Pub. 8 2018-2019 Issue 5

10 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S FEATURE ARTICLE BY VICTORIA E. STEPHEN Commercial Loans and the FCRA T he Fair Credit Reporting Act, or FCRA for short, basically regulates the furnishing and collecting of credit information and imposes certain disclosure requirements in connection with accessing credit reports. The FCRA itself is a statute and only a few parts of the statute have implementing regulations, so it can be particularly tricky to interpret at times. One of the most common questions we get on the Compliance Alliance Hotline is whether the FCRA applies to commercial loans. Unfor- tunately, there’s not a straightforward answer to this like there is for regulations X or Z. Although the FCRA is generally limited to consumer pur- pose transactions, it also applies in some cases to commercial purpose transactions involving a consumer. Youmight be asking, if there is a “consumer” how can this possibly be a commercial loan? Well, the answer is that the statute defines “consumer” very simply—just as an “individual”: § 603. Definitions; rules of construction [15 U.S.C. § 1681a] (c) The term “consumer” means an indi- vidual. As you can see, there’s no requirement that the individual must be obtaining a product or service specifically for a consumer purpose. Likewise, the term “consumer report” includes other purposes besides just personal, family, or household purposes: (d) Consumer Report (1) In general. The term “consumer report” means any written, oral, or other communication…used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under section 604 [§ 1681b]. Does this mean that the bank has to have a permissible purpose before pulling a credit report on an individual guarantor for a loan to a business entity? The answer to this is conclusively ‘yes’—there always has to be some permissible purpose before pulling any con- sumer report on any individual. The question is whether the application itself is enough of a permissible purpose, since the individual is just a guarantor. For this, we turn to the Fed- eral Trade Commission’s (FTC) “Tatelbaum Opinion” which ultimately concludes that if an individual has any kind of personal liability on a business loan, including just a guarantee, there would be permissible purpose under the FCRA by means of the application for credit. What about during the term of the loan though? Many banks regularly pull consumer reports on individuals throughout the term of the loan, and there’s a question as to whether The FCRA itself is a statute and only a few parts of the statute have implementing regulations, so it can be particularly tricky to interpret at times.