WASHINGTON–The Consumer Financial Protection Bureau has issued a legal interpretation it said is designed to ensure companies that use and share credit reports and background reports have a permissible purpose under the Fair Credit Reporting Act.
The CFPB said its 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.”
Permissible Purposes
Among other things, the CFPB said 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,” the Bureau stated. “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.”
The CFPB said the 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.
The Specifics
Specifically, the CFPB stated, 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
According to the Bureau, 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 said.
The advisory opinion can be found here.