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Difficulty: MediumFair Credit Reporting Act (FCRA)

A mutual insurance company evaluates a new application for a homeowners policy. Based on negative financial data obtained from a standard third-party credit check, the company decides to decline the application. Which procedural step must the company take to comply with the Fair Credit Reporting Act (FCRA)?

  1. Supply the applicant with the name, address, and telephone number of the agency that provided the credit informationAnswer
  2. B
    Mail the applicant a complete copy of the credit report that was used to make the underwriting decision
  3. C
    Notify the applicant that they have three business days to submit an alternative credit report for reconsideration
  4. D
    Request that the credit reporting agency temporarily suppress the negative data until the applicant can formally dispute it

Answer

Supply the applicant with the name, address, and telephone number of the agency that provided the credit information
When an insurer takes an adverse action (such as declining coverage or charging a higher premium) based on a consumer report, the Fair Credit Reporting Act requires the insurer to provide the applicant with the name, address, and phone number of the consumer reporting agency. This allows the consumer to contact the agency, obtain a free copy of their report, and dispute any inaccurate information directly with the source.

Step-by-Step Solution

1
Identify the cause of the adverse underwriting decision.
The application was declined strictly due to information found in a consumer credit report.
Recognizing the source of the decline dictates which federal regulations apply to the notification process.
2
Apply the Fair Credit Reporting Act (FCRA) requirements for adverse actions.
The insurer must notify the consumer of the decision and provide the contact information of the reporting agency.
FCRA mandates that consumers be informed of who provided the negative data so they can exercise their right to review and dispute the information directly with the agency.

Key Concept

FCRA Adverse Action Notification Requirements
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Topics

Fair Credit Reporting Act (FCRA)

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