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It’s Finally Official: You CAN Order Credit Without The Payor’s Permission!
by Lorelei Stevens, President, Wall Street Brokers, Inc.
"I want to buy a note. Can I order a credit report
on the payor without the payor’s consent?”
This question has haunted note buyers for years. Finally, the answer appears
to be “yes.” The federal Fair Credit Reporting Act (“FCRA”)
was amended by the Consumer Credit Reporting Reform Act. Section 604 (a)
(3) (E) has been added to “Permissible Purposes of Reports.”
It states that a permissible purpose is given to a person who “intends
to use the information, as a potential investor or servicer, or current
insurer, in connection with a valuation of, or an assessment of the credit
or prepayment risks associated with, an existing credit obligation…”
Therefore, this section gives a permissible purpose for potential investors,
servicers or insurers of credit obligations to obtain a report on a payor
for the purpose of evaluating or assessing the credit or prepayment risks
involved in existing credit obligations of the payor.
For example, an entity which plans to buy a note and trust deed would
have a permissible purpose under this section to obtain a consumer report
on the payor for that particular transaction.
I have verified this information with my attorney and with the Federal
Trade Commission. However, your own attorney should be consulted regarding
this matter for legal advice. You may also refer to Internet Site http://www.wdia.com/fcra604.htm
More On The New Credit Law As It Affects Note Buyers
From W.J. Mencarow's column in THE PAPER SOURCE:
Lorelei Stevens reported in the October issue on a new law that went into
effect Sept. 30 making it legal to check a mortgagor’s credit report
without his permission.
Lorelei has been spearheading this question on behalf of the note industry
for years — unofficially, of course, since there is no organized
“note industry.” (Reminds me of Will Rogers’ comment, “I’m
not a member of any organized political party. I’m a Democrat.”)
She’s corresponded with credit bureaus, state regulators, hired attorneys
and has engaged in a continuing dialogue with the Federal Trade Commission
over the legalities.
Lorelei recently faxed a copy of the Associated Credit Bureau’s analysis
of the new law. It says:
“Section 604(a)(3)(E) creates a permissible purpose for potential
investors, servicers or insurers of credit obligations to obtain consumer
reports for the purpose of evaluating or assessing the credit or prepayment
risks involved in existing credit obligations of consumers. For example,
an entity that plans to invest in a mortgage loan transaction would have
a permissible purpose under this section to obtain a consumer report on
the borrower in that transaction.”
The industry owes a debt of gratitude to Lorelei Stevens for her tenacity
in monitoring this issue.
Lorelei Stevens is president of Wall Street Brokers, Inc. in Seattle
Washington. If you have a note to sell, please contact her at (206) 448-1160
or (206) 448-8476 or e-mail lorelei@eskimo.com
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