UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Division of Financial Practices
Clarke W. Brinckerhoff
April 30, 1999
Mr. Kenneth J. Benner
American Council on Consumer Awareness
Post Office Box 17291
St. Paul, Minnesota 55117
Re: Sections 604(a)(3), 607(e), and 609(a)(3) of the Fair Credit
Dear Mr. Benner:
This responds to your letters concerning whether the Fair Credit Reporting Act
("FCRA") permits a party to obtain a credit report on a consumer under certain
circumstances. We list the three questions you posed verbatim, with our opinion following
1. How long after a consumer terminates an account does a previous credit card
issuer or lender have access to the consumer's credit file?
Section 604(a)(3)(A) of the FCRA provides a consumer reporting agency ("CRA,"
usually a credit bureau) with a permissible purpose to provide a report on a consumer to a
person who "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) Once an account is closed because the consumer has paid
the debt in full (and also, in the case of an open-end account such as a credit card
account, notified the creditor to close the account), it is our view that no permissible
purpose exists for a CRA to provide file information on a consumer to the creditor.
Because there no longer exists any account to "review" and the consumer is not
applying for credit, the FCRA provides no permissible purpose for the creditor to receive
a consumer report from a CRA. I enclose a recent staff opinion letter (Gowen,
04/29/99) that discusses this issue in more detail.
2. Is a permissible purpose for obtaining consumer credit reports for the sole
purpose of determining possible debt by a collection agency for the purpose of soliciting
collection business from creditors?
No. You report that a debt collector and a major credit bureau assert that the
collector has a "legitimate business need" to obtain a random selection of
credit histories for the purpose of determining overdue accounts and then contacting the
creditors on the account to solicit collection business. Section 604(a)(3)(F)(ii) does
provide a permissible purpose to a party that "has a legitimate business need for the
information to review an account to determine whether the consumer continues to meet the
terms of the account." In our view, this section authorizes a provider of an existing
account (e.g., a bank that has established a checking account with the consumer) to
obtain a report on the individual. In the scenario you described, the debt collector has
no "account" to "review" when it orders a credit report (in fact, no
"account" may exist for some consumers), but instead seeks to randomly examine
credit files in order to solicit collection business from creditors. The collector is not
authorized to obtain (nor a CRA to furnish) a consumer report for that purpose. The entire
focus of Section 604 is to protect the confidentiality of consumers' personal data in the
files of CRAs, by restricting access to parties who have a specific need for it.(2) If a third party such as a debt collector can review the
consumer's file to see if there exists any account that the creditor has reported as
delinquent, the section has totally failed its goal.
3. Is it permissible for a business doing credit with a consumer to obtain credit
information under false pretenses, i.e. hiring another firm to solicit credit file
information without disclosing the name of the party actually seeking the credit file
information? In these cases the consumer attempting to determine who has accessed his
credit file, as required, is provided with names of parties unknown to him.
No. Section 607(e)(1)(A) provides that the second firm may "procure a consumer
report for purposes of reselling the report (or any information in the report)" only
if it discloses "the identity of the end-user of the report (or information)" to
the credit bureau. In our view, the firm hired to procure credit file information would be
required to comply with this provision. Section 609(a)(3) requires the credit bureau, when
responding to a consumer attempting to determine who has accessed his file, to identify
the end-user -- not the intermediary -- as the recipient of the report. Thus, the amended
FCRA results in the consumer being provided with the parties who actually used his or her
credit file information.
The opinions set forth in this informal staff letter are not binding on the Commission.
Clarke W. Brinckerhoff
1. Section 604(a)(3)(F)(ii) provides a similar
"review" purpose in connection with accounts (such as checking accounts) that do
not involve credit.
2. "The bill also seeks to prevent an undue invasion of
the individual's right of privacy in the collection and dissemination of credit
information. ... (Section 604) requires that the information in a person's file be kept
confidential and used only for legitimate business transactions." S. Rept. 91-517,
91st Cong., 1st Sess. 1 (1969).