Property & Casualty Insurance Exam (National Portion)Insurance RegulationMedium
A newly licensed insurance producer is reviewing the Fair Credit Reporting Act (FCRA) to understand its implications for consumers. Under FCRA, which of the following actions by a credit reporting agency is prohibited?
- AReporting outdated bankruptcy information that is more than 10 years old.
- BAllowing a consumer to dispute inaccurate information on their credit report.
- CFurnishing a credit report to a business for employment purposes with proper authorization.
- DProviding a consumer's credit report to an insurer for underwriting purposes with the consumer's consent.
Show answer & explanationAnswer & explanation
Correct answer: A. Reporting outdated bankruptcy information that is more than 10 years old.
The Fair Credit Reporting Act (FCRA) imposes restrictions on the reporting of outdated information to protect consumers. Specifically, it prohibits credit reporting agencies from reporting bankruptcies that are more than 10 years old, or most other adverse information that is more than 7 years old.
Why the other options are wrong
- B. Consumers have the right to dispute inaccurate information, and credit reporting agencies must investigate these disputes under FCRA.
- C. Furnishing a credit report for employment purposes with proper authorization is a permissible purpose under FCRA.
- D. Providing a credit report with consent for underwriting is a permissible purpose under FCRA.
FCRA Outdated Information
The Fair Credit Reporting Act (FCRA) places strict limits on how long certain negative information can remain on a consumer's credit report to ensure fairness and accuracy.
- Most adverse information must be removed after 7 years.
- Bankruptcies must be removed after 10 years.
- This protects consumers from old information unfairly impacting current credit decisions.
Memory trick: FCRA's Shield Guards Your Past From Being Forever Cast.