UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
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Division of Financial Practices
Bureau
of Consumer Protection
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Ronald G. Isaac
Attorney
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November 10, 1998
Mr. Ronald L. Sheffield
Special Assistant Commissioner, Consumer Affairs
Arkansas Insurance Department
1200 West Third Street
Little Rock, AR 72201-1904
Re: Section 615(a) of the Fair Credit Reporting
Act
Dear Mr. Sheffield:
This will respond to your letter inquiring about the applicability
of the Fair Credit Reporting Act ("FCRA") to an insurance
company's denial of insurance to an applicant based on information
contained in a consumer report. You ask two specific questions:
(1) does the FCRA require an insurance company to disclose to
an applicant what specific information in the credit report was
relied on in denying insurance to that applicant; (2) if not,
would the insurance company violate the FCRA by voluntarily disclosing
such information to the applicant. The answer is "no"
to both questions.
Section 615(a) of the FCRA sets forth the information that must
be disclosed to a consumer by any person taking adverse action(1)
with respect to that consumer based in whole or in part on any
information contained in a consumer report. That section requires
disclosure of only the information specified, namely:
- 1. Notice (either oral, written, or electronic) of the adverse
action;
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- 2. The name, address, and telephone number of the consumer
reporting agency ("CRA") from whom the report was
obtained. If the CRA compiles and maintains files on consumers
on a nationwide basis, the person must disclose a toll-free
number for the CRA, which the CRA is required to establish;
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- 3. A statement that the CRA did not make the decision to take
the adverse action and is unable to provide the specific reasons
why the action was taken; and
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- 4. Notice of the consumer's right to obtain a free copy of
his or her consumer report from the CRA and to dispute the accuracy
or completeness of any information in a consumer report furnished
by the CRA.
The FCRA does not require insurers to disclose specific reason(s)
for taking adverse action, or to identify information from a consumer
report that contributed to the action. Instead, it provides the
consumer with the right to obtain a copy of all the information
in his or her CRA files. From the required notice (item #4, above),
consumers who suffer adverse action will know of their right to
obtain that data without charge. However, should an insurer or
other person wish to tell a consumer the reason(s) for the adverse
action, nothing in the FCRA precludes that person from doing so.(2)
This is an informal staff opinion and is not binding on the Commission.
Sincerely,
Ronald G. Isaac
1. With respect to the underwriting
of insurance, Section 603(k)(1)(B)(i) of the FCRA defines "adverse
action" to mean "a denial or cancellation of, an increase
in any charge for, or a reduction or other adverse or unfavorable
change in the terms of coverage or amount of, any insurance, existing
or applied for, in connection with the underwriting of insurance."
2. Section 607(c) forbids CRAs from
prohibiting insurers or other consumer report users from providing
consumers against whom they have taken adverse action with copies
of their reports.
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