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Difficulty: MediumFair Credit Reporting Act (FCRA)

An underwriter reviewing a high-net-worth life insurance application wants to gather detailed information about the applicant's character, general reputation, and lifestyle. To do so, the underwriter commissions a report that involves conducting personal interviews with the applicant's neighbors and business associates. Under the Fair Credit Reporting Act (FCRA), what specific action must the insurer take regarding this process?

  1. Mail a written disclosure to the applicant within three days of requesting the report, stating that an investigative consumer report may be made.Answer
  2. B
    Withhold notification about the interviews unless the policy is declined or issued with a premium surcharge based on the findings.
  3. C
    Provide a notice explaining the applicant's right to opt out of having their information shared with nonaffiliated third parties.
  4. D
    Inform the applicant that they must wait 30 days to review the completed report before any final underwriting decision can be made.

Answer

The insurer must mail a written disclosure to the applicant within three days of requesting the report, stating that an investigative consumer report may be made.
Under the Fair Credit Reporting Act (FCRA), an investigative consumer report goes beyond a standard credit check by gathering subjective information through personal interviews with an applicant's friends, neighbors, or associates. Because this process is highly intrusive, federal law strictly requires the insurer to inform the applicant in writing within three days of requesting the report that such an investigation may take place.

Step-by-Step Solution

1
Identify the type of report being requested by the underwriter.
The report involves personal interviews with neighbors and associates to determine character and lifestyle, which classifies it as an 'investigative consumer report' under the FCRA.
Different types of consumer reports have different procedural requirements under federal law.
2
Determine the FCRA requirements for this specific type of report.
The FCRA mandates that whoever orders an investigative consumer report must notify the consumer in writing within 3 days of the date the report was requested.
Investigative reports are highly intrusive, so the law grants consumers the right to be informed upfront that such an investigation is occurring.
3
Select the option that matches this regulatory requirement.
The correct action is mailing a written disclosure to the applicant within three days of the request.
This directly satisfies the primary notification mandate of the Fair Credit Reporting Act for investigative consumer reports.

Key Concept

Fair Credit Reporting Act (FCRA) - Investigative Consumer Reports
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Topics

Fair Credit Reporting Act (FCRA)

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