Obtaining a Credit Report for New Accounts

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Question:

At the recent Florida Deposit Account Administration seminar, we were told that we must get written permission from a business before obtaining a consumer report from ChexSystem's etc. The question is, must we get written permission to run the report on the business signers, or on the business itself or both?

Answer:

The issue here is whether you have a "permissible purpose" under the Fair Credit Reporting Act for pulling a report on a consumer; i.e. a person. With deposit accounts, the two things that would generally meet the test are a consumer's application (need not be in writing) or a consumer's written permission.

If you are opening an account for an individual (include a sole proprietor in that group) you can pull a consumer report based on the application. If you are opening an account for an entity; e.g. LLC, partnership, corporation, association etc. you do not have an application from a consumer. Therefore, you cannot pull consumer reports on the signers, owners or not, unless you have their written permission.

The Fair Credit Reporting Act does not apply to an entity (partnership, LLC, etc); theirs is not a "consumer" report; you do not need an application or written permission to obtain information on their creditworthiness.

First published on BankersOnline.com 4/01/02