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?
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.