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| TO: |
CHIEF EXECUTIVE OFFICER AND COMPLIANCE OFFICER |
| SUBJECT: |
The Consumer Credit Reporting Reform Act of 1996
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The Consumer Credit Reporting Reform Act of 1996 (Reform Act),
signed into law September 30, 1996, substantially amended the
Fair Credit Reporting Act. The changes incorporated by the
Reform Act will have a significant effect on banks that use
information from and furnish information to consumer reporting
agencies.
Attached is a copy of the revised text of the Fair Credit
Reporting Act as amended (FCRA). Since the FCRA does not have
implementing regulations, bank management, with its counsel,
should review the text carefully to determine the full impact
that the Reform Act may have on the bank's operations. One major
change contained in the Reform Act permits the Board of Governors
of the Federal Reserve System (Federal Reserve Board) to issue
interpretations on how the FCRA may apply to banks, savings
associations, credit unions and their holding companies.
Previously, the Federal Trade Commission was responsible for
issuing all interpretations.
We encourage bank management to review the attached text in
detail, however, we wish to draw attention to some specific areas
in which substantive changes have been made by the Reform Act.
These include:
The ability of affiliates to share information from consumer
reports between affiliates if certain compliance procedures
are established and followed. . 603(d)(2)(A) and
. 615(b)(2)
The ability of a bank to disclose to a consumer the contents
of the consumer report when adverse action is taken because
of information in the consumer report. . 607(c)
Expanded requirements and disclosures when taking adverse
action on the basis of information contained in consumer
reports. . 615
Substantial new requirements for persons who furnish
information to consumer reporting agencies. These were not
previously covered. . 623
Clarification of rules involving pre-screening of potential
clients from consumer reporting agency files. . 603(l) and
(m), . 604(c), . 615(d)
New civil and criminal liability provisions for violations
of the FCRA by any person.
. 616, . 617, and . 619
One new requirement, wholly unrelated to the credit granting
process, that will substantially affect the human resource
activities of financial institutions involves the use of credit
reports for employment purposes. New requirements and
disclosures are set out in Section 604(b) of the FCRA whenever a
consumer report is used for employment purposes. Section 615
continues the requirement for notification in the event adverse
action is taken in employment situations where the action is
based on information from a consumer reporting agency.
The amendments to the FCRA become effective on September 30,
1997. Since the Reform Act prohibits any agency from adopting
regulations to implement any provisions of the FCRA, further
guidance will be provided through interpretations from either the
Federal Reserve Board or the Federal Trade Commission. It is our
understanding that the two agencies are discussing a number of
issues regarding the FCRA, however, there is no timetable for the
issuance of official interpretations or guidance.
Questions about the FCRA and Reform Act may be directed to
either:
Ken Baebel, Sr. Review Examiner, Division of Compliance and Consumer Affairs,
(202) 942-3086, (E-mail; JBaebel@FDIC.gov), or
Ann Johnson, Counsel, Regulations and Legislation Section, Legal Division,
(202) 898-3573, (E-mail; AAJohnson@FDIC.gov).
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Carmen J. Sullivan |
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Director |
Attachment: The Fair Credit Reporting Act can be accessed at:
Distribution: FDIC-Supervised Banks (Commercial and Savings)
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