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Prequalification Credit Report

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  • #5891
    ScottH
    Participant

    Has anyone ever received or know of any regulatory guidance on whether a prequalification provides permissible purpose to pull credit? I currently have an auditor that has stated pulling a credit report on a prequal would be a violation of FCRA and I am trying determine if I should concede.
    I have always felt that it fits the permissible purpose of “intends to use the information in connection with a credit
    transaction involving the consumer”. When a customer requests a prequalification we pull a credit report and either inform the customer that they are prequalified or issue a adverse action. If we prequalify them for a mortgage and they later identify a property we consider it an applicaiton under RESPA and Reg B and issue disclosures. We will continue with the same credit report from the prequalification when they identify a property. So if we are pulling it with the intent to use it for the entire process of the credit transaction from prequal to closing how does it not fit this permissible purpose?

    #5909
    rcooper
    Keymaster

    There are differing opinions on this topic. I think your auditors approach is the safe approach. Just to add if you are only issuing a prequalification based information the customer provides and you note that along with a statement that approval would be subject to underwriting, etc., is a credit report really needed for you to do pre-qualification? Here is a link to a page on the CFPB’s website that briefly explains the difference between pre-quals and pre-approvals (I think you’ll see an indication of what their thinking might be): https://www.consumerfinance.gov/askcfpb/127/whats-the-difference-between-being-prequalified-and-preapproved-for-a-mortgage.html.

    #5912
    jholzknecht
    Keymaster

    I have always encouraged lenders to obtain the consumer’s written permission to pull a report at the time of the pre-approval or pre-qualification.

    #5917
    ScottH
    Participant

    Can they email us to give us permission? I don’t think we would have to have an e-sign disclosure since we are not providing disclosures.

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