InfoBytes, July 22, 2011 - A Weekly In-depth review of news & developments in the financial services industry


In This Issue:

Federal Issues; State Issues; Firm News; Mortgages; Banking; and Consumer Finance.

Excerpt from Consumer Finance:

FTC Issues Summary of Staff Interpretations; Withdraws Commentary. On the eve of the transfer of primary enforcement authority for the Fair Credit Reporting Act (FCRA) to the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission issued a staff report that summarizes its interpretations of FCRA. The report, entitled "Forty Years of Experience with the Fair Credit Reporting Act" incorporates many positions that the FTC previously took in its 1990 Commentary on FCRA (which the FTC rescinded when it released the staff report) and in staff interpretation letters. Of particular interest to the consumer finance industry, the staff report: (i) expands upon the previous Commentary’s "joint user" interpretation that consumer report information can be shared with another person to effectuate a consumer-initiated transaction (although the term "joint user" is no longer used); (ii) states that the "review" permissible purpose applies to both open-end and closed-end accounts when the creditor is considering taking action with respect to that account, but not to the use of credit reports in marketing the creditor’s other products or services; (iii) incorporates the holdings related to credit bureau prescreening in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), and Murray v. New Cingular Wireless, 523 F.3d 719 (7th Cir. 2008), that an "offer of credit may not be a ‘sham offer’ used as a ruse to engage in target marketing," but that "a solicitation may be a firm offer of credit even if the solicitation does not set forth the terms of the offer or includes a term that is variable"; (iv) clarifies that only the "credit prong" of the FCRA definition of "adverse action," which incorporates the Regulation B definition of the term including the "accepted counteroffer" exception, applies to applications for credit; and (v) adopts the FTC’s previous position that a report for commercial purposes is a "consumer report," thus requiring a permissible purpose, but that an application for business credit can provide a permissible purpose when the credit report is obtained on an individual who will be personally liable for the debt....

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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