Even though your employer, creditor, or landlord might be allowed to pull your credit report, they must still have a permissible purpose to do so. If someone pulls your credit report for an impermissible purpose, then it may be a violation of the Fair Credit Reporting Act.
Which of the players in the credit game has a lawful reason to pull your credit report?
if you applied for a credit card, mortgage, car loan, etc., these companies would generally pull your credit report regularly to monitor your credit habits as long as you have a business relationship with them. Of course, they have no right to do so once that business relationship ends. Here’s how it’s written in the law — credit reporting agencies/credit bureaus can release your private credit information as follows:
- 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;
- 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;
- Otherwise has a legitimate business need for the information
- in connection with a business transaction that is initiated by the consumer, or
- to review an account to determine whether the consumer continues to meet the terms of the account.
if a debt collector (including law firms) is pulling your credit report, then it is likely claiming to do so “in connection with a business transaction that is initiated by the consumer”, or “to review an account to determine whether the consumer continues to meet the terms of the account”. The critical elements to examine here are whether the alleged transaction was, in fact, initiated by you, and whether the alleged account is one for which you are responsible. If either is untrue, then the debt collector has no legal right to pull your credit report.
if debt buyers (including law firms) claim they pulled your report to conduct an account review, or allege that they have a legitimate business purpose to do so, this is false. They do not qualify under these sections of the statute because you and the Debt Buyer never had a contract; they are never an original creditor. Debt Buyers can pull your credit report prior to purchasing the debt (specifically, information about the alleged account; such as name of the person(s) thought to be responsible for the account, phone, address, account #, alleged balance owed, and what are purported to be account statements. These items are purchased without warranty or recourse, which means the seller is not guaranteeing the accuracy of the information sold to the debt buyer. In sum, they have no account with you, very little verifiable information about the alleged debt and/or your responsibility to pay it.
If the Debt Buyer pulled your credit report in preparation for litigation against you, this is permitted; however, they must promptly follow thru with the lawsuit. They are prohibited from pulling your credit report once you file a lawsuit against them.
For more information, read Impermissible Credit Report Use.
Withholding Notices
You are entitled to notices concerning the reporting, handling, and use of your credit information. Notice violations under the FCRA might occur when:
- a creditor fails to notify you when it supplies negative credit information to a CRA
- a “user of credit information” (such as prospective employer or lender) fails to notify you of a negative decision based upon your credit report
- a creditor fails to provide you with your credit score if it was used as part of any credit decision
- a creditor fails to notify you of your right to dispute inaccurate credit information
- a creditor fails to notify you of your right to obtain a free credit report, or
- a creditor or “user of information” refuses to identify the source of the credit information it obtained about you.
Private Right of Action to Sue Violators
Under these provisions, sections 1681n and 1681o of the FCRA impose liability for willful noncompliance and negligent noncompliance, respectively. In the case of negligent noncompliance, the consumer can recover actual damages, costs, and attorney’s fees. In the case of a willful violation, the consumer can also recover statutory damages between $100 and $1,000, plus punitive damages.