FCRA Permissible Purpose: A Complete Guide
The American people like to work from home. A new study concluded that roughly 56% of Americans are working from home at least part-time. Approximately one-third are working from home full-time.
These statistics are not surprising, given the many benefits of working from home. At the top of the list is the money saved on business expenses by carving out a home office. Many small businesses are relocating to a home office to reduce their overhead expenses.
If you are considering a home office, it is important to be cognizant of the Fair Credit Reporting Act (FCRA). You cannot pull employees’ credit reports without meeting the criteria for FCRA permissible purposes. Read on to learn how virtual and onsite inspections verify whether your business has a permissible purpose.
What Is FCRA Permissible Purpose?
The government is protective of consumers’ data and privacy. They are not going to give anyone the ability to pull an individual’s credit history.
At the same time, this is a valuable tool for companies seeking job applicants. An applicant’s credit report provides an objective look into a person’s finances. Employers should know if an applicant has outstanding judgments or liens.
To afford employers this ability, the government created strict rules under the FCRA. For starters, the business requires verification via virtual or onsite inspections. Professional inspectors are tasked with ensuring that the business has a permissible purpose to access consumer data.
The government has clearly defined what constitutes a permissible purpose. Continue reading for six different purposes that meet the FCRA standard:
The extension of credit or authorizing a credit transaction is a permissible purpose. Reviews or collections on a consumer’s account are also permissible.
The consumer has to consent to the business pulling the credit history. If adverse action is taken, such as denying credit, the business must notify the consumer.
Seeking employment is another permissible purpose. The employer requires the applicant’s consent before pulling the credit report.
It is important that the employer complies with equal opportunity laws while pulling the report. For example, they cannot ask for the credit history of a minority applicant while not requiring it for others.
Many insurance agents are working from home instead of in a traditional office setting. They often pull credit reports as part of the underwriting process. This is considered a permissible purpose under FCRA.
Other Permissible Purposes
Investors and insurers are allowed to pull a consumer’s credit report. In order to qualify as permissible, it has to be in conjunction with a valuation or risk assessment.
Also, it is permissible to pull credit when a person is applying for a governmental license. Lastly, a business may pull credit when they demonstrate a legitimate need. This is a broad criterion but gives businesses some flexibility in pulling credit.
The Importance of Permissible Purpose Compliance
In order to make your home office work, it is critical to comply with permissible purpose regulations. Your business will not be in compliance with the FCRA unless it demonstrates a permissible purpose.
By following this guide, you are one step closer to passing your virtual or onsite FCRA inspection. If you have any questions about FCRA's permissible purpose, contact us today to speak with a specialist.