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Inactive Financial Institution Letters 

Fair Credit Reporting Act

June 2, 1997


SUBJECT: The Consumer Credit Reporting Reform Act of 1996

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;, or

    Ann Johnson, Counsel, Regulations and Legislation Section, Legal Division, (202) 898-3573, (E-mail;

Carmen J. Sullivan

Attachment: The Fair Credit Reporting Act can be accessed at:

Distribution: FDIC-Supervised Banks (Commercial and Savings)

Last Updated 07/16/1999

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