Our bank is very concerned about the FTC Staff Opinion which says that unless you have express authorization you can't pull a credit report on an individual who is a principal, owner, or officer of a business which is applying for a loan. It is my understanding that this opinion is grounded upon an amendment to the language of FCRA which went into effect in 1997. That means that even if we change our practices immediately, we have three years' exposure for not getting these authorizations since 1997. I'd like to know what other people are doing about this.

The opinion wasn't written then, many still disagree, but regardless there is no corrective actions that could be placed now, for past "violations".

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

The interpretation issued by the FTC is based on the changes to the FCRA so that compliance and enforcement can go back only to the effective date of the FCRA amendments. But here's the dilemma: an interpretation of law basically says that this is what the law means and has always meant. So, in legal theory, banks have lots of violations in their files. At Compliance Action, we recommend implementing a procedure of obtaining permission of all current business loan borrowers and guarantors so that your files become compliant. These permissions then should roll with renewals and refinances.

What effect will new regulations mandated by GLB coming from the banking agencies have on all of this? Will we have an opportunity to provide industry comment to the effect that this interpretation contains absolutely no common sense?

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Opinions expressed are my own, and do not necessarily reflect those of my employer.

FCRA comments are due by 12-04-00 on the current proposal. That may be the best avenue to comment on the whole enchilada.

That doesn't necessarily address the FTC opinion letters, but it may be the best way to voice your opinion.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Most of the standard financial statements provided by loan document companies (such as Bankers Systems) provide similar language on the statement "the lender may verify in any manner" any information on the financial statement about the borrower. Wouldn't this type of language be sufficient authorization for the bank to pull a credit bureau report, or do other means of verification?

That likely would cover you, but how often might you accept the CPA's format and never get your form? That is part of the problem.

I was meeting with several regulators today and asked about this subject. At this point there is no certainty that they will automatically accept the FTC's informal opinions.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.