Negative Information Notice
In this Compliance Clip (video), Adam explains the regulatory requirements for the negative information notice. While the Fair Credit Reporting Act is one of the most dreadful and boring regulations found in the entire complianceverse, Adam does his best in this video to provide a bit of excitement to an otherwise soul sucking topic.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about the Negative Information Notice.
The Negative Information Notice is a requirement of Section 623(a)(7) of the Fair Credit Reporting Act. This rule requires financial institutions to provide consumers with a notice that negative information may be provided to a consumer reporting agency. So if you're going to provide negative information like they're late, or they missed the payment, something like that, to a consumer reporting agency like Experian, Equifax, or TransUnion, then you have to give consumers this notice under the Fair Credit Reporting Act.
There's two ways you can provide this. The first way is you provide this before submitting the information to the credit reporting agency, and there's two ways that most financial institutions do this. Or you can provide this notice within 30 days after reporting the information to the consumer reporting agency. Those are your options. When you're providing negative information to a consumer reporting agency where a consumer was late on a payment or missed the payment, something like that, you have to give them a disclosure. It’s either given to them before you provide the information to that consumer reporting agency or within 30 days after you have reported that negative information.
If you are providing the notice in advance, you have two options, two main options that financial institutions typically utilize. The first is to provide the notice on or with any default notice or billing statement or other written notices as long as it is clear and conspicuous for the consumer. Most people, what they do in this case is, provide this disclosure right on the past due notices that go out to consumers. So that's the first way this can be provided. The second option that financial institutions have is to provide it to all consumers out of an abundance of caution. You could just give it to everybody at account closing. What you can’t do is include this disclosure on the till, but you can provide it as a separate disclosure and give it to all your customers at closing. These are your two options for providing this, in fact, some financial institutions give both of these disclosures to cover their bases. Those are the two main options, to give it beforehand, that's what most financial institutions do. They don't often wait until after they've already reported to provide this notice.
There are a couple model notice options in the regulation. So there are model forms that we can use. Model form B-1 basically has this text that says, “We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults in your account may be reflected on your credit report.” That’s the first option. The second option is model form B-2, which is what you would provide if you had already provided the notice and you're doing this within 30 days after providing the information to the credit reporting agency. This model notice would say, “We've told the credit bureau about a late payment, missed payment, or other default on your account. This information may be reflected in your credit report.” So those are your options for the negative notice information.
That's all we have for this Compliance Clip today.