The Consumer Credit Reporting Reform Act of 1996

The Consumer Credit Reporting Reform Act of 1996 (Reform Act), signed into law September 30, 1996, substantially amended the Fair Credit Reporting Act. The changes incorporated by the Reform Act will take effect September 30, 1997 and will have a significant impact on credit unions that furnish information to, and use information from, consumer reporting agencies.

Attached is a copy of the revised text of the Fair Credit Reporting Act as amended (FCRA). One major change contained in the Reform Act is the responsibility for the Federal Reserve Board to issue interpretations on how the act may apply to credit unions, banks, and savings associations. Previously, the Federal Trade Commission was responsible for issuing all interpretations.

We encourage you to review the text in detail. However, we wish to draw attention to some specific areas in which substantive changes have been made:

• The ability of affiliates to share information from consumer reports between affiliates if certain compliance procedures are established and followed. Sections 603(d)(2)(A) and 615(b)(2).
• The ability of a credit union to disclose to a consumer the contents of the credit report when adverse action is taken because of the information in the consumer report. Section 607(c).
• Expanded requirements and disclosures when taking adverse action on the basis of information contained in a consumer report. Section 607(c).
• Substantial new requirements for furnishers of information to consumer reporting agencies. These requirements were not previously covered. Section 623.
• Clarification of rules involving pre-screening from consumer reporting agency files. Sections 603(l)(m) and 615(d).
• New civil and criminal liability provisions for violations of the FCRA by any person. Sections 616, 617 and 619.

One new requirement, wholly unrelated to the credit granting process, involves the use of credit reports for employment purposes. The requirements will substantially affect the human resource activities of credit unions. These new requirements and disclosures which are triggered whenever a consumer report is used for employment purposes, are set out in section 604(b) of the FCRA.

The Reform Act prohibits any agency from adopting regulations to implement the FCRA. Any future guidance will be provided through interpretations from the Federal Reserve Board.