Multiple requirements have been added to the Fair Credit Reporting Act (FCRA) in recent years, including those related to:
• Requirements to detect, prevent, and mitigate identity theft
• Issuance of credit cards to consumers who have recently changed address
• Risk-Based Pricing Notices
Less-well-known are the requirements related to Regulation V, §222.82, regarding Address Discrepancy Notices (ADNs) provided by Consumer Reporting Agencies (CRAs) to users of consumer credit information. ADNs are provided when a user (e.g., bank) pulls a credit report. Format can vary in that ADN text/info can be found nearly anywhere within a credit report. The ADN verbiage also varies slightly on reports from different providers.
Between being overshadowed by other FCRA requirements and varied placement, ADNs are sometimes a ‘forgotten’ FCRA requirement at financial institutions. Often, loan officers and/or lending staff are the only people who see the ADN – and they may not know what to do. Numerous times, ICS has observed the requirements documented, yet found little awareness among lending and operations staff on how to handle them. The requirements are simple; when an ADN is received, institutions should follow the steps below:
• Have reasonable policies and procedures already in place, to enable the institution to form a reasonable belief that the consumer report received relates to the consumer about whom it was requested.
• Related to timing, establish a reasonable belief when the user receives an ADN. At a practical level, reasonable belief should be established:
- prior to creating a customer relationship (e.g., loan or deposit account), or
- before expanding the customer relationship to include an additional financial product.
• Provide the “reasonably confirmed” consumer address to the CRA that provided the ADN if in the ordinary course of business you report to the CRA.
• Timing-wise, send updated information to the CRA [when the institution] regularly furnishes [information] for the reporting period in which it establishes a relationship with the consumer. For most institutions, this is when it provides its monthly update to CRA(s).
An additional consideration is that this requirement is for all users of information received from CRAs, such as:
• Consumer Lending Institutions that pull credit reports on consumer applicants
• Employers that perform pre-employment checks.
• Commercial Lending Institutions (or departments) that pull credit on individual owners of commercial loan applicant entities
A few examples can be found in Table 1.
Wrapping up, keep the following in mind for ADNs:
• Have policies and procedures in place,
• Ensure that lending and loan operations are aware of requirements, and
• Provide timely updates to CRAs for all ADNs related to existing or newly-acquired consumers.
TABLE 1.
|
Type of
|
Existing
|
ADN
|
|
Update to Credit
|
|
Product
|
Customer?
|
Received?
|
Action
|
Bureau required?
|
|
Loan: Consumer
|
No
|
Yes
|
Loan Declined
|
No
|
|
Loan: Consumer
|
No
|
Yes
|
Loan Originated
|
Yes
|
|
Loan: Consumer
|
Yes
|
Yes
|
Loan Declined
|
Yes3
|
|
Loan: Consumer
|
Yes
|
Yes
|
Loan Originated
|
Yes
|
|
Loan: Commercial 1
|
No
|
Yes
|
Commercial Loan Declined
|
No
|
|
Loan: Commercial 1
|
No
|
Yes
|
Commercial Loan Originated
|
Yes
|
|
Loan: Commercial 1
|
Yes 2
|
Yes
|
Commercial Loan Declined
|
Yes3
|
|
Loan: Commercial 1
|
Yes 2
|
Yes
|
Commercial Loan Originated
|
Yes
|
1 commercial loan for which credit report is pulled for owners of commercial entity
2 Existing relationship could be for the consumer or the commercial entity
3 Verify that existing addresses on record are accurate and make any necessary revisions
Author: Gene Collett, MBA, CRCM, Assistant Director for ICS in the Texas region.
