When an individual applies to open a new account, we make an oral disclosure to the applicant that we are pulling their consumer credit report, which we obtain from ChexSystems. When an applicant’s request to open a new account is denied and we provide them with an in-person adverse action notice, we also make an oral disclosure that we pulled the applicant’s consumer credit report. Is this form of notification appropriate, or do we need to follow the notice requirements for investigative consumer reports? Should we obtain written permission from an applicant before pulling a consumer credit report?

We believe the account opening notification procedures you described are appropriate. We are not aware of any initial disclosures required by the Fair Credit Reporting (FCRA) at the time of an account opening.

When pulling a credit report from ChexSystems, your bank is not required to follow the FCRA’s notice requirements for investigative consumer reports, which provide information on a “consumer’s character, general reputation, or mode of living” and are obtained through personal interviews of the consumer’s neighbors, friends, or associates. Our understanding of ChexSystems reports is that they would not include such investigative information and would not qualify as investigative consumer reports.

Also, we do not believe that you need to obtain an applicant’s authorization before obtaining a report from ChexSystems in connection with an account opening. Under the FCRA, your bank has a permissible purpose to pull a consumer’s credit report when it has “a legitimate business need for the information in connection with a business transaction that is initiated by the consumer.” When a consumer applies to open a deposit account, we believe that your bank has a permissible purpose to obtain the consumer’s report from ChexSystems, whether or not the customer has provided written permission for obtaining the report.

However, if your bank rejects an account application based on information in a consumer credit report, the FCRA requires you to provide an adverse action notice to the applicant. If the ChexSystems report includes a numerical credit score, the adverse action notice must be in writing and must disclose the credit score with additional information about the score and the scoring model used.

For resources related to our guidance, please see:

FCRA, 15 USC 1681d(a)(e) (“The term ‘investigative consumer report’ means a consumer report or portion thereof in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. However, such information shall not include specific factual information on a consumer’s credit record obtained directly from a creditor of the consumer or from a consumer reporting agency when such information was obtained directly from a creditor of the consumer or from the consumer.”)

FCRA, 15 USC 1681b(a)(3)(F)(i) (“Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other: . . . (3) To a person which it has reason to believe . . . (F) otherwise has a legitimate business need for the information (i) in connection with a business transaction that is initiated by the consumer; . . .”)

FCRA, 15 USC 1681a(k)(1)(B)(iv) (“The term ‘adverse action’ . . . means . . . an action taken or determination that is (I) made in connection with an application that was made by, or a transaction that was initiated by, any consumer . . . ; and (II) adverse to the interests of the consumer.”)

FCRA, 15 USC 1681m(a)(1) (“If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall

(1) provide oral, written, or electronic notice of the adverse action to the consumer;

(2) provide to the consumer written or electronic disclosure (A) of a numerical credit score as defined in section 1681g(f)(2)(A) of this title used by such person in taking any adverse action based in whole or in part on any information in a consumer report; and (B) of the information set forth in subparagraphs (B) through (E) of of this title;

(3) provide to the consumer orally, in writing, or electronically (A) the name, address, and telephone number of the consumer reporting agency . . . ; and (B) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and

(4) provide to the consumer an oral, written, or electronic notice of the consumer’s right (A) to obtain, under section 1681j of this title, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (3), which notice shall include an indication of the 60-day period under that section for obtaining such a copy; and (B) to dispute, under section 1681i of this title, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency.”)