December 6, 2024
On December 3, 2024, the Consumer Financial Protection Bureau issued a proposed rule that would make changes to the Fair Credit Reporting Act. The CFPB described its proposed "Protecting Americans from Harmful Data Broker Practices" rule as necessary to protect national security, among other things, although the proposed rule has little to do with those concerns. Here is how the CFPB's proposal could impact small business financing providers.
The FCRA applies to more than just "credit." For example, the FCRA requires anyone obtaining a consumer credit report to have a "permissible purpose" to do so. Many small business financing providers rely on a broadly worded written consent to satisfy the FCRA's permissible purpose based on a consumer's "written instructions." The proposed rule would require providers to obtain a specifically worded, signed consent to pull a business owner's credit report. (Note that this would apply even for a "soft" credit pull. For purposes of the FCRA, there is no difference between a "soft" credit pull and a regular credit pull.)
The proposed requirements include providing a disclosure, either in writing or electronically, that authorizes the consumer reporting agency to furnish the credit report. The disclosure must include the name of the entity obtaining the consent, the consumer reporting agency from which the report will be obtained, a description of the product or service that the individual is requesting or the specific use for which the report will be furnished, and additional disclosures. The proposed rule requires that the individual be provided with a method to revoke consent and provides that the consent will be effective for one year.
Comments on the proposed rule are due by March 3, 2025.