When Can I Pull A Credit Report on an Existing Loan Customer?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM 

Q When is it permissible, under the Fair Credit Reporting Act, to pull a credit report on an existing loan customer when there is no new application? 

A A bank may obtain a credit report on an existing customer to review an account to determine whether the customer continues to meet the terms of the account (§604(a)(3)(F) of FCRA). However, this applies only for purposes of reviewing an account “to determine whether the consumer continues to meet the terms of the account.”  

As a practical matter, this means a review that may cause the bank to change the terms of the account, such as lowering or raising the credit limit or closing the account. Thus, banks generally may obtain credit reports for existing lines of credit because lenders can typically modify terms of such loans, although there may be legal restrictions on the types of changes permitted. However, because terms are usually not changeable for closed-end loans (though there may be exceptions depending on the contract), there is typically no “review” permissible purpose for those loans. 

Of course, lacking any other permissible purpose, the bank may always obtain a consumer report “[i]n accordance with the written instructions of the consumer to whom it relates.” (§604(a)(2) of FCRA). Such authorization must be explicit. An FTC staff opinion letter explains that written consent must clearly authorize a party to obtain a consumer report. Merely including the signed statement, “I understand that, where appropriate, credit bureau reports may be obtained,” is insufficient, as such a statement is more a notification that the bank might obtain a consumer report when a permissible purpose exists.  

You can learn more in an FAQ on permissible purpose addendum in an ABA members-only staff analysis. (Response provided February 2020.) 

Q The appraisal rule’s thresholds for determining whether a bank is required to obtain an appraisal versus an evaluation vary depending on whether the loan is for residential real estate ($400,000) or for commercial real estate ($500,000).  

Could a consumerpurpose residential real estate loan fall into the commercial loan definition regarding these thresholds? For example, the bank is extending a bridge loan secured by both the customers’ current principal residence and the new principal residence being purchased. Would this consumer transaction fall into the commercial real estate definition and thus be subject to the $500,000 threshold?    

A Yes, because the loan is secured by more than a single 1-to-4 family residence. The appraisal transaction definitions focus on the type of collateral, not the purpose of the loan. A commercial real estate transaction is defined as a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property. It excludes transactions secured by a single 1-to-4 family residential property, which are considered residential real estate loans subject to the $400,000 threshold. In the example, the transaction is secured by two properties, so is thus a CRE transaction for these purposes. (Response provided February 2020.) 

Q I understand that under the Unlawful Internet Gambling Enforcement Act of 2006, implemented by Regulation GG, the bank must block unlawful gambling transactions made through debit and credit cards. Must the bank also block unlawful noncard gambling transactions? 

A No. A bank is not required to block ACH, wire or check payments related to unlawful Internet gambling to comply with Regulation GG. The regulation only requires banks to ensure that illegal credit and debit card transactions are blocked, and banks may rely on the card networks policies and procedures. (Response provided February 2020.) 

Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, senior compliance analyst, ABA Regulatory Policy and Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.