Question & Answer

Question: As part of our routine underwriting procedure for mortgage loans, we obtain reports from an information reporting service on the status of the title that will secure the property. The report identifies any liens on the property such as mechanics liens or tax liens. Is this a "consumer report" and do we have to give an FCRA notice if we use information in this report to take adverse action?

Answer: This is indeed a consumer report. The report reveals information about the consumer and the status of the consumer's credit. When a creditor obtains and uses this type of report, it is subject to all of the pertinent rules in the Fair Credit Reporting Act. This means that you must have a legitimate business purpose for obtaining the loan (the credit application). It also means that if information in the report was used to take adverse action, you must provide the ?615(a) notice to the customer. This notice explains that information from a credit reporting agency was used to take adverse action and includes the name, address, and phone number of the agency.

Remember that under the FCRA, adverse action includes an accepted counteroffer. Thus, if the information was used to reduce the amount of loan the bank is willing to offer and the applicant accepts this lower amount, you still owe the applicant an FCRA notice. This is different from the Equal Credit Opportunity rule which states that if the applicant accepts the counter-offer, you do not have to give the notice required by Regulation B.

Copyright © 1995 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 1, 11/95