Several of the FTC’s older interpretations have been deleted as they were based on provisions that have been repealed or amended.
Recent legislation has transferred the authority to issue interpretive guidance under the FCRA to the Consumer Financial Protection Bureau (CFPB). Withdrawing the 1990 Commentary avoids the outdated document being transferred to the CFPB.
The report provides updated interpretative guidance on several FCRA issues including:
- The issue of whether and how the FCRA applies in the context of an application for business credit when a creditor that is considering a credit application from a small business wants to procure a credit report on the sole proprietor or other principal in the business.
- Under what circumstances lenders can share an applicant’s consumer report with another party, and whether the lender sharing the report becomes a CRA by doing so.
- Guidelines regarding when “credit guides” – listings that rate how well consumers pay their bills – are considered consumer reports.
- Clarification of the application of the FCRA to resellers of credit reports, as distinguished from sellers of software used to procure such reports.
- The issues here concern when a creditor has a permissible “review” purpose and, when it does, whether it may exploit consumer reports obtained for “review” purposes in order to market its products or services.
- Explaining what constitutes the permissible purpose of “reviewing” a consumer report, and the general prohibition against using the report to market products or services to the consumer.
Providing a detailed section-by-section analysis of the FCRA and citations to applicable legal authority over 117 pages, the report provides a very useful guide for compliance with the FCRA under the FTC’s current regulatory environment.