What type of consumer authorization for accessing credit is sufficient?
What type of consumer authentication to access credit is sufficient? It is spelled out in the Fair Credit Reporting Act See below.
Section 604(a)(2) allows CRAs to furnish consumer reports in accord “with the written instructions of the consumer to whom it relates.”
1. CONSUMER INSTRUCTION
A consumer’s written consent qualifies as an “instruction” that provides a permissible purpose under this section if it clearly authorizes the issuance of a consumer report on that consumer.109 For example, a consumer’s clear and specific written statement that “I authorize you to procure a consumer report on me” provides a permissible purpose under this section. However, the consumer’s signature on a form that includes the statement “I understand that where appropriate, credit bureau reports may be obtained” is not a sufficiently specific instruction from the consumer to authorize a CRA to provide a consumer report. This language is more in the nature of a notification that a consumer report might be procured, as opposed to a grant of permission to obtain the consumer report.110
2. WRITTEN AUTHORIZATION
A consumer may transmit “written” authorization electronically or by facsimile, in addition to regular mail or in person.111 The Electronic Signatures in Global and National Commerce Act (“ESIGN”) (15 U.S.C. §§7001 et seq., Public Law 106-229; June 30, 2000) provides that a consumer’s consent is not invalid merely because it is communicated in electronic form. A consumer’s “electronic signature” may be an acceptable method of providing “written instructions” under the FCRA. To be valid under the ESIGN Act, electronic authorization must be in a form that can be retained and retrieved in a perceivable form. Whether an e-mail, a mouse click “yes,” or other electronic means clearly conveys the consumer’s instructions depends on the specific facts.112
Section 604(a)(3)(A) allows a CRA to furnish consumer reports 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 “IN CONNECTION WITH A CREDIT TRANSACTION INVOLVING THE CONSUMER”
A. Credit application. An application by a consumer for credit gives rise to a permissible purpose to obtain a consumer report, regardless of form. When a consumer applies for credit, whether in person, by phone, by mail, or by electronic means, the creditor has a permissible purpose to obtain a consumer report on the applicant, and thus does not need specific authorization from the applicant.113
B. Real estate transactions. A seller of property has a permissible purpose under this subsection to obtain a consumer report on a prospective purchaser to whom the seller has been requested to extend credit.114 Similarly, a real estate agent acting on behalf of a seller with a permissible purpose may obtain the consumer report.115
INFORMATION ON AN APPLICANT’S SPOUSE
A. Where permissible purpose exists. A creditor has a permissible purpose to obtain a consumer report on an applicant’s spouse if that spouse will be permitted to use the account or will be contractually liable upon the account, or if the applicant is relying on the spouse’s income as a basis for repayment of the credit requested. In addition, a creditor may obtain a consumer report on an applicant’s spouse if (i) the state law doctrine of necessaries (which may make a consumer liable for certain debts of a spouse) applies to the transaction, (ii) the applicant resides in a community property state, (iii) the property upon which the applicant is relying as a basis for repayment of the credit requested is located in such a state, or (iv) the applicant is acting as the agent of the nonapplicant spouse.116
B. Where permissible purpose does not exist. A creditor does not have a permissible purpose to obtain a report on a nonapplicant spouse if the creditor receives information indicating that (i) the applicant is not acting as the agent of the nonapplicant spouse, (ii) the applicant is relying only on separate property to repay the credit extended, (iii) the state law doctrine of necessaries does not apply to the transaction, or (iv) the applicant does not reside in a community property state. Where Regulation B, issued under the ECOA (12 CFR 202), prohibits the creditor from requesting information on such a spouse, a permissible purpose for making a consumer report on a nonapplicant spouse can never exist under the FCRA. 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