Ever since the revision to the Fair Credit Reporting Act (FCRA) in
1996 there has been confusion as to its relevance to business credit
grantors who use consumer credit reports for the extension of business
credit primarily when dealing with proprietorships, partnerships and
The most frequently asked questions have been:
Can a business credit grantor obtain a consumer credit report on an
individual, for business purposes, without getting written permission
from the specific individual?
Does the signed personal guarantee qualify as the authorization to
obtain a consumer credit report on the individual who signed the
Many credit grantors and trade organizations, including NACM, have
written to the FTC asking for clarification. NACM went so far as to
provide argument as to why they believed the changes to the FCRA did
not apply to business credit grantors.
On July 26, 2000, the FTC issued a five page response which said
business credit grantors are no different then any other credit
grantor and the changes to the FCRA applies to everyone who obtains a
consumer credit report regardless of the intended reason.
As it stands now it is no longer permissible to obtain a consumer
credit report for any purpose unless you have the individuals specific
permission to do so in writing. Any broad language on the credit
application does not cover the creditor in these circumstances,
according to the FTC.
It is important to remember that unlike a business credit report,
every time you make inquiry on a consumer credit report you are
leaving a record that an inquiry was made. The end result could be
that an applicant who is denied credit files a complaint alleging that
his/her personal credit report was obtained without their permission.
Without the written authorization signed by the individual we have no
defense under the existing law.
For further information, the July 26 opinion written by Dennis
Medine of the FTC can be found at
It is suggested that you view this with your attorney to determine
how to proceed to insure that your firm is in compliance with the FCRA.
THE INFORMATION PROVIDED IN THIS ARTICLE IS NOT LEGAL ADVICE BUT
PROVIDED MERELY AS INFORMATION. FOR LEGAL ADVICE SEEK THE COUNSEL OF
YOUR ATTORNEY OR LAW DEPARTMENT.
I wish you well.