Pub. 13 2018-2019 Issue 5

WWW.NEBANKERS.ORG 20 (B) employment purposes; or (C) any other purpose authorized under section 604 [§ 1681b]. Does this mean that the bank has to have a permissible pur- pose before pulling a credit report on an individual guarantor for a loan to a business entity? The answer to this is conclusively ‘yes’—there always has to be some permissible purpose before pulling any consumer report on any individual. The question is whether the application itself is enough of a permissible pur- pose, since the individual is just a guarantor. For this, we turn to the Federal Trade Commission’s (FTC) “Tatelbaum Opinion” which ultimately concludes that if an individual has any kind of personal liability on a business loan, including just a guarantee, there would be permissible purpose under the FCRA by means of the application for credit. What about during the term of the loan though? Many banks regularly pull consumer reports on individuals throughout the term of the loan, and there’s a question as to whether the need to review itself constitutes a permissible purpose. In the “Gowen Opinion,” the FTC concludes that in order to have valid permis- sible purpose, the bank would need to have some authority to change the terms of the loan as a result of the review; for example, if the bank had the authority to terminate or freeze the loan if the report contained certain negative information. On the other hand, if the bank is just “reviewing” the report so as to potentially offer the borrower different terms, then it would generally not be allowed, “unless the contract expressly provides for such action.” As a caveat, however, these opinions are only informal guid- ance that are not binding on the FTC, and further, interpretive authority for the FCRA technically transferred to the Consumer Financial Protection Bureau (CFPB) pursuant to the Dodd-Frank Act. While plenty of banks do rely on them, we would still rec- ommend getting written authorization from the individual to pull credit. In fact, we’d recommend this in every case, for any consumer report pulled. This way, the bank can rely on that written authorization as valid permissible purpose to pull the consumer report, rather than having to justify that one of the other permissible purposes apply. Said another way, the bank Commercial Loans — continued from page 19 While plenty of banks do rely on them, we would still recommend getting written authorization from the individual to pull credit. NEBRASKA BANKERS: Have You Reported Your Fi nanc i a l L i teracy Efforts to the NBA? JAN. 2019 1/25: Earned Income Tax Awareness Day 1/28: Data Privacy Day 1/28-2/1: Tax Identity Theft Awareness Week FEB. 2019 2/25 - 3/2: America Saves Week MARCH 2019 3/3 - 3/19: National Consumer Protection Week 3/19: National Agriculture Day Send your Personal Economics Program Activity Report to nbacommunications@nebankers.org by March 15, 2019. To obtain an activity report, please email the above address. Questions? Call 402-474-1555.