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Difficulty: EasyFair Credit Reporting Act (FCRA)

An underwriter decides to charge a higher premium for a life insurance policy based on information found in a consumer credit report. According to the Fair Credit Reporting Act (FCRA), what action is the insurer required to take regarding this adverse decision?

  1. Notify the applicant of the adverse action and supply the name and address of the consumer reporting agency.Answer
  2. B
    Immediately provide the applicant with a revised policy and a free, corrected copy of the credit report.
  3. C
    Obtain written authorization from the Department of Insurance before finalizing the increased premium.
  4. D
    Refund the initial premium and wait 30 days before taking any adverse underwriting action.

Answer

The insurer must notify the applicant of the adverse action and supply the name and address of the consumer reporting agency.
Under the Fair Credit Reporting Act, if an insurer takes any adverse action (like denying coverage or charging a higher premium) based on a consumer report, the insurer is legally required to notify the consumer. This notification must include the name and address of the reporting agency so the consumer can request a copy of the report and dispute any inaccurate information directly with the agency.

Step-by-Step Solution

1
Identify the core regulatory framework governing the scenario.
The scenario involves a consumer credit report being used to make an adverse underwriting decision, which falls under the Fair Credit Reporting Act (FCRA).
Determining the applicable law dictates the procedural requirements the insurer must follow.
2
Recall the specific FCRA mandates for adverse actions.
When an adverse action (such as denying coverage or increasing a premium) is taken based on a consumer report, the consumer must be notified.
This guarantees the consumer's right to know why the action was taken.
3
Determine the necessary components of the notification.
The notification must include the name and address of the consumer reporting agency that supplied the information.
This allows the consumer to contact the agency, obtain a copy of their report, and dispute any inaccuracies.

Key Concept

Fair Credit Reporting Act (FCRA) Adverse Action Notice
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Topics

Fair Credit Reporting Act (FCRA)

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