FCRA Permissible Purpose & End-User Requirements 2 — Questions and Answers
Question 1: A consumer reporting agency may lawfully furnish a consumer report only to a user it has reason to believe:
- Works in the financial services industry
- Has a permissible purpose as enumerated in Section 604 (Correct answer)
- Is a licensed business entity in good standing
- Has obtained the consumer's verbal consent
Correct answer: Has a permissible purpose as enumerated in Section 604
CRAs are obligated under Section 607(a) to maintain reasonable procedures to limit the furnishing of reports to users with a Section 604 permissible purpose.
Question 2: Which of the following is NOT a permissible purpose under FCRA Section 604?
- Collection of a consumer debt
- Insurance underwriting initiated by the consumer
- A neighbor's personal curiosity about someone's finances (Correct answer)
- Access pursuant to a valid court order
Correct answer: A neighbor's personal curiosity about someone's finances
Personal curiosity has no legitimate business nexus and is not listed as a permissible purpose anywhere in Section 604.
Question 3: When a creditor uses a consumer report to review an existing account, this account review purpose falls under which Section 604 provision?
- Section 604(a)(3)(A) — credit transactions (Correct answer)
- Section 604(a)(3)(B) — employment
- Section 604(a)(3)(C) — insurance underwriting
- Section 604(a)(3)(F) — legitimate business need
Correct answer: Section 604(a)(3)(A) — credit transactions
Section 604(a)(3)(A) covers credit transactions, including both the extension of new credit and the review or collection of existing credit accounts.
Question 4: When an end user shares a consumer report with an affiliate, the FCRA requires that:
- No restrictions apply because affiliates share a permissible purpose by default
- The consumer must be notified within 30 days of the sharing
- The affiliate must independently have a permissible purpose for receiving the report (Correct answer)
- A new consumer report must be obtained specifically for the affiliate
Correct answer: The affiliate must independently have a permissible purpose for receiving the report
Permissible purpose is user-specific; each entity that receives or uses a consumer report must independently have a permissible purpose under Section 604.
Question 5: Which type of consumer report triggers additional disclosure and notice requirements under FCRA Section 606 due to the manner in which information is gathered?
- Standard tri-merge credit report
- Investigative consumer report (Correct answer)
- Employment background screening report
- Tenant screening report
Correct answer: Investigative consumer report
Section 606 imposes heightened disclosure obligations for investigative consumer reports, which are compiled through personal interviews about the consumer's character, general reputation, and personal characteristics.
Question 6: A creditor that takes adverse action based wholly or partly on information in a consumer report is obligated under the FCRA to:
- Retain the consumer report for a minimum of five years
- Provide the consumer with required adverse action notices under Section 615 (Correct answer)
- Report the adverse action to the FTC within 30 days
- Destroy the consumer report immediately after the decision
Correct answer: Provide the consumer with required adverse action notices under Section 615
Section 615(a) requires any person who takes adverse action based on a consumer report to provide the consumer with specific disclosures including the CRA's name and the consumer's right to obtain a free report.
Question 7: Under the FCRA, a child support enforcement agency seeking a consumer report for enforcement purposes obtains authority from:
- General government administrative authority
- Broad law enforcement provisions applicable to all agencies
- Specific child support enforcement provisions within Section 604 (Correct answer)
- A court order is always required
Correct answer: Specific child support enforcement provisions within Section 604
The FCRA includes specific provisions authorizing child support enforcement agencies to obtain consumer reports for enforcement purposes, distinct from general government access provisions.
FCRA Permissible Purpose & End-User Requirements 2
A consumer reporting agency may lawfully furnish a consumer report only to a user it has reason to believe: