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Court upholds FCRA prescreening process
WASHINGTON (3/25/08)—An appeals court recently upheld a lower court ruling that Greenwood FCU, of Warwick, R.I., behaved properly under the Fair Credit Reporting Act (FCRA) in its “prescreened” offer of credit to members. The First Circuit Court of Appeals dismissed a class action lawsuit against Greenwood that claimed a certain credit offer for a mortgage loan was not permissible under the FCRA. The class action charged that the offer did not contain sufficient information regarding the loan terms to be considered a “firm offer” and therefore the credit union should not have been allowed even limited access to the members’ credit report information without the person’s consent. If the plaintiff had prevailed the credit union would have had to pay either actual damages or a penalty of between $100 and $1,000 per person solicited with a prescreened offer. The issue in the case was whether the plaintiff was entitled to the penalty as there was no claim that he was wrongfully denied credit, according to Jeff Bloch, senior assistant general counsel for the Credit Union National Association (CUNA). The Court reviewed the term “firm offer of credit” in the relevant provisions of the FCRA and concluded there is no requirement that these types of offers must provide the specific terms for credit, such as the interest rate and duration of the loan. Under the FCRA, the term only means that the creditor will not deny the loan if the consumer meets the creditor’s pre-selection criteria. “Although this ruling will not reduce the number of prescreened offers that consumers receive, the FCRA does permit consumer’s to opt-out of these offers,” Bloch said noting 2005 rules issued under the Fair and Accurate Credit Transactions Act that enhanced the disclosure of these opt-out rights.


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