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6500 - Consumer Protection
{{4-29-94 p.7179}}
FEDERAL TRADE COMMISSION REGULATIONS: STATEMENT OF
GENERAL
POLICY OR INTERPRETATION
PART 600—STATEMENTS OF GENERAL POLICY OR INTERPRETATIONS
Sec.
600.1
Authority and purpose.
600.2
Legal effect.
Appendix--Commentary on the Fair Credit Reporting Act
AUTHORITY: 15 U.S.C.
1681s and 16 CFR 1.73.
SOURCE: The provisions of this Part 600 appear at 55 Fed. Reg.
18804, May 4, 1990, except as otherwise noted.
§ 600.1 Authority and purpose.
(a) Authority: This part is issued by the Commission
pursuant to the provisions of the Fair Credit Reporting Act. Pub. L.
91--508, approved October 26, 1970, 84 Stat. 1127--36 (15 U.S.C. 1681
et seq).
(b) Purpose. The purpose of this part is to clarify and
consolidate statements of general policy or interpretations in a
commentary in the appendix to this part. The commentary will serve as
guidance to consumer reporting agencies, their customers, and consumer
representatives. The Fair Credit Reporting Act requires that the manner
in which consumer reporting agencies provide information be fair and
equitable to the consumer with regard to the confidentiality, accuracy,
and proper use of such information. The commentary will enable
interested parties to resolve their questions more easily, present a
more comprehensive treatment of interpretations and facilitate
compliance with the Fair Credit Reporting Act in accordance with
congressional intent.
[Codified to 16 C.F.R. § 600.1]
§ 600.2 Legal effect.
(a) The interpretations in the commentary are not trade regulation
rules or regulations, and, as provided in § 1.73 of the Commission's
rules, they do not have the force or effect of statutory provisions.
(b) The regulations of the Commission relating to the
administration of the Fair Credit Reporting Act are found in subpart H
of 16 CFR part 1 (Sections 1.71--1.73).
[Codified to 16 C.F.R. § 600.2]
Appendix—Commentary on the Fair Credit Reporting Act
Introduction
1. Official status. This Commentary contains
interpretations of the Federal Trade Commission (Commission) of the
Fair Credit Reporting Act (FCRA). It is a guideline intended to clarify
how the Commission will construe the FCRA in light of Congressional
intent as reflected in the statute and its legislative history. The
Commentary does not have the force or effect of regulations or
statutory provisions, and its contents may be revised and updated as
the Commission considers necessary or appropriate.
2. Status of previous interpretations. The Commentary
primarily addresses issues discussed in the Commission's earlier formal
interpretations of the FCRA (16 CFR 600.1--600.8), which are hereby
superseded, in the staff's manual entitled "Compliance With the Fair
Credit Reporting Act" (the current edition of which was published in
May 1973, and revised in January 1977 and March 1979), and in informal
staff opinion letters responding to public requests for
interpretations, and it also reflects the results of the Commission's
FCRA enforcement program. It is intended to synthesize the Commission's
views and give clear advice on important issues. The Commentary sets
forth some interpretations that differ from those previously expressed
by the Commission or its staff, and is intended to supersede all prior
formal Commission interpretations, informal staff opinion letters, and
the staff manual cited above.
{{4-29-94 p.7180}}
3. Statutory references. Reference to several
different provisions of the FCRA is frequently required in order to
make a complete analysis of an issue. For various sections and
subsections of the FCRA, the Commentary discusses the most important
and common overlapping references under the heading "Relation to
other (sub)sections."
4. Issuance of staff interpretations. The Commission
will revise and update the Commentary as it deems necessary, based on
the staff's experience in responding to public inquiries about, and
enforcing, the FCRA. The Commission welcomes input from interested
industry and consumer groups and other public parties on the Commentary
and on issues discussed in it. Staff will continue to respond to
requests for informal staff interpretations. In proposing revisions of
the Commentary, staff will consider and, where appropriate, recommend
that the Commentary incorporate issues raised in correspondence and
other public contacts, as well as in connection with the Commission's
enforcement efforts. Therefore, a party may raise an issue for
inclusion in future editions of the Commentary without making any
formal submission or request to that effect. However, requests for
formal Commission interpretations of the FCRA may also still be made
pursuant to the procedures set forth in the Commission's Rules (16 CFR
1.73).
5. Commentary citations to FCRA. The Commentary should
be used in conjunction with the text of the statute. In some cases, the
Commentary includes an abbreviated description of the statute, rather
than the full text, as a preamble to discussion of issues pertaining to
various sections and subsections. These summary statements of the law
should not be used as a substitute for the statutory text.
Section 601--Short
Title
"This title may be cited as the Fair Credit Reporting
Act."
The Fair Credit Reporting Act (FCRA) is title VI of the Consumer
Credit Protection Act, which also includes other Federal statutes
relating to consumer credit, such as the Truth in Lending Act (title
I), the Equal Credit Opportunity Act (Title VII), and the Fair Debt
Collection Practices Act (title VIII).
Section 602--Findings
and Purpose
Section 602 recites the Congressional findings regarding the
significant role of consumer reporting agencies in the nation's
financial system, and states that the basic purpose of the FCRA is to
require consumer reporting agencies to adopt reasonable procedures for
providing information to credit grantors, insurers, employers and
others in a manner that is fair and equitable to the consumer with
regard to confidentiality, accuracy, and the proper use of such
information.
Section
603--Definitions and Rules of Construction
Section 603(a) states that "definitions and rules of
construction set forth in this section are applicable for the purposes
of this title."
Section 603(b) defines "person" to mean "any
individual, partnership, corporation, trust, estate, cooperative,
association, government or governmental subdivision or agency or other
entity."
1. Relation to Other Sections
Certain "persons" must comply with the Act. The term
"consumer reporting agency" is defined in section 603(f) to
include certain "persons." Section
619 subjects any "person" who knowingly and willfully
obtains information from a consumer reporting agency on a consumer
under false pretenses to criminal sanctions. Requirements relating to
report users apply to "persons."
Section 606 imposes disclosure
obligations on "persons" who obtain investigative reports or
cause them to be prepared. Section
615(c) uses the term "person" to denote those subject to
disclosure obligations under sections 615(a) and 615(b).
2. Examples
The term "person" includes universities, creditors, collection
agencies, insurance companies, private investigators, and
employers.
{{4-29-94 p.7181}}
Section 603(c) defines the term "consumer" to mean
"an individual."
1. Relation to Other Sections
The term "consumer" denotes an individual entitled to the
Act's protections. Consumer reports, as defined in section 603(d), are
reports about consumers. A "consumer" is entitled to obtain
disclosures under section 609
from consumer reporting agencies and to take certain steps that require
such agencies to follow procedures in section 611, concerning disputes
about the completeness or accuracy of items of information in the
consumer's file. Disclosures required under
section 606 by one procuring an
investigative report must be made to the "consumer" on whom the
report is sought. Notifications required by
section 615 must be provided to
"consumers." A "consumer" is the party entitled to sue for
willful noncompliance (section
616) or negligent noncompliance
(section 617) with the Act's
requirements.
2. General
The definition includes only a natural person. It does not include
artificial entities (e.g., partnerships, corporations,
trusts, estates, cooperatives, associations) or entities created by
statute (e.g., governments, governmental subdivisions or
agencies).
Section 603(d) defines "consumer report" to mean "any
written, oral, or other communication of any information by a consumer
reporting agency bearing on a consumer's credit worthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living which is used or expected to be used
or collected in whole or in part for the purpose of serving as a factor
in establishing the consumer's eligibility for (1) credit or insurance
to be used primarily for personal, family, or household purposes, or
(2) employment purposes, or (3) other purposes authorized under Section
604" (with three specific exclusions).
1. Relation to ``Consumer Reporting Agency''
To be a "consumer report," the information must be furnished
by a "consumer reporting agency" as that term is defined in
section 603(f). Conversely, the term "consumer reporting agency"
is restricted to persons that regularly engage in assembling or
evaluating consumer credit information or other information on
consumers for the purpose of furnishing "consumer reports" to
third parties. In other words, the terms "consumer reporting
agency" in section 603(f) and "consumer report" in section
603(d) are mutually dependent and must therefore be construed together.
For example, information is not a "consumer report" if the person
furnishing the information is clearly not a "consumer reporting
agency" (e.g., if the person furnishing the information
does not regularly furnish such information for monetary fees or on a
cooperative nonprofit basis).
2. Relation to the Applicability of the Act
If a report is not a "consumer report," then the Act does not
usually apply to it. 1
For example, because a commercial credit report is not a report on a
consumer, it is not a "consumer report". Therefore, the user need
not notify the subject of the name and address of the credit bureau
when taking adverse action, and the provider need not omit
"obsolete" information, as would be required if the FCRA applied.
3. Report Concerning a ``Consumer's'' Attributes and
History
A. General. A "consumer report" is a report on a
"consumer" to be used for certain purposes involving that
"consumer."
B. Artificial entities. Reports about corporations,
associations, and other collective entities are not consumer reports,
and the Act does not apply to them.
C. Reports on businesses for business purposes.
Reports used to determine the eligibility of a business, rather
than a consumer, for certain purposes, are not consumer
{{4-29-94 p.7182}}reports and the FCRA does not apply to them,
even if they contain information on individuals, because Congress did
not intend for the FCRA to apply to reports used for commercial
purposes (see 116 Cong. Rec. 36572 (1970) (Conf. Report on H.R.
15073)).
4. ``(C)redit Worthiness, Credit Standing, Credit
Capacity, Character, General Reputation, Personal Characteristics, or
Mode of Living * * *''
A. General. To be a "consumer report," the
information must bear on at least one of the seven characteristics
listed in this definition.
B. Credit guides. Credit guides are listings,
furnished by credit bureaus to credit grantors, that rate how well
consumers pay their bills. Such guides are a series of "consumer
reports," because they contain information which is used for the
purpose of serving as a factor in establishing the consumers'
eligibility for credit. However, if they are coded (by identification
such as social security number, driver's license number, or bank
account number) so that the consumer's identity is not disclosed, they
are not "consumer reports" until decoded. (See discussion of
uncoded credit guides under section 604(3)(A), item 8
infra.)
C. Motor vehicle reports. Motor vehicle reports are
distributed by state motor vehicle departments, generally to insurance
companies upon request, and usually reveal a consumer's entire driving
record, including arrests for driving offenses. Such reports are
consumer reports when they are sold by a Department of Motor Vehicles
for insurance underwriting purposes and contain information bearing on
the consumer's "personal characteristics," such as arrest
information. The Act's legislative history indicates Congress intended
the Act to cover mutually beneficial exchanges of information between
commercial enterprises rather than between governmental entities.
Accordingly, these reports are not consumer reports when provided to
other governmental authorities involved in licensing or law enforcement
activities. (See discussion titled "State Departments of Motor
Vehicles," under section 603(f), item 10 infra.)
D. Consumer lists. A list of the names of creditworthy
individuals, or of individuals on whom credit bureaus have derogatory
information, is a series of "consumer reports" because the
information bears on credit worthiness.
E. Public record information. A report solely of
public record information is not a "consumer report" unless that
information is provided by a consumer reporting agency, is collected or
used for the purposes identified in section 603(d), and bears on at
least one of the seven characteristics listed in the definition. Public
record information relating to records of arrest, or the institution or
disposition of civil or criminal proceedings, bears on one or more of
these characteristics.
F. Name and address. A report limited solely to the
consumer's name and address alone, with no connotations as to credit
worthiness or other characteristics, does not constitute a "consumer
report," if it does not bear on any of the seven factors.
G. Rental characteristics. Reports about rental
characteristics (e.g., consumers' evictions, rental payment
histories, treatment of premises) are consumer reports, because they
relate to character, general reputation, personal characteristics, or
mode of living.
5. ``(U)sed or Expected to Be Used or Collected in Whole
or in Part for the Purpose of Serving as a Factor in Establishing the
Consumer's Eligibility * * *''
A. Law enforcement bulletins. Bulletins that are
limited to a series of descriptions, sometimes accompanied by
photographs, of individuals who are being sought by law enforcement
authorities for alleged crimes are not a series of "consumer
reports" because they have not been collected for use in evaluating
consumers for credit, insurance, employment or other consumer purposes,
and it cannot reasonably be anticipated they will be used for such
purposes.
B. Directories. Telephone directories and city
directories, to the extent they only provide information regarding
name, address and phone number, marital status, home ownership, and
number of children, are not "consumer reports," because the
information is not used or expected to be used in evaluating
consumers for credit, insurance,
{{4-29-94 p.7183}}employment or other purposes and does not
reflect on credit standing, credit worthiness, or any of the other
factors. A list of names of individuals with checking accounts is not a
series of consumer reports because the information does not bear on
credit worthiness or any of the other factors. A trade directory, such
as a list of all insurance agents licensed to do business in a state,
is not a series of consumer reports because it is commercial
information that would be used for commercial purposes.
C. Use of prior consumer report in preparation. A
report that would not otherwise be a consumer report may be a consumer
report, notwithstanding the purpose for which it is furnished, if it
includes a prior consumer report or information from consumer report
files, because it would contain some information "collected in whole
or in part" for consumer reporting purposes. For example, an
insurance claims report would be a consumer report if a consumer report
(or information from a consumer report) were used to prepare it. (See
discussion, infra, in item 6--C under this subsection.)
D. Use of reports for purposes not anticipated by the
reporting party. The question arises whether a report that is not
otherwise a consumer report is subject to the FCRA because the
recipient subsequently uses the report for a permissible purpose. If
the reporting party's procedures are such that it neither knows of nor
should reasonably anticipate such use, the report is not a consumer
report. If a reporting party has taken reasonable steps to insure that
the report is not used for such a purpose, and if it neither knows of,
nor can reasonably anticipate such use, the report should not be deemed
a consumer report by virtue of uses beyond the reporting party's
control. A reporting party might establish that it does not reasonably
anticipate such use of the report by requiring the recipient to certify
that the report will not be used for one of the purposes listed in
section 604. (Such procedure may
be compared to the requirement in section
607(a), discussed infra, that consumer reporting
agencies furnishing consumer reports require that prospective users
certify the purposes for which the information is sought and certify
that the information will be used for no other purpose.) For example, a
claims reporting service could use such a certification to avoid having
its insurance claims reports deemed "consumer reports" if the
report recipient/insurer were to use the report later for
"underwriting purposes" under section 604(3)(C), such as
terminating insurance coverage or raising the premium.
6. ``(E)stablishing the Consumer's Eligibility for (1)
Credit or Insurance to Be Used Primarily for Personal, Family or
Household Purposes, or (2) Employment Purposes, or (3) Other Purposes
Authorized Under Section 604''
A. Relation to section 604. Because section 603(d)(3)
refers to "purposes authorized under section 604" (often
described as "permissible purposes" of consumer reports), some of
which overlap purposes enumerated in section 603 (e.g.,
603(d)(1) and 603(d)(2)), sections 603 and 604 must be construed
together, to determine what are "consumer reports" and
"permissible purposes" under the two sections. See discussion
infra, under section 604.
B. Commercial credit or insurance. A report on a
consumer for credit or insurance in connection with a business operated
by the consumer is not a "consumer report," and the Act does not
apply to it.
C. Insurance claims reports. (It is assumed that
information in prior consumer reports is not used in claims reports.
See discussion, supra, in item 5-C under this subsection).
Reports provided to insurers by claims investigation services solely to
determine the validity of insurance claims are not consumer reports,
because section 604(3)(C) specifically sets forth only underwriting
(not claims) as an insurance-related purpose, and section 603(d)(1)
deals specifically with eligibility for insurance and no other
insurance-related purposes. To construe section 604(3)(E) as including
reports furnished in connection with insurance claims would be to
disregard the specific language of sections 604(3)(C) and 603(d)(1).
D. Scope of employment purpose. A report that is used
or is expected to be used or collected in whole or in part in
connection with establishing an employee's eligibility
for
{{4-29-94 p.7184}}"promotion, reassignment or retention,"
as well as to evaluate a job applicant, is a consumer report because
sections 603(d)(2) and 604(3)(B) use the term "employment
purposes," which section 603(h) defines to include these situations.
E. Bad check lists. A report indicating that an
individual has issued bad checks, provided by printed list or
otherwise, to a business for use in determining whether to accept
consumers' checks tendered in transactions primarily for personal,
family or household purposes, is a consumer report. The information
furnished bears on consumers' character, general reputation and
personal characteristics, and it is used or expected to be used in
connection with business transactions involving consumers.
F. Tenant screening reports. A report used to
determine whether to rent a residence to a consumer is a consumer
report, because it is used for a business transaction that the consumer
wishes to enter into for personal, family or household purposes.
7. Exclusions From the Definition of ``Consumer
Report''
A. "(A)ny reports containing information solely as to
transactions or experiences between the consumer and the person making
the report;"--(1) Examples of sources. The
exemption applies to reports limited to transactions or experiences
between the consumer and the entity making the report (e.g.,
retail stores, hospitals, present or former employers, banks,
mortgage servicing companies, credit unions, or universities).
(2) Information beyond the reporting entity's own
transactions or experiences with the consumer.
The exemption does not apply to reports by these entities of
information beyond their own transactions or experiences with the
consumer. An example is a creditor's or an insurance company's report
of the reasons it cancelled credit or insurance, based on information
from an outside source.
(3) Opinions concerning transactions or experiences.
The exemption applies to reports that are not limited to the facts,
but also include opinions (e.g., use of the term "slow
pay" to describe a consumer's transactions with a creditor), as long
as the facts underlying the opinions involve only transactions or
experiences between the consumer and the reporting entity.
B. "(A)ny authorization or approval of a specific
extension of credit directly or indirectly by the issuer of a credit
card or similar device;"--(1) General. The
exemption applies to a credit or debit card issuer's written, oral, or
electronic communication of its decision whether or not to authorize a
charge, in response to a request from a merchant or other party that
the consumer has asked to honor the card.
C. "(A)ny report in which a person who has been
requested by a third party to make a specific extension of credit
directly or indirectly to the consumer conveys his decision with
respect to such request, if the third party advises the consumer of the
name and address of the person to whom the request was made and such
person makes the disclosures to the consumer required under
section
615."--(1) General. The exemption covers
retailers' attempts to obtain credit for their individual customers
from an outside source (such as a bank or a finance company). The
communication by the financial institution of its decision whether to
extend credit is not a "consumer report" if the
retailer informs the customer of the name and address of the financial
institution to which the application or contract is offered and
the financial institution makes the disclosures required by
section 615 of the Act. Such disclosures must be made only when there
is a denial of, or increase in the charge for, credit or insurance.
(See discussion of section 615, item 10, infra.)
(2) Information included in the exemption.
The exemption is not limited to a simple "yes" or "no"
response, but includes the information constituting the basis for the
credit denial, because it applies to "any report."
(3) How third party creditors can insure that the exemption
applies.
Creditors, who are requested by dealers or merchants to make such
specific extensions of credit, can assure that communication of their
decision to the dealer or merchant will be exempt under this section
from the term "consumer report," by having written
agreements
{{4-29-94 p.7185}}that
require such parties to inform the consumer of the creditor's name and
address and by complying with any applicable provisions of section 615.
Section 603(e) defines "investigative consumer report"
as "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."
1. Relation to Other Sections
The term "investigative consumer report" denotes a subset of
"consumer report" for which the Act imposes additional
requirements on recipients and consumer reporting agencies. Persons
procuring "investigative consumer reports" must make certain
disclosures to the consumers who are the subjects of the reports, as
required by section 606. Consumer
reporting agencies must comply with section 614, when furnishing
"investigative consumer reports" containing adverse information
that is not a matter of public record. Consumer reporting agencies
making disclosure to consumers pursuant to
section 609 are not required to
disclose "sources of information acquired solely for use in
preparing an investigative consumer report and actually used for no
other purpose."
2. General
An "investigative consumer report" is a type of "consumer
report" that contains information that is both related to a
consumer's character, general reputation, personal characteristics or
mode of living and obtained by personal interviews with the consumer's
neighbors, friends, associates or others.
3. Types of Sources Interviewed
A report consisting of information from any third party concerning
the subject's character (reputation, etc.) may be an investigative
consumer report because the phrase "obtained through personal
interviews * * * with others" includes any source that is a third
party interviewee. A report containing interview information obtained
solely from the subject is not an "investigative consumer
report."
4. Telephone Interviews
A consumer report that contains information on a consumer's
"character, general reputation, personal characteristics or mode of
living" obtained through telephone interviews with third parties is
an "investigative consumer report," because "personal
interviews" includes interviews conducted by telephone as well as in
person.
5. Identity of Interviewer
A consumer report is an "investigative consumer report" if
personal interviews are used to obtain information reported on a
consumer's "character, general reputation, personal characteristics
or mode of living," regardless of who conducted the interview.
6. Noninvestigative Information in ``Investigative
Consumer Reports''
An "investigative consumer report" may also contain
noninvestigative information, because the definition includes reports,
a "portion" of which are investigative reports.
7. Exclusions From ``Investigative Consumer Reports''
A report that consists solely of information gathered from
observation by one who drives by the consumer's residence is not an
"investigative consumer report," because it contains no
information from "personal interviews."
{{4-29-94 p.7186}}
Section 603(f) defines "consumer reporting agency" as
"any person which, for monetary fees, dues, or on a cooperative
nonprofit basis, regularly engages in whole or in part in the practice
of assembling or evaluating consumer credit information or other
information on consumers for the purpose of furnishing consumer reports
to third parties, and which uses any means or facility of interstate
commerce for the purpose of preparing or furnishing consumer
reports."
1. Relation to Other Sections
A. Duties imposed on "consumer reporting agencies."
The Act imposes a number of duties on "consumer reporting
agencies." They must have permissible purposes to furnish consumer
reports (section 604), avoid furnishing obsolete adverse information in
certain consumer reports (sections 605, 607(a)), adopt reasonable
procedures to assure privacy (section 604, 607(a)), and accuracy
(section 607(b)) of consumer reports, provide only limited disclosures
to governmental agencies (section 608), provide consumers certain
disclosures upon request (sections 609 and 610) at no cost or for a
reasonable charge (section 612), follow certain procedures if a
consumer disputes the completeness or accuracy of any item of
information contained in his file (section 611), and follow certain
procedures in reporting public record information for employment
purposes or when reporting adverse information other than public record
information in investigative consumer reports (sections 613, 614).
B. Relation to "consumer reports." The term
"consumer reporting agency," as defined in section 603(f),
includes certain persons who assemble or evaluate information on
individuals for the purpose of furnishing "consumer reports" to
third parties. Conversely, section 603(d) defines the term "consumer
report" to mean the communication of certain information by a
"consumer reporting agency." In other words, the terms
"consumer report" in section 603(d) and "consumer reporting
agency" as defined in section 603(f) are defined in a mutually
dependent manner and must therefore be construed together. For example,
a party is not a "consumer reporting agency" if it provides only
information that is excepted from the definition of "consumer
report" under section 603(d), such as reports limited to the party's
own transactions or experiences with a consumer, or credit information
on organizations.
2. Isolated Reports
Parties that do not "regularly" engage in assembling or
evaluating information for the purpose of furnishing consumer reports
to third parties are not consumer reporting agencies. For example, a
creditor that furnished information on a consumer to a governmental
entity in connection with one of its investigations, would not
"regularly" be making such disclosure for a fee or on a
cooperative nonprofit basis, and therefore would not become a consumer
reporting agency, even if the information exceeded the creditor's
transactions or experiences with the consumer.
3. Provision of Credit Report to Report Subject
A consumer report user does not become a consumer reporting agency
by regularly giving a copy of the report, or otherwise disclosing it,
to the consumer who is the subject of the report, because it is not
disclosing the information to a "third party."
4. Employment Agency
An employment agency that routinely obtains information on job
applicants from their former employers and furnishes the information to
prospective employers is a consumer reporting agency.
5. Information Compiled for Insurance Underwriting
A business that compiles claim payment histories on individuals from
insurers and furnishes them to insurance companies for use in
underwriting decisions concerning those individuals is a consumer
reporting agency.
{{4-29-94 p.7187}}
6. Private Investigators and Detective Agencies
Private investigators and detective agencies that regularly obtain
consumer reports and furnish them to clients may thereby become
consumer reporting agencies.
7. Collection Agencies and Creditors
Collection agencies and creditors become consumer reporting agencies
if they regularly furnish information beyond their transactions or
experiences with consumers to third parties for use in connection with
consumers' transactions.
8. Joint Users of Consumer Reports
Entities that share consumer reports with others that are jointly
involved in decisions for which there are permissible purposes to
obtain the reports may be "joint users" rather than consumer
reporting agencies. For example, if a lender forwards consumer reports
to governmental agencies administering loan guarantee programs (or to
other prospective loan insurers or guarantors), or to other parties
whose approval is needed before it grants credit, or to another
creditor for use in considering a consumer's loan application at the
consumer's request, the lender does not become a consumer reporting
agency by virtue of such action. An agent or employee that obtains
consumer reports does not become a consumer reporting agency by sharing
such reports with its principal or employer in connection with the
purposes for which the reports were initially obtained.
9. Loan Exchanges
Loan exchanges, which are generally owned and operated on a
cooperative basis by consumer finance companies, constitute a mechanism
whereby each member furnishes the exchange information concerning the
full identity and loan amount of each of its borrowers, and receives
information from the exchange concerning the number and types of
outstanding loans for each of its applicants. A loan exchange or any
other exchange that regularly collects information bearing on decisions
to grant consumers credit or insurance for personal, family or
household purposes, or employment, is a "consumer reporting
agency."
10. State Departments of Motor Vehicles
State motor vehicle departments are "consumer reporting
agencies" if they regularly furnish motor vehicle reports containing
information bearing on the consumer's "personal characteristics,"
such as arrest information, to insurance companies for insurance
underwriting purposes. (See discussion of motor vehicle reports under
section 603(d), item 4c supra.)
11. Federal Agencies
The Office of Personnel Management collects and files data
concerning current and potential employees of the Federal Government
and transmits that information to other government agencies for
employment purposes. Because Congress did not intend that the FCRA
apply to the Office of Personnel Management and similar federal
agencies (see 116 Cong. Rec. 36576 (1970) (remarks of Rep. Brown)), no
such agency is a "consumer reporting agency."
12. Credit Application Information
A creditor that provides information from a consumer's application
to a credit bureau, for verification as part of the creditor's
evaluation process that includes obtaining a report on the consumer
from that credit bureau, does not thereby become a "consumer
reporting agency," because the creditor does not provide the
information for "fees, dues, or on a cooperative nonprofit
basis," but rather pays the bureau to verify the information when it
provides a consumer report on the applicant.
Section 603(g) defines "file," when used in connection
with information on any consumer, to mean "all of the information on
that consumer recorded and retained by a consumer reporting agency
regardless of how the information is stored."
{{4-29-94 p.7188}}
1. Relation to Other Sections
Consumer reporting agencies are required to make disclosures of all
information in their "files" to consumers upon request
(section 609) and to follow
reinvestigation procedures if the consumer disputes the completeness or
accuracy of any item of information contained in his "file"
(section 611).
2. General
The term "file" denotes all information on the consumer that
is recorded and retained by a consumer reporting agency that might be
furnished, or has been furnished, in a consumer report on that
consumer.
3. Audit Trail
The term "file" does not include an "audit trail" (a
list of changes made by a consumer reporting agency to a consumer's
credit history record, maintained to detect fraudulent changes to that
record), because such information is not furnished in consumer reports
or used as a basis for preparing them.
4. Other Information
The term "file" does not include information in billing
records or in the consumer relations folder that a consumer reporting
agency opens on a consumer who obtains disclosures or files a dispute,
if the information has not been used in a consumer report and would not
be used in preparing one.
Section 603(h) defines "employment purposes" to mean
"a report used for the purpose of evaluating a consumer for
employment, promotion, reassignment or retention as an employee."
1. Relation to Other Sections
The term "employment purposes" is used as part of the
definition of "consumer reports" (section 603(d)(2)) and as a
permissible purpose for the furnishing of consumer reports (section
604(3)(B)). Where an investigative consumer report is to be used for
"employment purposes" for which a consumer has not specifically
applied, section 606(a)(2)
provides that the notice otherwise required by section 606(a)(1) need
not be sent. When a consumer reporting agency furnishes public record
information in reports "for employment purposes," it must follow
the procedure set out in section
613.
2. Security Clearances
A report in connection with security clearances of a government
contractor's employees would be for "employment purposes" under
this section.
Section 603(i) defines "medical information" to mean
"information or records obtained, with the consent of the individual
to whom it relates, from licensed physicians or medical practitioners,
hospitals, clinics, or other medical or medically related
facilities."
1. Relation to Other Sections
Under section 609(a)(1), a
consumer reporting agency must, upon the consumer's request and proper
identification, disclose the nature and substance of all information in
its files on the consumer, except "medical information."
2. Information From Non-medical Sources
Information from non-medical sources such as employers, is not
"medical information."
Section
604--Permissible Purposes of Reports
"A consumer reporting agency may furnish a consumer report
under the following circumstances and no other: * * *"
{{4-29-94 p.7189}}
1. Relation to Section 603
Sections 603(d)(3) and 604 must be construed together to determine
what are "permissible purposes," because section 603(d)(3) refers
to "purposes authorized under section 604" (often described as
"permissible purposes" of consumer reports), and some purposes
are enumerated in section 603 (e.g., sections 603(d)(1) and
603(d)(2)). Subsections of sections 603 and 604 that specifically set
forth "permissible purposes" relating to credit, insurance and
employment, are the only subsections that cover "permissible
purposes" relating to those three areas. Section 604(3)(E), a
general subsection, is limited to purposes not otherwise addressed in
section 604(3)(A)--(D).
A. Credit. Sections 603(d)(1)--which defines
"consumer report" to include certain reports for the purpose of
serving as a factor in establishing the consumer's eligibility for
credit or insurance primarily for personal, family, or household
purposes--and 604(3)(A) must be read together as fully describing
permissible purposes involving credit for obtaining consumer reports.
Accordingly, section 604(3)(A) permits the furnishing of a consumer
report for use in connection with a credit transaction involving the
consumer, primarily for personal, family or household purposes, and
involving the extension of credit to, or review or collection of an
account of, the consumer.
B. Insurance. Sections 603(d)(1) and 604(3)(C) must be
read together as describing the only permissible insurance purposes for
obtaining consumer reports. Accordingly, section 604(3)(C) permits the
furnishing of a consumer report, provided it is for use in connection
with the underwriting of insurance involving the consumer, primarily
for personal, family, or household purposes.
C. Employment. Employment is covered exclusively by
sections 603(d)(2) and 604(3)(B), and by section 603(h) (which defines
"employment purposes"). Therefore, "permissible purposes"
relating to employment include reports used for evaluating a consumer
"for employment, promotion, reassignment or retention as an
employee."
D. Other purposes. "Other purposes" are referred
to in section 603(d)(3) and covered by section 604(3)(E), as well as
sections 604(1), 604(2) and 604(3)(D) (which contain specific purposes
not involving credit, insurance, employment). Permissible purposes
relating to section 604(3)(E) are limited to transactions that
consumers enter into primarily for personal, family or household
purposes (excluding credit, insurance or employment, which are
specifically covered by other subsections discussed above). The FCRA
does not cover reports furnished for transactions that consumers enter
into primarily in connection with businesses they operate (e.g.,
a consumer's rental of equipment for use in his retail store).
2. Relation to Other Sections
A. Section 607(a).
Section 607(a) requires consumer reporting agencies to keep
information confidential by furnishing consumer reports only for
purposes listed under section 604, and to follow specified, reasonable
procedures to achieve this end. Section
619 provides criminal sanctions against any person who
knowingly and willfully obtains information on a consumer from a
consumer reporting agency under false pretenses.
B. Section 608.
Section 608 allows "consumer reporting agencies" to furnish
governmental agencies specified identifying information concerning
consumers, notwithstanding the limitations of section 604.
Section 604(1)--A consumer reporting agency may furnish a
consumer report "in response to the order of a court having
jurisdiction to issue such an order."
1. Subpoena
A subpoena, including a grand jury subpoena, is not an "order of
a court" unless signed by a judge.
2. Internal Revenue Service Summons
An I.R.S. summons is an exception to the requirement that an order
be signed by a judge before it constitutes an "order of a court"
under this section, because a 1976 revision to
{{4-29-94 p.7190}}federal statutes (26 U.S.C. 7609)
specifically requires a consumer reporting agency to furnish a consumer
report in response to an I.R.S. summons upon receipt of the designated
I.R.S. certificate that the consumer has not filed a timely motion to
quash the summons.
Section 604(2)--A consumer reporting agency may furnish a
consumer report "in accordance with the written instructions of the
consumer to whom it relates."
1. No Other Permissible Purpose Needed
If the report subject furnishes written authorization for a report,
that creates a permissible purpose for furnishing the report.
2. Refusal to Furnish Report
The consumer reporting agency may refuse to furnish the report
because the statute is permissive, not mandatory. (Requirements that
consumer reporting agencies make disclosure to consumers (as contrasted
with furnishing reports to users) are discussed under sections 609 and
610, infra.)
Section 604(3)(A)--A consumer reporting agency may issue a
consumer report to "a person which it has reason to believe * * *
intends to use the information in connection with a credit transaction
involving the consumer on whom the information is to be furnished and
involving the extension of credit to, or review or collection of an
account of, the consumer."
1. Reports Sought in Connection with the ``Review or
Collection of an Account''
A. Reports for collection. A collection agency has a
permissible purpose under this section to receive a consumer report on
a consumer for use in attempting to collect that consumer's debt,
regardless of whether that debt is assigned or referred for collection.
Similarly, a detective agency or private investigator attempting to
collect a debt owed by a consumer, would have a permissible purpose to
obtain a consumer report on that individual for use in collecting that
debt. An attorney may obtain a consumer report under this section on a
consumer for use in connection with a decision whether to sue that
individual to collect a credit account.
B. Unsolicited reports. A consumer reporting agency
may not send an unsolicited consumer report to the recipient of a
previous report on the same consumer, because the recipient will not
necessarily have a permissible purpose to receive the unsolicited
report. 2
For example, the recipient may have rejected the consumer's application
or ceased to do business with the consumer. (See also discussion in
section 607, item 2G, infra.)
2. Judgment Creditors
A judgment creditor has a permissible purpose to receive a consumer
report on the judgment debtor for use in connection with collection of
the judgment debt, because it is in the same position as any creditor
attempting to collect a debt from a consumer who is the subject of a
consumer report.
3. Child Support Debts
A district attorney's office or other child support agency may
obtain a consumer report in connection with enforcement of the report
subject's child support obligation, established by court (or
quasi-judicial administrative) orders, since the agency is acting as or
on behalf of the judgment creditor, and is, in effect, collecting a
debt. However, a consumer reporting agency may not furnish consumer
reports to child support agencies seeking to establish
paternity or the duty to pay child support.
4. Tax Obligations
A tax collection agency has no general permissible purpose to obtain
a consumer report to collect delinquent tax accounts, because this
subsection applies only to collection of "credit" accounts.
However, if a tax collection agency acquired a tax lien having the
same
{{4-29-94 p.7191}}effect as a judgment or obtained a judgment,
it would be a judgment creditor and would have a permissible purpose
for obtaining a consumer report on the consumer who owed the tax.
Similarly, if a consumer taxpayer entered an agreement with a tax
collection agency to pay taxes according to some timetable, that
agreement would create a debtor-creditor relationship, thereby giving
the agency a permissible purpose to obtain a consumer report on that
consumer.
5. Information on an Applicant's Spouse
A. Permissible purpose. A creditor may request any
information concerning an applicant's spouse if that spouse will be
permitted to use the account or will be contractually liable upon the
account, or the applicant is relying on the spouse's income as a basis
for repayment of the credit requested. A creditor may request any
information concerning an applicant's spouse if (1) the state law
doctrine of necessaries applies to the transaction, or (2) the
applicant resides in a community property state, or (3) the property
upon which the applicant is relying as a basis for repayment of the
credit requested is located in such a state, or (4) the applicant is
acting as the agent of the nonapplicant spouse.
B. Lack of permissible purpose. If the creditor
receives information clearly indicating that the applicant is not
acting as the agent of the nonapplicant spouse, and that the applicant
is relying only on separate property to repay the credit extended, and
that the state law doctrine of necessaries does not apply to the
transaction and that the applicant does not reside in a community
property state, the creditor does not have a permissible purpose for
obtaining a report on a nonapplicant spouse. A permissible purpose for
making a consumer report on a nonapplicant spouse can never exist under
the FCRA, where Regulation B, issued under the Equal Credit Opportunity
Act (12 CFR 202), prohibits the creditor from requesting information on
such spouse. There is no permissible purpose to obtain a consumer
report on a nonapplicant former spouse or on a nonapplicant spouse who
has legally separated or otherwise indicated an intent to legally
disassociate with the marriage. (This does not preclude reporting a
prior joint credit account of former spouses for which the spouse that
is the subject of the report is still contractually liable. See
discussion in section 607, items 3--D infra.)
6. Prescreening
"Prescreening" means the process whereby a consumer reporting
agency compiles or edits a list of consumers who meet specific criteria
and provides this list to the client or a third party (such as a
mailing service) on behalf of the client for use in soliciting these
consumers for the client's products or services. The process may also
include demographic or other analysis of the consumers on the list
(e.g., use of census tract data reflecting real estate
values) by the consumer reporting agency or by a third party employed
for that purpose (by either the agency or its client) before the list
is provided to the consumer reporting agency's client. In such
situations, the client's creditworthiness criteria may be provided only
to the consumer reporting agency and not to the third party performing
the demographic analysis. The consumer reporting agency that performs a
"prescreening" service may furnish a client with several
different lists of consumers who meet different sets of
creditworthiness criteria supplied by the client, who intends to make
different credit offers (e.g., various credit limits) to
consumers who meet the different criteria.
A prescreened list constitutes a series of consumer reports, because
the list conveys the information that each consumer named meets certain
criteria for creditworthiness. Prescreening is permissible under the
FCRA if the client agrees in advance that each consumer whose name is
on the list after prescreening will receive an offer of credit. In
these circumstances, a permissible purpose for the prescreening service
exists under this section, because of the client's present intent to
grant credit to all consumers on the final list, with the result that
the information is used "in connection with a credit transaction
involving the consumer on whom the information is to be furnished and
involving the extension of credit to * * * the consumer."
{{4-29-94 p.7192}}
7. Seller of Property Extending Credit
A seller of property has a permissible purpose under this subsection
to obtain a consumer report on a prospective purchaser to whom he is
planning to extend credit.
8. Uncoded Credit Guides
A consumer reporting agency may not furnish an uncoded credit guide,
because the recipient does not have a permissible purpose to obtain a
consumer report on each consumer listed. (As discussed under section
603(d), item 4 supra, credit guides are listings that credit
bureaus furnish to credit grantors, rating how consumers pay their
bills. Such guides are a series of "consumer reports" on the
"consumers" listed therein, unless coded so that the consumer's
identity is not disclosed.)
9. Liability for Bad Checks
A party attempting to recover the amount due on a bad check is
attempting to collect a debt and, therefore, has a permissible purpose
to obtain a consumer report on the consumer who wrote it, and on any
other consumer who is liable for the amount of that check under
applicable state law.
Section 604(3)(B)--A consumer reporting agency may issue a
consumer report to "a person which it has reason to believe * * *
intends to use the information for employment purposes;"
1. Current Employees
An employer may obtain a consumer report on a current employee in
connection with an investigation of the disappearance of money from
employment premises, because "retention as an employee" is
included in the definition of "employment purposes" (section
603(h)).
2. Consumer Reports on Applicants and Non-applicants
An employer may obtain a consumer report for use in evaluating the
subject's application for employment but may not obtain a consumer
report to evaluate the application of a consumer who is not the subject
of the report.
3. Grand Jurors
The fact that grand jurors are usually paid a stipend for their
service does not provide a district attorney's office a permissible
purpose for obtaining consumer reports on them, because such service is
a duty, not "employment."
Section 604(3)(C)--A consumer reporting agency may issue a
consumer report to "a person which it has reason to believe * * *
intends to use the information in connection with the underwriting of
insurance involving the consumer;"
1. Underwriting
An insurer may obtain a consumer report to decide whether or not to
issue a policy to the consumer, the amount and terms of coverage, the
duration of the policy, the rates or fees charged, or whether or not to
renew or cancel a policy, because these are all "underwriting"
decisions.
2. Claims
An insurer may not obtain a consumer report for the purpose of
evaluating a claim (to ascertain its validity or otherwise determine
what action should be taken), because permissible purposes relating to
insurance are limited by this section to "underwriting" purposes.
Section 604(3)(D)--A consumer reporting agency may issue a
consumer report to "a person which it has reason to believe * * *
intends to use the information in connection with a determination of
the consumer's eligibility for a license or other benefit granted by a
governmental instrumentality required by law to consider an applicant's
financial responsibility or status * * *"
{{4-29-94 p.7193}}
1. Appropriate Recipient
Any party charged by law (including a rule or regulation having the
force of law) with responsibility for assessing the consumer's
eligibility for the benefit (not only the agency directly responsible
for administering the benefit) has a permissible purpose to receive a
consumer report. For example, a district attorney's office or social
services bureau, required by law to consider a consumer's financial
status in determining whether that consumer qualifies for welfare
benefits, has a permissible purpose to obtain a report on the consumer
for that purpose. Similarly, consumer reporting agencies may furnish
consumer reports to townships on consumers whose financial status the
townships are required by law to consider in determining the consumers'
eligibility for assistance, or to professional boards (e.g.,
bar examiners) required by law to consider such information on
applicants for admission to practice.
2. Inappropriate Recipient
Parties not charged with the responsibility of determining a
consumer's eligibility for a license or other benefit, for example, a
party competing for an FCC radio station construction permit, would not
have a permissible purpose to obtain a consumer report on that
consumer.
3. Initial or Continuing Benefit
The permissible purpose includes the determination of a consumer's
continuing eligibility for a benefit, as well as the evaluation of a
consumer's initial application for a benefit. If the governmental body
has reason to believe a particular consumer's eligibility is in doubt,
or wishes to conduct random checks to confirm eligibility, it has a
permissible purpose to receive a consumer report.
Section 604(3)(e)--A consumer reporting agency may issue a
consumer report to "a person which it has reason to believe * * *
otherwise has a legitimate business need for the information in
connection with a business transaction involving the consumer."
1. Relation to Other Subsections of Section 604(3)
The issue of whether credit, employment, or insurance provides a
permissible purpose is determined exclusively by reference to
subsection (A), (B), or (C), respectively.
2. Commercial Transactions
The term "business transaction" in this section means a
business transaction with a consumer primarily for personal, family, or
household purposes. Business transactions that involve purely
commercial purposes are not covered by the FCRA.
3. ``Legitimate Business Need''
Under this subsection, a party has a permissible purpose to obtain a
consumer report on a consumer for use in connection with some action
the consumer takes from which he or she might expect to receive a
benefit that is not more specifically covered by subsections (A), (B),
or (C). For example, a consumer report may be obtained on a consumer
who applies to rent an apartment, offers to pay for goods with a check,
applies for a checking account or similar service, seeks to be included
in a computer dating service, or who has sought and received
over-payments of government benefits that he has refused to return.
4. Litigation
The possibility that a party may be involved in litigation involving
a consumer does not provide a permissible purpose for that party to
receive a consumer report on such consumer under this subsection,
because litigation is not a "business transaction" involving
the consumer. Therefore, potential plaintiffs may not always obtain
reports on potential defendants to determine whether they are worth
suing. The transaction that gives rise to the litigation may or may not
provide a permissible purpose. A party seeking to sue on a credit
account would have a permissible purpose under section 604(3)(A). (That
section also permits judgment creditors and lien creditors to obtain
consumer reports on
{{4-29-94 p.7194}}judgment debtors or individuals whose property
is subject to the lien creditor's lien.) If that transaction is a
business transaction involving the consumer, there is a permissible
purpose. If the litigation arises from a tort, there is no permissible
purpose. Similarly, a consumer report may not be obtained solely for
use in discrediting a witness at trial or for locating a witness. This
section does not permit consumer reporting agencies to furnish consumer
reports for the purpose of locating a person suspected of committing a
crime. (As stated in the discussion of section 608 infra
(item 2), section 608 permits the furnishing of specified, limited
identifying information to governmental agencies, notwithstanding the
provisions of section 604.)
5. Impermissible Purposes
A consumer reporting agency may not furnish a consumer report to
satisfy a requester's curiosity, or for use by a news reporter in
preparing a newspaper or magazine article.
6. Agents
A. General. An agent 3
of a party with a "permissible purpose" may obtain a consumer
report on behalf of his principal, where he is involved in the decision
that gives rise to the permissible purpose. Such involvement may
include the agent's making a decision (or taking action) for the
principal, or assisting the principal in making the decision
(e.g., by evaluating information). In these circumstances,
the agent is acting on behalf of the principal. In some cases, the
agent and principal are referred to as "joint users." See
discussion in section 603(f), supra (item 8).
B. Real estate agent. A real estate agent may obtain a
consumer report on behalf of a seller, to evaluate the eligibility as a
prospective purchaser of a subject who has expressed an interest in
purchasing property from the seller.
C. Private detective agency. A private detective
agency may obtain a consumer report as agent for its client while
investigating a report subject that is a client's prospective employee,
or in connection with advising a client concerning a business
transaction with the report subject or in attempting to collect a debt
owed its client by the subject of the report. In these circumstances,
the detective agency is acting on behalf of its client.
D. Rental clearance agency. A rental clearance agency
that obtains consumer reports to assist owners of residential
properties in screening consumers as tenants, has a permissible purpose
to obtain the reports, if it uses them in applying the landlord's
criteria to approve or disapprove the subjects as tenant applicants.
Similarly, an apartment manager investigating applicants for apartment
rentals by a landlord may obtain consumer reports on these applicants.
E. Attorney. An attorney collecting a debt for a
creditor client, including a party suing on a debt or collecting on
behalf of a judgment creditor or lien creditor, has a permissible
purpose to obtain a consumer report on the debtor to the same extent as
the client.
1However, a creditor denying a consumer's application based on
a report from a "third party" must give the disclosure required
by section 615(b). Go Back to Text
2Of course a consumer reporting agency must furnish
notification required by section 611(d), upon the consumer's requests,
to prior recipients of reports containing disputed information that is
deleted or that is the subject of a dispute statement under
section 611(b). Go Back to Text
3Of Course agents and principals are bound by the Act. Go Back to Text
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