WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) issued a legal interpretation to ensure that companies that use and share credit reports and background reports have a permissible purpose under the Fair Credit Reporting Act. The CFPB’s new advisory opinion makes clear that credit reporting companies and users of credit reports have specific obligations to protect the public’s data privacy. The advisory also reminds covered entities of potential criminal liability for certain misconduct.
“Americans are now subject to round-the-clock surveillance by large commercial firms seeking to monetize their personal data,” said CFPB Director Rohit Chopra. “While Congress and regulators must do more to protect our privacy, the CFPB will be taking steps to use the Fair Credit Reporting Act to combat misuse and abuse of personal data on background screening and credit reports.”
Over the last century, Congress enacted a number of sector-specific privacy laws to protect personal data, such as educational and health data. One law that includes privacy protections across multiple sectors is the Fair Credit Reporting Act. Congress enacted the Fair Credit Reporting Act in 1970 to ensure companies “exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” The Fair Credit Reporting Act regulates companies that assemble dossiers on individual consumers, including credit reporting companies, tenant screeners, and other data brokers.
Among other things, the Fair Credit Reporting Act ensures fair and accurate reporting, and it requires users who buy these dossiers to have a legally permissible purpose. This ensures that companies cannot check an individual’s personal information, including their credit history, without a bona fide reason. Some common permissible purposes include using consumer reports for credit, insurance, housing, or employment decisions. For example, a bank may request a credit report in order to determine the terms on which it will offer someone a line of credit.
Today’s advisory opinion will help to hold responsible any company, or user of credit reports, that violates the permissible purpose provisions of the Fair Credit Reporting Act. Specifically, the advisory opinion makes clear:
- Insufficient matching procedures can result in credit reporting companies providing reports to entities without a permissible purpose, which would violate consumers’ privacy rights: For example, when a credit reporting company uses name-only matching procedures, the items of information appearing on a credit report may not all correspond to a single individual. That means the user of a credit report could be provided a report about a person for whom the user does not have a permissible purpose.
- It is unlawful to provide credit reports of multiple people as “possible matches”: Credit reporting companies may not provide reports on multiple individuals where the requester only has a permissible purpose to obtain a report on one individual. They must have adequate procedures to find the right person, or else the result may be that they provide a report on at least one wrong person.
- Disclaimers about insufficient matching procedures do not cure permissible purpose violations: Disclaimers will not cure a failure to take reasonable steps to ensure the information contained in a credit report is only about the individual for whom the user has a permissible purpose.
- Users of credit reports must ensure that they do not violate a person’s privacy by obtaining a credit report when they lack a permissible purpose for doing so: The Fair Credit Reporting Act strictly prohibits anyone from using or obtaining credit reports without a permissible purpose.
Criminal Liability for Violating the Fair Credit Reporting Act’s Privacy Protections
The advisory opinion outlines some of the criminal liability provisions in the Fair Credit Reporting Act. Covered entities can face criminal liability for obtaining a background report on an individual under false pretenses or by providing a background report to an unauthorized individual. For example, Section 620 of the Fair Credit Reporting Act imposes criminal liability on any officer or employee of a consumer reporting agency who knowingly and willfully provides information concerning an individual from the agency’s files to an unauthorized person. Violators can face criminal penalties and imprisonment.
The CFPB will continue to take steps to ensure credit reporting companies and other relevant entities adhere to the Fair Credit Reporting Act and other consumer financial protection laws. In addition to some of the steps already mentioned, the CFPB has:
- Highlighted the experiences of military families with medical billing, credit reporting, and debt collection. The CFPB’s report showed that nationwide credit reporting companies are failing to correct mistakes and inaccuracies, fueled by allegedly unpaid medical bills, on servicemembers’ credit reports.
- Spotlighted medical billing challenges faced by millions of American consumers. The CFPB’s report found that many consumers reported their credit reports being used as weapons to force payments of allegedly unpaid medical bills and that the bills are surreptitiously and unlawfully placed on their credit reports.
- Identified credit reporting companies the public can hold accountable. The CFPB released its annual list of credit reporting companies. Using the list, people can exercise their right to see what personal information these companies have, dispute inaccuracies, and take action if a firm is violating the Fair Credit Reporting Act.
- Issued a bulletin to prevent unlawful medical debt collection and credit reporting. The bulletin states that the accuracy and dispute obligations imposed by the Fair Credit Reporting Act apply with respect to debts stemming from charges that exceed the amount permitted by the No Surprises Act.
- Took action to stop the false identification of consumers by background screeners. The advisory opinion affirmed that credit reporting companies and tenant and employment screening companies are violating the Fair Credit Reporting Act if they engage in shoddy name-only matching procedures.