Excerpted from a Consumer Financial Protection Post

On July 7, the Consumer Financial Protection Bureau (CFPB) issued a legal interpretation to ensure that companies that use and share credit reports and background reports have a permissible purpose under the Fair Credit Reporting Act. The CFPB’s new advisory opinion makes clear that credit reporting companies and users of credit reports have specific obligations to protect the public’s data privacy. The advisory also reminds covered entities of potential criminal liability for certain misconduct.

“Americans are now subject to round-the-clock surveillance by large commercial firms seeking to monetize their personal data,” said CFPB Director Rohit Chopra. “The CFPB will be taking steps to use the Fair Credit Reporting Act to combat misuse and abuse of personal data on background screening and credit reports.”

Congress enacted the Fair Credit Reporting Act in 1970 to ensure companies “exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” The Fair Credit Reporting Act regulates companies that assemble dossiers on consumers, including credit reporting companies and tenant screeners.

Permissible Purposes
Among other things, the Fair Credit Reporting Act ensures fair and accurate reporting, and it requires users who buy these dossiers to have a legally permissible purpose. This ensures that companies cannot check an individual’s personal information, including their credit history, without a bona fide reason. Common permissible purposes include using consumer reports for credit, housing or employment decisions.

The new advisory opinion will hold responsible any company that violates the permissible purpose provisions of the Fair Credit Reporting Act. The advisory opinion makes clear:

Criminal Liability
The advisory opinion outlines some of the criminal liability provisions in the Fair Credit Reporting Act. Covered entities can face criminal liability for obtaining a background report on an individual under false pretenses or by providing a background report to an unauthorized individual. Violators can face criminal penalties and imprisonment.

The CFPB will continue to take steps to ensure credit reporting companies and other relevant entities adhere to the Fair Credit Reporting Act. In addition, the CFPB has:

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