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Thursday, June 16, 2016

Exclusions from Consumer Reports

QUESTION
We believe we have a good idea about what information should be included in a consumer report. However, we would like to know what information must a consumer reporting agency exclude from consumer reports?

ANSWER
The Fair Credit Reporting Act (FCRA) actually limits the length of time that various adverse items may appear in a consumer report. There are exceptions certainly important for mortgage lenders, but consumer reporting agencies (“CRAs”) may not include in a consumer report any of the following items or information:

  • Cases under the Federal Bankruptcy Code (Title 11 of the US Code) or under the Bankruptcy Act when the date on which entry of the order for relief or the date of adjudication occurred precedes the report by more than ten years;
  • Civil suits, civil judgments, and records of arrest that, from the date of entry, precede the report by more than seven years; however, if the governing statute of limitations expires in less than seven years, the length of the statute of limitations applies;
  • Paid tax liens, when the date of payment precedes the report by more than seven years;
  • Accounts that were placed for collection or charged to profit and loss more than seven years before the report; and
  • Any other adverse item of information, other than records of convictions of crimes, that precedes the report by more than seven years. [15 USC §§ 1681c(a)(1-5), 1681c(b)] 

It is important here to note that the foregoing restrictions do not apply in the case of a consumer report to be used in connection with a credit transaction involving or expected to involve a principal amount of $150,000 or more. [15 USC § 1681c(b)]

Other exemptions involve the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more, or the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal, $75,000 or more.

Finally, CRAs may also not prepare any consumer report that contains the name, address, and telephone number of any medical information furnisher that has notified the agency of its status, unless the name, address, and telephone number are restricted or reported in a manner that does not identify or provide information sufficient to infer the specific provider or nature of such services, products, or devices to anyone other than the consumer the report is being provided to an insurance company for a purpose relating to engaging in the business of insurance other than property and casualty insurance. [15 USC § 1681c(a)(6)]

Jonathan Foxx
President & Managing Director
Lenders Compliance Group