Informative article about car dealers pulling your credit report

Jeff Blyskal with http://www.consumerreports.org/ wrote an interesting article about car dealers not needing your SSN to pull your credit report.  Here's the article:

Considering all the time we spend fretting about protecting our Social Security numbers, this may come as a shock: Your SSN isn’t necessary for a car salesperson to surreptitiously peek at your credit report. He or she has the technological ability to unlock your file using only the information on your driver’s license.

“An auto dealership checking a consumer’s credit through TransUnion is not required to have the individual’s social security number (SSN) in order to submit the request,” says Steven Katz, a TU spokesman. Does the dealer need your permission to do that? “The dealer does not need ‘permission’; rather, it needs only certify a permissible purpose (such as extension of credit),” says Katz.

Equifax told us the same thing about the ability to get your credit report without your SSN, but stressed that anyone who pulls your file must get your permission to do so.

Experian did not respond to our query.

TransUnion prefers to get the SSN, because it more reliably helps locate your exact credit file, but it’s not absolutely necessary. The credit report access keys on the license are your name, address, and date of birth, all of which are essentially public information. The driver’s license number itself is not relevant, since the credit bureaus don’t use that as an identifier.

Car dealers commonly ask for and photocopy your driver’s license before they’ll let you take one of their cars out for a test drive, says Charles Cyrill, a spokesman for the National Automobile Dealers Association. If you encounter this situation and are worried that your privacy may be compromised, explicitly tell the salesperson that you are not authorizing use of your license to pull your credit report.

Under the federal Fair Credit Reporting Act, a car dealer must always get your permission to look at your credit report. He or she can get that permission in writing—when you sign a release or a loan application—or by implication, without your signature, if there is a “legitimate business need.”

What does that mean? According to the FTC, simply shopping around, checking deals, and even taking test drives does not constitute a legitimate business need by itself. Rather, it’s only when you’ve gone further along into an obvious purchase transaction that your actions qualify as business that possibly involves a need to check your credit, according to a 1998 FTC staff opinion letter.

“Only in those circumstances where it is clear both to the consumer and to the dealer that the consumer is actually initiating the purchase or lease of a specific vehicle and, in addition, the dealer has a legitimate business need for consumer report information may the dealer obtain a report without written permission,” says the FTC opinion.

Whoever Jeff Blyskal spoke to at Equifax was completely misinformed or being untruthful.  Equifax allows companies to pull consumers' credit reports all the time without their express permission.  This is allowed by the FCRA as long as there is a permissible purpose, as laid out in 15 U.S.C. 1681b. 

Car dealers are the worst about not following the law in multiple ways, the FCRA being but one of them.  While all car dealers know that they can not pull your credit report without either your permission or a permissible purpose such as you actually applying for financing to purchase the vehicle, many pull your report anyway. 

Not having a permissible purpose arise until the consumer actually applies for financing makes sense.  For instance, what if the buyer is paying cash?  In that instance, his or her credit history matters not so there's no permissible reason for the car buyer to pull the credit report.  Or if the potential buyer is just test driving or walking the lot "kicking tires".  At that point, there is no legitimate need to pull the person's credit report.  But it is all too easy for the car dealer to simply indicate either consent or a "legitimate business need" even when one does not exist yet (and may never exist).  The credit bureaus simply "trust" their customers, whether they are credit card companies, banks, car dealers or bottom feeding collection agencies.  The CRAs even trust them after being informed of a pattern of impermissibly pulling credit reports.  But why should the CRAs care when they make more money by turning a blind eye to impermissible pulls (i.e. sales of credit reports)?  Selling your credit information is what CRAs do best.  Why let a little thing like 15 U.S.C. 1681b get in the way of that?!

15 U.S.C. 1681b - part 5

In this installment, I'll finish explaining the permissible purposes section of the Fair Credit Reporting Act - 15 U.S.C. 1681b.

"(f) Certain use or obtaining of information prohibited. A person shall not use or obtain a consumer report for any purpose unless

(1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this subsection; and

(2) the purpose is certified in accordance with section 607 [section 1681e] by a prospective user of the report through a general or specific certification."

[This is the section that makes it a violation to obtain or use a credit report for a purpose that is not permitted by the rest of 15 U.S.C. 1681b. The "or use" is very important so that a user cannot use the report for any purpose even if it was obtained using a permissible purpose.]

"(g) Protection of Medical Information

(1) Limitation on consumer reporting agencies. A consumer reporting agency shall not furnish for employment purposes, or in connection with a credit or insurance transaction, a consumer report that contains medical information (other than medical contact information treated in the manner required under section 605(a)(6)) about a consumer, unless --

(A) if furnished in connection with an insurance transaction, the consumer affirmatively consents to the furnishing of the report;

(B) if furnished for employment purposes or in connection with a credit transaction --

(i) the information to be furnished is relevant to process or effect the employment or credit transaction; and

(ii) the consumer provides specific written consent for the furnishing of the report that describes in clear and conspicuous language the use for which the information will be furnished; or

(C) the information to be furnished pertains solely to transactions, accounts, or balances relating to debts arising from the receipt of medical services, products, or devises, where such information, other than account status or amounts, is restricted or reported using codes that do not identify, or do not provide information sufficient to infer, the specific provider or the nature of such services, products, or devices, as provided in section 605(a)(6)."

[A consumer reporting agency can only provide a credit report with medical information on it for an insurance transaction IF the consumer consents to it. A consumer reporting agency can only provide a credit report containing medical information regarding an employment or credit transaction IF the medical information to be provided is relevant to the transaction and the consumer consents in writing or if the medical information is restricted in such a way that the specific provider or nature of the medical treatment is not identified and can not be inferred. One way the CRAs do this is reporting the information using a code number instead of the name of the medical provider (i.e. #12345 instead of "Cancer Institute") which, in this example, keeps the recipient of the report from knowing the consumer has been treated for cancer.]

"(2) Limitation on creditors. Except as permitted pursuant to paragraph (3)(C) or regulations prescribed under paragraph (5)(A), a creditor shall not obtain or use medical information (other than medical contact information treated in the manner required under section 605(a)(6)) pertaining to a consumer in connection with any determination of the consumer's eligibility, or continued eligibility, for credit."

[This means that the recipient of the credit report can not use the medical information provided as a factor in the consumer's eligibility for credit (i.e. that the consumer may have cancer should not prevent him or her from getting a credit card, but non-payment of a medical bill can affect the consumer's eligibility to get a credit card).]

"(3) Actions authorized by federal law, insurance activities and regulatory determinations. Section 603(d)(3) shall not be construed so as to treat information or any communication of information as a consumer report if the information or communication is disclosed --

(A) in connection with the business of insurance or annuities, including the activities described in section 18B of the model Privacy of Consumer Financial and Health Information Regulation issued by the National Association of Insurance Commissioners (as in effect on January 1, 2003);

(B) for any purpose permitted without authorization under the Standards for Individually Identifiable Health Information promulgated by the Department of Health and Human Services pursuant to the Health Insurance Portability and Accountability Act of 1996 or referred to under section 1179 of such Act, or described in section 502(e) of Public Law 106-102; or

(C) as otherwise determined to be necessary and appropriate, by regulation or order and subject to paragraph (6), by the Commission, any Federal banking agency or the National Credit Union Administration (with respect to any financial institution subject to the jurisdiction of such agency or Administration under paragraph (1), (2), or (3) of section 621(b), or the applicable State insurance authority (with respect to any person engaged in providing insurance or annuities).

[In other words, publication of medical infrormation for underwriting of health or life insurance, or HIPAA compliant publications of medical information are not considered consumer reports.]

"(4) Limitation on redisclosure of medical information. Any person that receives medical information pursuant to paragrpah (1) or (3) shall not disclose such information to any other person, except as necessary to carry out the purpose for which the information was initially disclosed, or as otherwise permitted by statute, regulation, or order."

[So even if the recipient has a permissible purpose for receiving the medical information, he or she can not disclose it to others unless it is necessary for carrying out the purpose that the information was originally (and permissibly) obtained to do or as permitted by law.]

"(5) Regulations and Effective Date for Paragraph (2)

(A) Regulations required. Each Federal banking agency and the National Credit Union Administration shall, subject to paragraph (6) and after notice and opportunity for comment, prescribe regulations that permit transactions under paragraph (2) that are determined to be necessary and appropriate to protect legitimate operational, transactional, risk, consumer, and other needs (and which shall include permitting actions necessary for administrative verification purposes), consistent with the intent of paragraph (2) to restrict the use of medical information for inappropriate purposes."

[This section requires each Federal banking agency and the National Credit Union Administration to propose regulations that allow creditors, in certain circumstances, to use the medical information on credit reports for credit eligibility decisions.]

"(B) Final regulations required. The Federal banking agencies and the National Credit Union Administration shall issue the regulations required under subparagraph (A) in final form before the end of the 6-month period beginning on the date of enactment of the Fair and Accurate Credit Transactions Act of 2003."

[Subsection (B) just puts a deadline on the regulations required by subsection (A).]

"(6) Coordination with other laws. No provision of this subsection shall be construed as altering, affecting, or superseding the applicability of any other provision of Federal law relating to medical confidentiality."

[This section just makes it clear that 15 U.S.C. 1681b(f) does not alter, affect or supersede any other federal law regaridng medical confidentiality. In other words, it does not make something disclosable if it is otherwise non-disclosable or confidential.]

That's it for the explanation of 15 U.S.C. 1681b. I will start explaining 15 U.S.C. 1681c in the next installment.

15 U.S.C. 1681b - part 4

Lets continue with the explanation of 15 U.S.C. 1681b with subsection (e).

"(e) Election of consumer to be excluded from lists.

(1) In general. A consumer may elect to have the consumer's name and address excluded from any list provided by a consumer reporting agency under subsection (c)(1)(B) in connection with a credit or insurance transaction that is not initiated by the consumer, by notifying the agency in accordance with paragraph (2) that the consumer does not consent to any use of a consumer report relating to the consumer in connection with any credit or insurance transaction that is not initiated by the consumer."

[This is the section that gives consumers the right to opt out of promotional lists distributed by the consumer reporting agencies. If you want to stop getting so much junk mail, you should do this. But this will also eliminate the majority of "preapproved" credit card offers that you receive.]

"(2) Manner of notification. A consumer shall notify a consumer reporting agency under paragraph (1)

(A) through the notification system maintained by the agency under paragraph (5); or

(B) by submitting to the agency a signed notice of election form issued by the agency for purposes of this subparagraph."

[The FCRA gives you two ways to notify the consumer reporting agency that you want to be left off promotional lists that they sell. One is through the national notification system required by subparagraph (5). The other is by using a written notice of election form that the CRAs can provide.]

"(3) Response of agency after notification through system. Upon receipt of notification of the election of a consumer under paragraph (1) through the notification system maintained by the agency under paragraph (5), a consumer reporting agency shall

(A) inform the consumer that the election is effective only for the 5-year period following the election if the consumer does not submit to the agency a signed notice of election form issued by the agency for purposes of paragraph (2)(B); and

(B) provide to the consumer a notice of election form, if requested by the consumer, not later than 5 business days after receipt of the notification of the election through the system established under paragraph (5), in the case of a request made at the time the consumer provides notification through the system."

[After a consumer tells the consumer reporting agency that he or she is opting out of the preapproved/promotional lists, the consumer reporting agency must tell the consumer that his or her opt out status is only effective for 5 years and must provide the notice of election form mentioned in 15 U.S.C 1681b(e)(2)(B) if it is requested by the consumer.]

"(4) Effectiveness of election. An election of a consumer under paragraph (1)

(A) shall be effective with respect to a consumer reporting agency beginning 5 business days after the date on which the consumer notifies the agency in accordance with paragraph (2);

(B) shall be effective with respect to a consumer reporting agency

(i) subject to subparagraph (C), during the 5-year period beginning 5 business days after the date on which the consumer notifies the agency of the election, in the case of an election for which a consumer notifies the agency only in accordance with paragraph (2)(A); or

(ii) until the consumer notifies the agency under subparagraph (C), in the case of an election for which a consumer notifies the agency in accordance with paragraph (2)(B);

(C) shall not be effective after the date on which the consumer notifies the agency, through the notification system established by the agency under paragraph (5), that the election is no longer effective; and

(D) shall be effective with respect to each affiliate of the agency."

[This subsection just explains when the opt out period begins, which is typically 5 days after notification and is good for either 5 years or until the consumer changes his or her mind and notifies the consumer reporting agency that they want back on the lists.]

"(5) Notification System.

(A) In general. Each consumer reporting agency that, under subsection (c)(1)(B), furnishes a consumer report in connection with a credit or insurance transaction that is not initiated by a consumer, shall

(i) establish and maintain a notification system, including a toll-free telephone number, which permits any consumer whose consumer report is maintained by the agency to notifiy the agency, with appropriate identification, of the consumer's election to have the consumer's name and address excluded from any such list of names and address provided by the agency for such a transaction; and

(ii) publish by not later than 365 days after the date of enactment of the Consumer Credit Reporting Reform Act of 1996, and not less than annually thereafter, in a publication of general circulation in the area served by the agency

(I) a notification that information in consumer files maintained by the agency may be used in connection with such transactions; and

(II) the address and toll-free telephone number for consumers to use to notify the agency of the consumer's election under clause (I)."

[This just means that a consumer reporting agency must have a toll free phone number for consumers to call to opt out and that they must publicize at least once a year the fact that they use consumer reports may be used to generate promotional lists and the address and toll free number that consumers can use to opt out.]

"(B) Establishment and maintenance as compliance. Establishment and maintenance of a notification system (including a toll-free telephone number) and publication by a consumer reporting agency on the agency's own behalf and on behalf of any of its affiliates in accordance with this paragraph is deemed to be compliance with this paragraph by each of those affiliates."

[This means that a consumer reporting agency that utilizes affiliate companies (i.e. small, regional CRAs) can use one notification system that allows the primary CRA and all affiliates to comply with this subsection.]

"(6) Notification system by agencies that operate nationwide. Each consumer reporting agency that compiles and maintains files on consumers on a nationwide basis shall establish and maintain a notification system for purposes of paragraph (5) jointly with other such consumer reporting agencies."

[Subsection (6) means that the big three CRAs (Experian, Equifax and Trans Union) must have a joint notification system, which means that a consumer only has to notify one CRA to be opted out of all three's promotional lists.]

I will finish the explanation of 15 U.S.C. 1681b in part 5.

15 U.S.C. 1681b - part 3

Now, moving on to explain subsection (c) to 15 U.S.C. 1681b of the Fair Credit Reporting Act:

"(c) Furnishing reports in connection with credit or insurance transactions that are not initiated by the consumer.

(1) In general. A consumer reporting agency may furnish a consumer report relating to any consumer pursuant to subparagraph (A) or (C) of subsection (a)(3) in connection with any credit or insurance transaction that is not initiated by the consumer only if

(A) the consumer authorizes the agency to provide such report to such person; or

(B)(i) the transaction consists of a firm offer of credit or insurance;

(ii) the consumer reporting agency has complied with subsection (e); and

(iii) there is not in effect an election by the consumer, made in accordance with subsection (e), to have the consumer's name and address excluded from lists of names provided by the agency pursuant to this paragraph."

[This means that, when the consumer does not initiate the transaction that forms the basis for the request for the credit report, the credit bureau may only provide the consumer report to a third party if the consumer consents to the disclosure or if there is a firm offer of credit or insurance, the consumer reporting agency has complied with 15 U.S.C. 1681b(e) (more on that in the next post) and, the consumer has not opted out of pre-screening lists (i.e. the consumer has taken his or her name off the list of consumers who accept preapproved offers). If the consumer did not initiate the transaction and neither of the two other exceptions apply, then there is no permissible purpose for the disclosure of the consumer report.]

"(2) Limits on information received under paragraph (1)(B). A person may receive pursuant to paragraph (1)(B) only

(A) the name and address of a consumer;

(B) an identifier that is not unique to the consumer and that is used by the person solely for the purpose of verifying the identity of the consumer; and

(C) other information pertaining to a consumer that does not identify the relationship or experience of the consumer with respect to a particular creditor or other entity."

[So if the consumer neither initiates the transaction nor consents to the credit report's disclosure (i.e. when the basis for the consumer report's disclosure is that there was a firm offer of credit or insurance), the credit bureau can not disclose the whole consumer report but is only allowed to disclose the name and address of the consumer and other non-credit related information. In other words, the credit bureau returns a list of names and addresses of consumers who meet the criteria provided by the company requesting the credit report.]

"(3) Information regarding inquiries. Except as provided in section 609(a)(5) [1681g], a consumer reporting agency shall not furnish to any person a record of inquiries in connection with a credit or insurance transaction that is not initiated by a consumer."

[In addition to not being able to produce credit information, subsection (3) makes it clear that the consumer reporting agency can not furnish the record of inquiries (i.e. the list of companies receiving that consumer's credit report within the last two years) when the transaction is not initiated by the consumer.]

"(d) Reserved."

[Hey, an easy one. This subsection is reserved for any later amendment to 1681b.]

I will move on to subsection (e) of 15 U.S.C. 1681b in part 4's explanation. Thanks for reading.

15 U.S.C. 1681b - part 2

Now, to continue our discussion of 15 U.S.C. 1681b - the permissible purposes section of the Fair Credit Reporting Act - I will discuss subsection (b) of 1681b.

"(b) Conditions for Furnishing and Using Consumer Reports for Employment Purposes.

(1) Certification from user. A consumer reporting agency may furnish a consumer report for employment purposes only if

(A) the person who obtains such report from the agency certifies to the agency that

(i) the person has complied with paragraph (2) with respect to the consumer report, and the person will comply with paragraph (3) with respect to the consumer report if paragraph (3) becomes applicable; and

(ii) information from the consumer report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation; and"

(B) the consumer reporting agency provides with the report, or has previously provided, a summary of the consumer's rights under this title, as prescribed by the Federal Trade Commission under section 609(c)(3) [§ 1681g]."

[In other words, the user (i.e. the person or company receiving the credit report) must certify that he has complied with paragraph 2's requirements to disclose to the consumer that a credit report may be obtained and that the user has written authorization from the consumer to obtain the credit report, and, the user (i.e. the prospective employer) must certify that, if it denies the employment application or the prospective employee suffers some other adverse action as a result of his or her credit report (i.e. paragraph 3), the user will provide a copy of the credit report to the consumer along with a description of his or her rights as a consumer. The user must also certify that the credit report will not be used in violation of any equal employment opportunity law or regulation and must provide a summary of the consumer's rights under the FCRA.]

"(2) Disclosure to Consumer.

(A) In general. Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless--

(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and

(ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person."

[Before a prospective employer (or current employer using a credit report to make a decision about the current employee) may obtain a consumer's credit report to use in an employment decision, the employer must make "clear and conspicuous" disclosure to the consumer in writing that a credit report may be obtained for employment purposes, and must receive written authorization from the consumer for the employer to get the consumer's credit report.]

"(B) Application by mail, telephone, computer, or other similar means. If a consumer described in subparagraph (C) applies for employment by mail, telephone, computer, or other similar means, at any time before a consumer report is procured or caused to be procured in connection with that application--

(i) the person who procures the consumer report on the consumer for employment purposes shall provide to the consumer, by oral, written, or electronic means, notice that a consumer report may be obtained for employment purposes, and a summary of the consumer's rights under section 615(a)(3); and

(ii) the consumer shall have consented, orally, in writing, or electronically to the procurement of the report by that person."

[If the possible employee does not apply in person, the employer must still disclose that a credit report may be obtained, provide a summary of the consumer's rights and get the consumer's consent. However, unlike an in person employment decision, consent may be obtained orally and not just in writing. Also, as you can see from (C) below, this only applies to positions under the Secretary of Transportation's regulations and there has not been any previous in-person contact between consumer and prospective employer.]

"(C) Scope. Subparagraph (B) shall apply to a person procuring a consumer report on a consumer in connection with the consumer's application for employment only if--

(i) the consumer is applying for a position over which the Secretary of Transportation has the power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49, or a position subject to safety regulation by a State transportation agency; and

(ii) as of the time at which the person procures the report or causes the report to be procured the only interaction between the consumer and the person in connection with that employment application has been by mail, telephone, computer, or other similar means."

[Told you, (C) limits (B) to applications for positions under the Secretary of Transportation's regulations where there has not been any previous in-person contact between consumer and prospective employer.]

"(3) Conditions on use for adverse actions.

(A) In general. Except as provided in subparagraph (B), in using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates--

(i) a copy of the report; and

(ii) a description in writing of the rights of the consumer under this title, as prescribed by the Federal Trade Commission under section 609(c)(3)."

[So if the employer refuses to hire the consumer, or demotes him or her if a current employee, based upon the content of the consumer's credit report, the employer must provide the consumer with a copy of his or her credit report and a description of the rights of the consumer pursuant to the FCRA.]

"(B) Application by mail, telephone, computer, or other similar means.

(i) If a consumer described in subparagraph (C) applies for employment by mail, telephone, computer, or other similar means, and if a person who has procured a consumer report on the consumer for employment purposes takes adverse action on the employment application based in whole or in part on the report, then the person must provide to the consumer to whom the report relates, in lieu of the notices required under subparagraph (A) of this section and under section 615(a), within 3 business days of taking such action, an oral, written or electronic notification--

(I) that adverse action has been taken based in whole or in part on a consumer report received from a consumer reporting agency;

(II) of the name, address and telephone number of the consumer reporting agency that furnished the consumer report (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis);

(III) that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide to the consumer the specific reasons why the adverse action was taken; and

(IV) that the consumer may, upon providing proper identification, request a free copy of a report and may dispute with the consumer reporting agency the accuracy or completeness of any information in a report.

(ii) If, under clause (B)(i)(IV), the consumer requests a copy of a consumer report from the person who procured the report, then, within 3 business days of receiving the consumer's request, together with proper identification, the person must send or provide to the consumer a copy of a report and a copy of the consumer's rights as prescribed by the Federal Trade Commission under section 609(c)(3)."

[If the potential employee (or current employee if seeking a raise or promotion) does not apply in person and suffers an adverse action (i.e. does not get the job or is denied the promotion or raise), then the employer must give written notice to the consumer of the adverse action and must provide the identity and address of the consumer reporting agency that provided the credit report that the adverse action is based upon, tell the employee that the consumer reporting agency did not make the decision to deny the employment application (even though the consumer reporting agencies do provide the "denial codes" used by most users when denying credit or employment) and inform the consumer that he can obtain a free copy of the consumer report from the consumer reporting agency (but not from the prospective employer, which would make more sense since that is the actual consumer report used in the adverse action decision, unlike the credit report the credit bureau sends days or even weeks later that may have changed since the date of the adverse action) and that he can dispute to the credit bureau any inaccuracies on the credit report.]

"(C) Scope. Subparagraph (B) shall apply to a person procuring a consumer report on a consumer in connection with the consumer's application for employment only if--

(i) the consumer is applying for a position over which the Secretary of Transportation has the power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49, or a position subject to safety regulation by a State transportation agency; and

(ii) as of the time at which the person procures the report or causes the report to be procured the only interaction between the consumer and the person in connection with that employment application has been by mail, telephone, computer, or other similar means."

[Subsection (C) limits subsection (B) to only jobs that the Secretary of Transportation has authority over to establish qualifications and maximum hours or jobs subject to safety regulations from a State transportation agency and only such jobs that are not applied for in person.]

"(4) Exception for national security investigations.

(A) In general. In the case of an agency or department of the United States Government which seeks to obtain and use a consumer report for employment purposes, paragraph (3) shall not apply to any adverse action by such agency or department which is based in part on such consumer report, if the head of such agency or department makes a written finding that–

(i) the consumer report is relevant to a national security investigation of such agency or department;

(ii) the investigation is within the jurisdiction of such agency or department;

(iii) there is reason to believe that compliance with paragraph (3) will–

(I) endanger the life or physical safety of any person;

(II) result in flight from prosecution;

(III) result in the destruction of, or tampering with, evidence relevant to the investigation;

(IV) result in the intimidation of a potential witness relevant to the investigation;

(V) result in the compromise of classified information; or

(VI) otherwise seriously jeopardize or unduly delay the investigation or another official proceeding."

[In other words, if an agency or department of the United States government obtains and uses a consumer report when denying an employment application, the agency or department does not have to comply with the requirements of subsection (3) if the consumer report is relevant to a national security investigation, the investigation is within the purview of that particular agency or department, and there is "reason to believe" that the investigation would either put someone at risk, result in someone either fleeing prosecution or tampering with evidence (i.e. because they were prematurely put on notice of the investigation), result in a witness potentially being intimidated or classified information being compromised or (the catchall) otherwise risking or delaying the investigation or other official proceeding. These reasons are so broad and vague just about any fact pattern could be shoehorned into one of them.]

"(B) Notification of consumer upon conclusion of investigation. Upon the conclusion of a national security investigation described in subparagraph (A), or upon the determination that the exception under subparagraph (A) is no longer required for the reasons set forth in such subparagraph, the official exercising the authority in such subparagraph shall provide to the consumer who is the subject of the consumer report with regard to which such finding was made--

(i) a copy of such consumer report with any classified information redacted as necessary;

(ii) notice of any adverse action which is based, in part, on the consumer report; and

(iii) the identification with reasonable specificity of the nature of the investigation for which the consumer report was sought."

[Once either the investigation is over or the reason for keeping secret the fact that a credit report was obtained is no longer valid, the government agency or department must provide the consumer a copy of the credit report and provide notice of any adverse action and describe generally the nature of the investigation.]

"(C) Delegation by head of agency or department. For purposes of subparagraphs (A) and (B), the head of any agency or department of the United States Government may delegate his or her authorities under this paragraph to an official of such agency or department who has personnel security responsibilities and is a member of the Senior Executive Service or equivalent civilian or military rank."

[In other words, the head honcho of the agency or department can delegate his authority to a subordinate in his department of sufficient security clearance.]

"(D) Report to the Congress. Not later than January 31 of each year, the head of each agency and department of the United States Government that exercised authority under this paragraph during the preceding year shall submit a report to the Congress on the number of times the department or agency exercised such authority during the year.

(E) Definitions. For purposes of this paragraph, the following definitions shall apply:

(i) The term 'classified information' means information that is protected from unauthorized disclosure under Executive Order No. 12958 or successor orders."

[See http://www.fas.org/sgp/clinton/eo12958.html.]

"(ii) The term 'national security investigation' means any official inquiry by an agency or department of the United States Government to determine the eligibility of a consumer to receive access or continued access to classified information or to determine whether classified information has been lost or compromised."

[i.e. investigations to initiate or renew security clearances.]

I'll pick back up with subsection (c) in part 3 regarding 15 U.S.C. 1681b.

15 U.S.C. 1681b - Part 1

We finally get to move past 15 U.S.C. 1681a on to 15 U.S.C. 1681b, which explains the permissible purposes for obtaining a consumer report. If its not permissible according to 1681b, then its impermissible and a violation of the Fair Credit Reporting Act.

"Permissible purposes of consumer reports

(a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(1) In response to the order of a court have jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury."

[There is some dispute as to whether a federal or state court subpoena is good enough for this section. In most states, subpoenas can be issued by a clerk, not just a judge. In the federal system, any attorney able to practice in any federal court can issue a subpoena. Experian refuses to produce a consumer report in response to just a subpoena but instead requires an actual order signed by a judge. Equifax and Trans Union, on the other hand, only require an issued subpoena.]

"(2) In accordance with the written instructions of the consumer to whom it relates."

[In other words, if the consumer consents in writing to the disclosure of his or her credit report.]

"(3) To a person which it has reason to believe

(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or"

[i.e. if the recipient of the consumer report is considering granting the consumer credit or is reviewing the consumer's existing account with the recipient or if the recipient of the consumer report is attempting to collect a debt from the consumer regarding whom the consumer report relates.]

"(B) intends to use the information for employment purposes; or"

[i.e. when a prospective employer uses a consumer report to make a decision described in 15 U.S.C 1681a(h) (i.e. employment, promotion, reassignment or retention)]

"(C) intends to use the information in connection with the underwriting of insurance involving the consumer; or"

[i.e. when an insurance company uses a consumer report to decide whether to insure a consumer or in setting a premium]

"(D) intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status; or"

[I see this mostly with top secret type clearances where the government wants to make sure the consumer with the top secret clearance is not susceptible to bribes because of too much debt.]

"(E) intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation; or"

[I am stumped by this one. If anyone can clue me in as to what this means, please do so.]

"(F) otherwise has a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account."

[Pretty much just a catch all for anyone needing to review a consumer's credit report in connection with a transaction initiated by the consumer or to review an account the consumer already has.]

"(4) In response to a request by the head of a State or local child support enforcement agency (or a State or local government official authorized by the head of such an agency), if the person making the request certifies to the consumer reporting agency that

(A) the consumer report is needed for the purpose of establishing an individual's capacity to make child support payments or determining the appropriate level of such payments;

(B) the paternity of the consumer for the child to which the obligation relates has been established or acknowledged by the consumer in accordance with State laws under which the obligation arises (if required by those laws);

(C) the person has provided at least 10 days' prior notice to the consumer whose report is requested by certified or registered mail to the last known address of the consumer, that the report will be requested; and

(D) the consumer report will be kept confidential, will be used solely for a purpose described in subparagraph (A), and will not be used in connection with any other civil, administrative, or criminal proceeding, for any other purpose."

[The head of a child support enforcement agency can get a delinquent father's credit report but only if certain extra qualifications are met, including that paternity has been established, the consumer gets 10 days notice before the consumer report is pulled and the consumer report is kept confidential and not used for any purpose other than the collection of the past due child support.]

"(5) To an agency administering a State plan under Section 454 of the Social Security Act (42 U.S.C. 654) for use to set an initial or modified child support award."

[i.e. when a consumer report is used to determine how much child support should be awarded or modified to be.]

I'll continue in part 2 with subsection (b) of 15 U.S.C. 1681b.