The Federal Credit Reporting Act (FCRA) is an important United States federal legislative act that promotes fairness and privacy for consumers when they are applying for a loan or line of credit. Here are a few quick Dos and Don’ts to stick to when you are working with a customer who may be interested in financing a purchase:
What to do and not to do when a customer is interested in applying for credit:
- Have the customer complete an application for credit
- Obtain written authorization from the customer for the company to access the customer’s consumer report
- Retain all records related to the customer’s credit application for a minimum of five years
- Provide a certification to the consumer reporting agency that the requested consumer report will be used for a specific permissible purpose and that the company has a legitimate business need for the information.
- Access the customer’s consumer report unless the customer has completed an application for credit or otherwise provided written instructions approved by the company authorizing the company to access the customer’s consumer report.
- Extend credit to a customer if the report contains an initial fraud alert or an active duty alert, unless following the company’s procedures for ensuring the identity of the customer seeking credit
- Extend credit to a customer if the report contains an extended fraud alert, unless we verify the customer’s identity by contacting the customer in person or by using the telephone number or other method specified by the customer in the alert. This may require the customer to return home to accept a call from the company.
The FCRA is one of a multitude of regulations dealers are on the hook for. But staying on top of them all shouldn’t make you panic.
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