The Fair Credit Reporting Act lays out responsibilities for financial institutions that obtain or use a consumer report. Just because we’re talking “consumer” reports, doesn’t mean that commercial lenders can ignore the requirements, however. If a consumer report is pulled on an individual in connection with an application for a business or commercial purpose, it’s still a consumer report. Lenders must also have a legitimate business need to pull a consumer report. This includes co-signers and guarantors who will be personally liable for business purpose credit. The 2011 FTC Staff Interpretations state:
A lender has a permissible purpose to obtain a consumer report on a consumer in connection with a business credit transaction when the consumer is or will be personally liable on the loan as a co-signer or guarantor, because such a transaction involves the “extension of credit to ... the consumer” by virtue of the individual’s liability. A lender would not have a permissible purpose to obtain a consumer report on a consumer who will not be personally liable for repayment of the credit… because this section does not include the extension of credit to commercial entities.
Kevin explains more in the video.
2025/02/17
