Examkin

Question

Difficulty: HardFair Credit Reporting Act (FCRA)

An insurer is underwriting a high-value life insurance policy and determines that an investigative consumer report is necessary to properly evaluate the applicant's moral hazard. Ultimately, the underwriter declines the application based entirely on the report's findings. According to the procedural requirements of the Fair Credit Reporting Act (FCRA), arrange the following compliance steps in the correct chronological order from first to last.

  1. 1The insurer formally orders an investigative consumer report from a specialized third-party consumer reporting agency.
  2. 2The insurer mails a preliminary written notification to the applicant, disclosing that an investigative report has been requested.
  3. 3The applicant submits a written request to the insurer seeking specific details regarding the nature and scope of the investigation.
  4. 4The insurer fulfills its statutory obligation by providing the applicant with a complete and accurate disclosure of the investigation's scope.
  5. 5Following the underwriter's decision to decline coverage based on the report, the insurer issues a comprehensive adverse action notice.

Answer

The correct sequence is: (1) ordering the report, (2) sending the initial 3-day notification, (3) the applicant requesting further details, (4) the insurer providing the 5-day detailed disclosure, and (5) issuing the adverse action notice after declining coverage.
The sequence precisely follows the FCRA mandates for investigative consumer reports: first, the report is ordered; second, within 3 days, the consumer is notified; third, the consumer may request further details; fourth, within 5 days of that request, the detailed disclosure must be provided; and finally, if the completed report leads to a denial, an adverse action notice must be issued.

Step-by-Step Solution

1
Identify the initiating event.
The insurer ordering the investigative consumer report is the trigger for all subsequent FCRA compliance timelines.
Without requesting the report, no FCRA obligations apply.
2
Determine the first statutory deadline.
The insurer must send a preliminary written notification to the applicant.
The FCRA states that a person may not procure an investigative consumer report unless it is clearly and accurately disclosed to the consumer that an investigative consumer report may be made. This disclosure must be made in writing no later than 3 days after the date on which the report was first requested.
3
Identify the consumer's response right.
The applicant exercises their right to submit a written request for details regarding the nature and scope of the investigation.
The initial 3-day notice must inform the consumer of their right to request additional disclosures regarding the nature and scope of the investigation.
4
Determine the second statutory deadline.
The insurer must provide a complete and accurate disclosure of the investigation's scope.
Upon receiving the consumer's request, the FCRA requires the insurer to provide this detailed disclosure no later than 5 days after the request was received (or the report was first requested, whichever is later).
5
Identify the final outcome based on the scenario.
The insurer issues an adverse action notice.
After the report is completed, delivered, and reviewed, the underwriter decides to decline the application based on its contents. The FCRA requires any person taking adverse action based in whole or in part on information in a consumer report to provide the consumer with an adverse action notice.

Key Concept

Investigative Consumer Report Timelines and Adverse Action under the FCRA
Estimated Time:1m 30s
Rate this question

Topics

Fair Credit Reporting Act (FCRA)

More questions from this topic