Topic: Fair Credit Reporting Act (FCRA)
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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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Which disclosures are required for a loan to purchase a commercial rental property that has one business building and one house on it? The borrower will rent the house out to a third party.
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Since this is a commercial loan, the disclosure requirements under both Regulation Z and Regulation X will not apply provided that the loan is “primarily for a business, commercial or agricultural purpose.” However, even in the context of a commercial loan, as in this case, to the extent that the mortgage covering the dwelling is…
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A customer applied to refinance her mortgage. She told us that she filed for bankruptcy in 2009. Before her bankruptcy, she had a second mortgage on her home. The customer does not remember what happened with her second mortgage following her bankruptcy, but she is not currently making any payments on it, and no second mortgage appears on her credit report. Consequently, we think this debt may have been discharged in the bankruptcy. However, we did obtain a financing statement from the second mortgage lender, which states that there is an outstanding loan in the amount of $28,000 secured by a lien on the property (again, she is not making any payments on this loan, and it does not appear in the credit report). We plan to consider the lien as part of our underwriting, but can we also consider the $28,000 debt?
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Generally speaking, a lender may consider that a debt was discharged in bankruptcy when underwriting a new loan, provided the debt was discharged within the time period in which it is allowed to appear on a credit report. A consumer’s bankruptcy information — including certain details about discharged debts — may appear on a credit…
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Have there been any substantive changes to the Fair Credit Reporting Act (FCRA) or the Equal Credit Opportunity Act (ECOA) regarding adverse action notices that would affect using Regulation B’s model notices?
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No, there have not been any substantive changes to the FCRA or the ECOA regarding adverse action notices that would affect your use of the model forms in Regulation B. For resources related to our guidance, please see: Appendix C to Regulation B — Sample Notification Forms
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We have a home loan customer who prosecutes high profile drug crimes. She does not want her loan reported to any credit bureau because she is afraid one of the individuals she is prosecuting may use her credit report to obtain her home address. Unfortunately, we already reported the loan to our credit bureau, including the address. Is there anything we can do to “recall” the report or update it to redact her address?
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We are not aware of any method for recalling information that has been reported to a credit bureau. However, under the Fair Credit Reporting Act (FCRA), credit reporting agencies can add fraud alerts to consumer files that block the release of consumer information upon the consumer’s request. We recommend that your customer contact the…
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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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We plan to start accepting deposit account applications online. When a customer applies for an account, we plan to gather credit data about the applicant. What disclosures are required under the Fair Credit Reporting Act (FCRA)?
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We are not aware of any initial disclosures required by the FCRA at the time of an account opening. However, if your bank rejects an online account application based on information in a consumer credit report, the FCRA requires you to send an adverse action notice to the applicant. In such case, you should follow…
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Does the notice and opt-out requirement in the Fair Credit Reporting Act (FCRA) regarding information sharing between affiliates for marketing purposes apply to business customers?
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No, the notice and opt-out requirements that are triggered when affiliates share information for marketing purposes do not apply to business customers. The FCRA requires affiliates that share consumer information for marketing purposes to clearly and conspicuously disclose to consumers what information will be shared and provide them an opportunity to opt out. However, under…
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Can our wholly owned subsidiary share its customer information with us for marketing purposes? What steps do we need to take before we can receive and use this information?
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Yes, you may use customer information that you receive from your wholly owned subsidiary for marketing purposes, provided that you disclose this arrangement to your customers and offer them the opportunity to opt out. The Illinois Banking Act’s prohibition on disclosing customer financial records does not apply to the exchange in the regular course of…