CFPB Issues Guidance on FCRA’s Permissible Purpose Requirements

The Consumer Financial Protection Bureau yesterday issued another advisory opinion yesterday with respect to the Fair Credit Reporting Act, this time tackling the permissible purpose requirement of the statute, while also issuing a reminder that there are circumstances under which violators of the FCRA could face criminal prosecution.

A copy of the advisory opinion can be accessed by clicking here.

Under the FCRA, entities that obtain copies of a consumer’s credit report must have a permissible purpose for doing so — credit reports can’t be obtained for just any reason. Obtaining an individual’s credit report to determine whether the individual should be extended credit, to buy a house or car, for example, constitutes a permissible purpose.

“The FCRA’s permissible purpose provisions are thus central to the statute’s protection of consumer privacy,” the CFPB wrote in the opinion. “Consumers suffer harm when consumer reporting agencies provide consumer reports to persons who are not authorized to receive the information or when recipients of consumer reports obtain or use such reports for purposes other than permissible purposes. These harms include the invasion of consumers’ privacy, as well as reputational, emotional, physical, and economic harms.”

The advisory opinion discusses situations where a credit reporting agency might match only the name of an individual or might supply reports on multiple individuals as possible matches. In those cases, the information on individuals other than the one whose information is being requested does not meet the permissible purpose threshold, according to the opinion. And disclaimers are not enough to cure any permissible purpose violation, the CFPB said.

With respect to violations, there are situations under which covered entities could face criminal prosecution for violating the FCRA, such as if a credit reporting agency knowingly or willfully provides information about a consumer to an unauthorized person.

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