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Reg alert warns CUs to review business lending practices

ALEXANDRIA, Va.-NCUA issued a regulatory alert to credit unions regarding the Federal Trade Commission's (FTC's) revised ruling on obtaining consumer credit reports in relation to business loans. The new interpretation, under the Fair Credit Reporting Act (FCRA), affects credit unions providing credit to someone for business purposes or to a...

By Staff Writer | Updated on September 11, 2001

ALEXANDRIA, Va.-NCUA issued a regulatory alert to credit unions regarding the Federal Trade Commission’s (FTC’s) revised ruling on obtaining consumer credit reports in relation to business loans. The new interpretation, under the Fair Credit Reporting Act (FCRA), affects credit unions providing credit to someone for business purposes or to a closely held business. Previously the FTC prohibited obtaining a consumer credit report on the guarantor of a business loan without their written consent. “.FTC staff determined that when an individual is or will be personally liable for repayment of a loan for business purposes, such as an individual proprietor, co-signer, or guarantor, the loan may be viewed as a consumer transaction,” the alert read. “Therefore, a credit union may obtain a consumer credit report under Section 604(a)(3)(A) of the FCRA in these situations.” The alert emphasized that only if the individual is personally liable for the loan may the credit union obtain a consumer report. NCUA encouraged credit unions to review their practices to ensure compliance with the new interpretation. The FTC’s letter was issued in June of this year.

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