CFPB Issues Advisory Opinion on FCRA and Post-Bankruptcy Credit Reviews
On July 7th, the Consumer Financial Protection Bureau (CFPB) issued an important advisory opinion that significantly impacts individuals who have filed for bankruptcy. If you have received a Discharge Order in a bankruptcy case, it is crucial to monitor your credit reports closely to ensure that creditors are not improperly accessing your credit information.
Once your debts are discharged in bankruptcy, the creditor-debtor relationship terminates, meaning creditors no longer have any legal standing to conduct an “Account Review” or pull your credit reports. These accounts are effectively closed, and any review by creditors after your bankruptcy discharge could be a violation of the Fair Credit Reporting Act (FCRA).
You can obtain free copies of your credit reports from TransUnion, Equifax, and Experian via AnnualCreditReport.com to verify if any post-bankruptcy reviews have occurred.
FCRA and Consumer Privacy Protections
Congress enacted the FCRA to ensure the accuracy of credit reporting, protect consumer privacy, and promote efficiency in the credit system. One of its key provisions is to limit the circumstances under which third parties, like creditors, can obtain or use consumer credit reports. Under FCRA Section 604(f), a creditor must have a permissible purpose to access your report, such as when you apply for new credit or maintain an active account.
The FCRA imposes strict penalties for violations, including criminal liability. For example, knowingly obtaining a consumer report under false pretenses can lead to prosecution under Section 619. Likewise, any employee of a credit reporting agency who unlawfully discloses consumer information to unauthorized parties faces potential criminal charges under Section 620.
CFPB’s Advisory Opinion on Permissible Purpose
In this recent advisory, the CFPB reaffirmed that creditors are prohibited from accessing consumer reports without a permissible purpose. Importantly, once an account has been closed—such as after a bankruptcy discharge—there is no longer any legitimate reason for a creditor to request a consumer’s credit report. According to both the CFPB and a longstanding Federal Trade Commission (FTC) advisory opinion, the closure of an account effectively terminates any basis for creditors to conduct further “account reviews.”
Consumers can suffer various harms from unauthorized access to their reports, including privacy violations, reputational damage, and financial or emotional stress. Ensuring your credit information is properly protected post-bankruptcy is a key step in recovering your financial life.
For more information, see the FTC Advisory Opinion to Benner.