Topic: Credit Reports
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We recently discovered a small number of loans that have been incorrectly reported to the credit bureaus. Several years ago, these customers went through bankruptcy and then reaffirmed the debts with our bank; however, the bankruptcy and reaffirmation never were reported to the credit bureaus. I believe we must report these as reaffirmed accounts per our contract with the credit bureaus. Are we subjecting ourselves to any additional legal, financial or other risks?
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We believe there could be risk for your bank if it fails to correctly report the missing information. The Fair Credit Reporting Act (FCRA) requires furnishers of consumer information to promptly correct any erroneous information. While the FCRA does exclude certain bankruptcy information from consumer credit reports, the responsibility to remove excluded bankruptcy information falls…
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Does the Fact Act (FACTA) prohibit us from considering an applicant’s medical collections affecting the applicant’s credit rating? If so, should we incorporate language to that effect into our loan procedures?
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No, the FACTA does not prohibit financial institutions from considering an applicant’s credit information relating to medical or hospital accounts, but the use of this information is subject to limitations and requirements in the FACTA and its implementing regulation, Regulation V. The FACTA limits the use of collection-related medical information about a credit applicant, with…
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If a borrower files a Chapter 7 bankruptcy and reaffirms their loan debt with us, should we report subsequent loan payments to the credit bureaus? If the borrower continues to pay without reaffirmation, should we report only that the loan was discharged in bankruptcy, but not report the payments made?
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Yes, if you receive notice that the debt has been discharged in bankruptcy, we believe you should report it so that the consumer reporting agency can accurately note the status of the debt (e.g., discharged, voluntarily repaid, etc.). It also would make sense to report a reaffirmation and to report loan payments that the borrower…
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Do we need to check a borrower’s credit report when we extend their existing loan? Or is this a requirement only for new loans and refinancings?
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We are not aware of any express requirement to review a consumer’s credit report when modifying an existing loan to extend its terms, but whether reviewing a credit report would be appropriate for a specific loan can depend on many factors, ranging from safety and soundness considerations to consumer protection considerations (the latter is discussed…
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When an individual personally guarantees a commercial loan, we require written authorization to pull credit information. Does that authorization expire after a set number of days? Or can we pull a credit report months after receiving written authorization?
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We are not aware of a statutory or regulatory expiration date on a consumer’s written authorization to allow your bank to obtain a credit report. However, in order to clarify the authorization, you may wish to add a provision specifying a certain time period during which you may pull a credit report in connection with…
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We purchased a bank and acquired all of their loans. Do we need to include the name of that bank when we report our newly acquired loans to our credit bureau?
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No, we do not believe you need to include the acquired bank’s name when furnishing information to your credit bureaus. In the context of mergers and acquisitions, Regulation V requires furnishers of consumer credit reporting information to establish policies that prevent re-aging, duplicative reporting, or other problems that may similarly affect the accuracy or integrity…
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Are we allowed to charge credit report, appraisal or application fees upfront for consumer mortgage loan applications?
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You may charge a credit report fee up front, but not application or appraisal fees. Under the TILA-RESPA Integrated Mortgage Disclosure (TRID) rules, a creditor may charge a credit report fee before preparing the Loan Estimate and documenting the consumer’s intent to proceed with the transaction. However, a creditor may not charge other fees, such…
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A customer applied jointly for a HELOC with a co-signer, and we pulled both co-signers’ individual credit reports. However, after underwriting the loan, we found that the co-signer’s credit caused the loan to be rejected. If the customer reapplies for a HELOC individually, can we reuse her credit report, which we first pulled in connection with the joint application?
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Yes, the Fair Credit Reporting Act (FCRA) permits a lender to reuse a credit report for the purpose of reviewing a subsequent credit application (which is a “permissible purpose” under the FCRA). Before reusing the report, however, you should check your bank’s underwriting policies and procedures, which should indicate when a credit report is too…
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One of our customers is submitting repeated disputes about information on a credit report. We responded as required and confirmed that the information is accurate. Do we need to continue responding? Should we provide a “Notice of Termination of Customer Dispute” form?
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No, you are not required to continue investigating and responding to the disputes. If you can demonstrate that the disputes are “frivolous or irrelevant,” or that they originate from a credit repair organization, the Fair Credit Reporting Act (FCRA) and Regulation V exempt you from investigating the disputes. And yes, you should provide notice when…
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We are purchasing a portion of a pool of consumer mortgages and wanted to do a soft credit pull for the borrowers on the underlying loans. Do we have a permissible purpose to pull the reports under the FCRA, even though we have not obtained the consumer’s consent?
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Yes, we believe that your institution has a permissible purpose for pulling the credit report. A permissible purpose exists when your institution “intends to use the information, as a potential investor or servicer . . . in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing…