Compliance: Pulling credit reports for cross-selling purposes
CUNA’s compliance staff has received questions about what the Fair Credit Reporting Act (FCRA) says about credit unions being allowed to pull credit reports for cross-selling purposes. According to compliance staff, credit unions are not allowed to do so, with one limited exception.
Credit reports only can be obtained if the user has a “permissible purpose,” as defined the FCRA, and a credit report cannot be obtained for a permissible purpose (in connection with a loan application) and then used for an impermissible one (cross-selling additional products and services).
Section 604(a) of the FCRA allows a credit bureau to release a consumer report to a credit union when authorized in writing by the consumer to whom the report relates, or when the credit bureau has reason to believe that the credit union intends to use the information:
In connection with a credit transaction involving the consumer that involves the extension of credit to the consumer, or a review or collection of the consumer’s account;
For employment purposes (requires applicant/employee’s written authorization);
In connection with insurance underwriting involving the consumer; or
- When the credit union otherwise has a legitimate business need for the information in connection with a business transaction that is initiated by the consumer or to review an account to determine whether the consumer continues to meet the terms of the account.
In general, marketing is not a permissible purpose. The only exception is making pre-screened credit solicitations in accordance with this section of the FCRA.
A member’s written consent “qualifies as an “instruction” that provides a permissible purpose if it clearly authorizes the issuance of a consumer report on that consumer,”according to a Federal Trade Commission staff report on the FCRA.