Your Credit Report: Legal Right #8 You Have the Right to Confidentiality
If you provide someone with written permission to obtain your credit file, the credit bureau may supply it to them. But your written permission is not always needed to get a copy of your report. The Fair Credit Reporting Act allows another person or business to access your credit file without your permission for:
1. Credit purposes: The user is considering extending credit to you, reviewing your credit account, or attempting to collect a debt. The credit being considered or reviewed must be for personal, family, or household purposes only.
For purposes of collecting a debt, the FTC’s interpretation of the law outlines a number of circumstances under which a person or business may obtain a credit report. Those include: a private detective attempting to collect a debt owed by the consumer, an attorney deciding whether to sue a consumer to collect a debt, a judgment creditor attempting to collect a judgment debt, a district attorney’s office or child-support enforcement agency trying to collect a delinquent child-support obligation, a tax collection agency that has a tax lien or judgment against the consumer, and someone attempting to collect on a bad check.
2. Employment purposes: The user is an employer or potential employer considering you for employment, promotion, reassignment, or retention. The law requires that employers must have your written permission to obtain your report. Before denying you a job, promotion, etc., because of your credit report, the employer must give you a copy of it with a statement describing your right to dispute wrong information.
3. Insurance purposes: The user is obtaining the report in connection with the underwriting of an insurance policy. Again, the insurance policy must be for personal, family, or household purposes. While a credit report may be obtained to decide whether or not to issue a policy, the amount and terms of coverage, the duration of the policy, the rates and fees charged, and whether or not to renew or cancel the policy, the credit report cannot be obtained to evaluate a claim—unless you give your permission for the creditor to get one to evaluate claims. According to one of the major credit reporting agencies, insurance companies will frequently make consumers sign “blanket consents” on their applications for insurance, so that the company can run a credit check if a claim is filed.
4. Business purposes: The user has a legitimate need for the information in connection with a business transaction that is initiated by the consumer.
5. Other purposes: The new law also specifies that a user can obtain a credit report if the intent is to “use the information, as a potential investor or servicer, or current investor, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation.” This would apply, for example, to an investor buying pools of mortgage obligations. When your mortgage is sold, you may continue to make the mortgage payment to the same servicer you have been using, but someone else is actually taking the “risk” if you don’t pay.
It also specifies that a credit report can be obtained by someone with a legitimate business purpose to review an account to “determine whether the consumer continues to meet the terms of an account.”
In addition, the FCRA lists several circumstances under which someone can obtain your credit report other than for insurance, employment, or credit purposes:
“In response to a court order”; or
“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.” For example, this provision allows government agencies to access reports in cases where consumers have applied for welfare benefits, a government security clearance, or even a license to practice law.
“In response to the written instructions of the consumer to whom it relates.” If you agree in writing to allow someone to access your credit report, they may do so. It is important to note, however, that the credit bureau is nor obligated to sell someone a report, even if you have asked them to do so. If, for instance, you are trying to rent a home from someone, or trying to buy their home on an owner-financed basis, the credit bureau may require you to order your own credit report and give it to them, rather than supply it directly to someone else.
Child Support: In the case of child support, a credit report can be obtained by an enforcement agency to determine whether the person who will be obligated to pay it can make the payments, or to set the level of the payments. However, that person must be given ten days’ prior notice via certified mail that the report will be reviewed, and the report must be kept confidential. A report can also be used by an enforcement agency to set an initial or modified child support award.
A friend of mine was at a party and met a car salesman. She didn’t give him any information about where she worked or her unlisted home phone number. She was very surprised, then, when he called her a couple of days later at work. “How did you get my number here?” she demanded. “Oh, I just used your name to pull up your credit report here at work, and it gave me the name of your employer,” he responded. He didn’t seem to think there was anything wrong with accessing her information like that, but in fact what he was doing was illegal. Just because someone can get credit reports doesn’t mean he or she is allowed to.
No Peeking: Based on interpretations of the Fair Credit Reporting Act, there are a number of reasons for which credit reports may not be obtained:
Credit reports cannot be used in most cases by attorneys for litigation purposes. They can, however, be used by attorneys trying to collect debts.
Ex-spouses’ credit reports may not be used by creditors or other third parties. If you are divorced, in the process of divorce, or legally separated, your spouse or ex-spouse may not obtain a report on you.
Credit reports may not be used to evaluate insurance claims (unless, of course, you’ve given your permission).
Credit reports cannot be used for general marketing purposes, or for marketing research. Prescreening is the exception.
Preapproved Cards: In prescreening, a card issuer or other lender supplies the credit bureau with a list of names of prospective customers. The list of names may be purchased from a list broker, or the issuer specifies a geographic area and relies on the credit reporting agency to develop the list of names. In either case, the card issuer will chose various criteria they want their customers to meet. The card issuer, for example, may ask the credit bureau for all the people on the list who have three to five credit cards, at least one bankcard, and no late payments or public record information. The credit bureau will then run through the credit files of the people on the list or in the chosen geographic area to determine which ones meet those criteria. The computer spits out a list of all the people who “pass” and they are all sent preapproved offers for credit cards.
If you decide to “opt out,” they must block your file within five business days and keep it blocked for two years. (You can sign a form supplied by the bureau to leave the block in effect until you say otherwise.)
If you don’t opt out, your file can be reviewed for preapproved offers. Don’t assume, however, that if you do accept one of these preapproved offers you will automatically be approved. While the new law says that a prescreened offer must be a “firm offer” of credit or insurance, it also has a sneaky provision that appears to make the definition of “firm” rather loose.
The new law says that a lender (or insurer) can set additional requirements ahead of time and may turn you down if you don’t meet those requirements. The problem is, of course, you won’t know exactly what those requirements are. In addition, if any of the criteria on which you were prescreened have changed by the time you accept the offer, you can be turned down (if, for example, you’ve defaulted on a credit card between the time your file was prescreened and when you responded). Finally, if collateral is required for the offer, you can be turned down if you don’t have it.
The credit grantor is required to keep its criteria on file for three years, presumably so you can challenge any deceptive offers. If you do respond to a preapproved offer and are turned down, talk to the credit grantor. If the answer is not satisfactory, I strongly suggest you write to the Federal Trade (Commission’s Credit Practices Division and complain.
Remember, inquiries for prescreened offers are “soft” inquiries and are not shown to anyone except the consumer, so they can’t hurt your credit. But if you respond to a preapproved offer, the creditor will likely pull a complete copy of your credit report, creating a “hard” inquiry, which can affect your credit. So if you do decide to respond to these offers, do so cautiously and try to avoid more than four or five hard inquiries in a six-month stretch.
Snooping in Your File: What happens if someone accesses your report illegally? The FCRA states that anyone who “knowingly and willfully obtains information on a consumer from a consumer-reporting agency under false pretenses shall be fined under Title 18 U.S.C., or imprisoned not more than two years, or both.” The penalty for an officer or employee of a credit bureau who “knowingly and willfully” provides information to someone who is not authorized to obtain it is similar.
The names of firms that have accessed your credit report will be found under the “inquiries” section of a credit report. While credit bureaus are clamping down on illegal access to credit reports, it does happen. Smaller credit bureaus and resellers have been known to sell credit reports without making sure the users had legal reasons for getting them.
New provisions in the FCRA require credit reporting agencies to make sure that all credit reports are supplied only for legal purposes. In particular, resellers cannot obtain credit reports unless they identify the end user of the report, as well as each permissible purpose for the report. Before reselling reports, the identification and certification of the end user must be reasonably established. Still, if you suspect that someone has gained illegal access to your file, report your suspicions to the credit bureau and the FTC.