Which act requires insurers to inform applicants in advance that a credit report might be ordered?

Which act requires insurers to inform applicants in advance that a credit report might be ordered?

• A. Fair Credit Reporting Act
• B. Gramm-Leach-Bliley Act
• C. Health Insurance Portability and Accountability Act
• D. Federal Trade Commission Act

Answer: (A)

The essential idea is how credit reports are used in underwriting and what disclosure is required before doing so. The Fair Credit Reporting Act governs consumer reporting, including credit reports, and specifically requires that when an insurer (or any lender) plans to obtain a consumer report for underwriting, they must inform the applicant in advance that such a report may be ordered and obtain the applicant’s written consent. This notice ensures the applicant knows their credit information may be checked and gives them a chance to review the report and exercise rights (like obtaining a copy and disputing inaccuracies). The other acts don’t directly mandate this advance notice for credit reporting: Gramm-Leach-Bliley focuses on privacy notices about financial information sharing; HIPAA covers health information privacy; and the Federal Trade Commission Act is a broad enforcement tool against unfair or deceptive practices but does not specifically require advance notice about credit reports.

The essential idea is how credit reports are used in underwriting and what disclosure is required before doing so. The Fair Credit Reporting Act governs consumer reporting, including credit reports, and specifically requires that when an insurer (or any lender) plans to obtain a consumer report for underwriting, they must inform the applicant in advance that such a report may be ordered and obtain the applicant’s written consent. This notice ensures the applicant knows their credit information may be checked and gives them a chance to review the report and exercise rights (like obtaining a copy and disputing inaccuracies).

The other acts don’t directly mandate this advance notice for credit reporting: Gramm-Leach-Bliley focuses on privacy notices about financial information sharing; HIPAA covers health information privacy; and the Federal Trade Commission Act is a broad enforcement tool against unfair or deceptive practices but does not specifically require advance notice about credit reports.