Topic: Fair Credit Reporting Act (FCRA)
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We deny an applicant’s request to open a deposit account for two reasons: (1) if the applicant is outside of our market area, or (2) if we receive a negative ChexSystems report. Do banks deny deposit account requests for any other reasons?
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We do not have access to data on our members’ reasons for denying deposit accounts, but a few examples we have seen are denials for failing to meet certain qualifications for a particular account type (such as a minimum deposit amount or special qualifications for health savings accounts) and one instance of a denial due…
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A business wants to open a checking account with our bank. A few years ago, we denied their request for an account based on several negative ChexSystem reports. We no longer subscribe to ChexSystems and cannot run a similar check. Can we refuse to open this account, and do we have to provide an adverse action notice with our reasons or documentation?
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No, we do not believe that you need to provide an adverse action notice when denying a business’s request for a checking account. The Fair Credit Reporting Act (FCRA)’s requirement to provide adverse action notices applies only to persons taking adverse action against consumers. Consequently, we believe you may refuse to open the checking account…
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We have an elderly deposit customer who we believe is gambling away most of their money, and we do not believe the gambling is the result of financial exploitation by a third party. We are worried that the customer may apply for a loan that they would be unable to repay because of their gambling. Can we report their gambling to a family member, or would this violate our customer’s financial privacy? Also, would we have a legitimate reason to deny their loan? On paper, this customer would qualify for a loan since their house is paid off and they have repaid their previous loans.
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No, we do not believe you may report your customer’s gambling to a family member, as this would violate Illinois and federal financial privacy protections. The Illinois Banking Act and Regulation P prohibit the disclosure of a customer’s financial records or financial information to a third party, unless an exception applies. Although there are exceptions…
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Our bank issues balloon notes that we frequently extend on maturity. When considering an extension, our loan review policy requires us to examine the borrower’s credit (without obtaining their consent), and we have always run hard credit inquiries for these reviews. We would like to switch to using soft credit inquiries that do not appear on our customers’ credit reports. Are there any rules that would prohibit us from using soft credit inquiries for these reviews, and do we need the borrowers’ consent to pull their credit? An examiner once advised us to do credit checks before renewing loans, and an auditor recommended a hard credit pull for new loans, but a representative from the Federal Reserve said we could use soft credit pulls in this case.
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No, we are not aware of any law or regulation that would prohibit you from using “soft pulls” for your loan reviews conducted before renewing loans. We do not believe that you need to obtain borrowers’ consent when pulling credit for purposes of deciding whether to offer a loan extension for the balloon notes. Under…
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We share credit-related information with a subsidiary that is 100% owned by the bank (not by our holding company). Are we required to provide customers with notice and an opportunity to opt-out under the Fair Credit Reporting Act (FCRA) to avoid being considered a consumer reporting agency?
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Yes, we believe the requirement to provide customers with notice and an opportunity to opt-out under the FCRA to avoid being considered a consumer reporting agency would apply if you share credit-related information with a subsidiary that is 100% owned by your bank. The FCRA provides that a financial institution will not be considered a…
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Are financial institutions required to open health savings accounts (HSAs) for individuals that apply for them, or can we follow our standard procedures for determining eligibility for checking and savings accounts? For example, we generally deny accounts to customers due to previous account closures. We would provide adverse action notices if information from a consumer report is used to deny the account.
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We are not aware of any law or regulation requiring banks to open HSAs for all individuals who apply for them, and we believe that you may follow your bank’s internal procedures for determining eligibility to open a new account — including providing adverse action notices when required. While the IRS has established requirements that…
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Are we required to include the option to opt-out in our privacy notice for an affiliated service provider that is 100% owned by our bank holding company? We share credit report information with the affiliate, and they provide us with underwriting services, but we do not share information with them for marketing purposes. If we are required to provide an opt-out notice for our affiliate, do we need to provide a similar opt-out notice for nonaffiliated third-party service providers?
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Yes, we believe you should be providing customers with notice and an opportunity to opt out under the Fair Credit Reporting Act (FCRA) if you are sharing credit-related information with your affiliate, and this notice and opportunity to opt-out should be included in your privacy notice. When sharing information from credit reports and credit applications…
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Do we need to include the part of a credit report disclosing an individual’s credit score when sending an adverse action notice? In certain situations, we use Form C-2 from Appendix C of Regulation B as our adverse action notice, and we want to make sure that we do not have to provide any additional documentation when using the form. But if we don’t use Form C-2, are there any situations where we would have to send an individual this part of the credit report along with an adverse action notice?
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No, we do not recommend separately including any part of a consumer report with an adverse action notice. If the adverse action was based on information from a consumer report, you must provide certain information about the consumer report in the adverse action notice, and if the consumer’s credit score was a factor in the…
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Our bank has established an affiliate relationship with a newly formed title company, of which we have 50% ownership. We will share only necessary information for everyday business purposes with this affiliate and will not share information for marketing purposes. We are revising our privacy notice and our website privacy notice, sending out a mass mailing, and providing each customer with the affiliated business arrangement disclosure required under the Real Estate Settlement Procedures Act (RESPA) for real estate transactions. Do these steps cover our responsibilities?
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In addition to providing the notices mentioned in your question, we recommend reviewing the information provided to your affiliate — if you are sharing credit-related information with your affiliate, you must provide customers with a notice and an opportunity to opt-out under the Fair Credit Reporting Act (FCRA). A financial institution that provides “consumer reports”…
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Under Regulation Z, servicers have the option of disclosing the amount due on a billing statement as either the full payment due according to the promissory note or the new payment due under a temporary loss mitigation agreement. However, our vendor provides only the option to bill for the full payment due under the note. This poses a credit reporting issue for us, since the Credit Reporting Resource Guide states that when reporting an account in forbearance, we should report the scheduled monthly payment amount as the new payment due. How should we handle this? We are not a small servicer.
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We believe it would be permissible to provide a customer in forbearance with a periodic statement reflecting the full payment due under the note while reporting the amount due under a temporary loss mitigation agreement to the credit reporting agencies — although we realize that the discrepancies between your periodic statements and amounts reported to…