FCRA Compliance Requirements for Fintech Lenders

The Fair Credit Reporting Act (15 U.S.C. § 1681) creates obligations for any company that uses consumer reports in lending decisions. For fintech lenders, FCRA compliance involves three distinct roles: as a user of consumer reports (when you pull credit), as a furnisher (when you report payment history), and as a recipient of adverse action obligations. Each role carries specific requirements with meaningful penalties for violations.

Key Takeaways:

• Permissible purpose documentation is required before every credit pull—"general lending" isn't specific enough
• Adverse action notices have strict content and timing requirements under 15 USC § 1681m
• Furnisher accuracy obligations require policies and procedures for dispute handling
• CFPB enforcement actions against fintechs have increased significantly since 2023

FCRA Obligations: User, Furnisher, and Adverse Action

Most fintech lenders wear all three FCRA hats simultaneously. Understanding which obligations apply to which activities prevents gaps that invite regulatory scrutiny.

User Obligations arise when you obtain a consumer report from a consumer reporting agency (CRA) like Equifax, Experian, or TransUnion. Key requirements:

• Permissible purpose certification before pulling credit (15 USC § 1681b)
• Proper disposal of consumer report information (16 CFR § 682)
• Adverse action notices when taking unfavorable action based on report information
• Identity theft and fraud alert procedures

Furnisher Obligations arise when you report account information to CRAs. Requirements include:

• Accuracy and integrity of furnished information (15 USC § 1681s-2)
• Policies and procedures for accurate reporting
• Dispute investigation within 30 days (extendable to 45 in certain cases)
• Direct dispute handling procedures
• Metro 2 format compliance for tradeline reporting

Adverse Action Obligations apply whenever you deny credit, reduce a credit line, or take other unfavorable action based wholly or partly on consumer report information.

Permissible Purpose: The Foundation of FCRA Compliance

You cannot pull a consumer report without a permissible purpose. For fintech lenders, the most relevant purposes under 15 USC § 1681b(a) are:

• (3)(A) Credit transaction initiated by the consumer
• (3)(F)(i) Legitimate business need in connection with a business transaction initiated by the consumer
• (3)(A) Review or collection of an existing account

Documentation Requirements:

Every credit pull must be tied to a documented permissible purpose. "Consumer applied for a loan" is sufficient. "Marketing analysis" is not a permissible purpose for a hard inquiry.

For prescreened offers under § 1681b(c), additional requirements apply:

• Firm offer of credit must actually be made
• Clear and conspicuous disclosure of prescreening
• Opt-out notice requirements
• Record retention for three years

Common Permissible Purpose Failures:

1. Pulling credit before application completion: If a consumer abandons an application before submitting, pulling their credit may lack permissible purpose.

2. Internal fraud checks without application: Using credit reports for fraud detection outside a transaction initiated by the consumer violates permissible purpose rules.

3. Account review without business need: Pulling credit on existing customers without a documented reason (credit line review, delinquency management) lacks permissible purpose.

Adverse Action Notices: Content and Timing

When you deny credit, increase pricing, or take other adverse action based wholly or partly on information in a consumer report, adverse action notice requirements under 15 USC § 1681m apply.

Required Notice Content:

Your adverse action notice must include:

1. Name, address, and phone number of the CRA that provided the report
2. Statement that the CRA didn't make the decision and can't explain why
3. Consumer's right to obtain a free copy of their report within 60 days
4. Consumer's right to dispute inaccurate information
5. Credit score used (if any) with range, key factors, and date generated
6. If risk-based pricing applies, disclosure of credit score information

Timing Requirements:

Adverse action notices must be provided:

• Credit denials: Notice must be provided (no specific timing, but promptly)
• Risk-based pricing: Notice at time of establishing terms or within 30 days
• Prescreened offers not made: Notice when adverse action taken after consumer responds

Model Forms:

The CFPB provides model adverse action notice forms in Appendix C to Regulation V (12 CFR Part 1022). Using the model forms provides safe harbor—deviation requires legal review.

Furnisher Accuracy: Reporting What You Know

If you report account information to consumer reporting agencies, you're a furnisher subject to 15 USC § 1681s-2. Accuracy obligations are substantial.

Accuracy Requirements:

• You must not furnish information you know or have reasonable cause to believe is inaccurate
• You must establish and implement reasonable written policies and procedures regarding accuracy
• You must not furnish information after receiving notice that it's inaccurate (until verified)

Metro 2 Format:

Credit reporting uses the Metro 2 format maintained by the Consumer Data Industry Association. Key data elements include:

• Account type and status codes
• Balance, credit limit, and payment history
• Date opened, closed, or last activity
• Consumer dispute indicators

Incorrect coding creates inaccurate tradelines. Common errors include:

• Reporting accounts as "charged off" while still attempting collection
• Incorrect balance reporting after partial payments
• Failing to report disputes when received

Dispute Handling: The 30-Day Clock

Consumers can dispute information directly with you (direct disputes) or through CRAs (indirect disputes). Both carry investigation obligations.

Indirect Disputes (via CRA):

When a CRA forwards a dispute:

1. You must investigate within 30 days (extendable to 45 if consumer provides additional information)
2. You must review all relevant information provided by the CRA
3. You must report results to the CRA
4. If the information is inaccurate, you must correct it with all CRAs to which you furnished
5. If the dispute is frivolous, you may decline to investigate (but document why)

Direct Disputes:

Under 12 CFR § 1022.43, consumers can dispute directly with furnishers. You must:

1. Investigate and review all relevant information
2. Complete investigation within 30 days
3. Notify consumer of results
4. If inaccurate, correct with all CRAs

What "Investigation" Means:

Investigation requires more than checking your own records. If a consumer provides documentation supporting their dispute, you must consider it. Rubber-stamping your original data as "verified" without genuine investigation violates FCRA.

CFPB Enforcement: Recent Fintech Actions

The CFPB has increased enforcement against fintechs for FCRA violations. Recent actions highlight:

Accuracy and Dispute Handling:

Multiple enforcement actions against furnishers for:

• Failing to investigate disputes (auto-verifying original information)
• Not maintaining reasonable accuracy policies
• Continuing to furnish disputed information without investigation

Adverse Action Notices:

Enforcement for:

• Missing required disclosures in adverse action notices
• Failing to provide score information when required
• Not identifying the CRA source of information

Permissible Purpose:

CFPB has examined:

• Soft pulls repurposed for hard-pull purposes
• Credit pulls without clear consumer initiation
• Prescreened offers that weren't actually "firm offers"

Penalties include civil money penalties, restitution, and injunctive relief requiring compliance program changes.

FCRA Compliance Checklist for Fintech Lenders

User Compliance:

• Permissible purpose documented for every credit pull
• Certification to CRAs regarding permissible purpose
• Consumer report disposal procedures implemented
• Identity theft and fraud alert handling procedures

Adverse Action Compliance:

• Adverse action notice template reviewed against model forms
• All required disclosures included (CRA info, rights, score)
• Timing requirements met for different action types
• Risk-based pricing notices implemented if applicable

Furnisher Compliance:

• Written accuracy policies and procedures
• Metro 2 reporting accuracy verified
• Indirect dispute handling procedures (CRA forwarded)
• Direct dispute handling procedures (consumer direct)
• 30-day investigation timeline tracked
• Dispute indicators furnished when required

Documentation:

• Permissible purpose records retained
• Adverse action notice copies retained
• Dispute investigation records retained
• Policy and procedure documentation current

Operationalizing FCRA Compliance

FCRA compliance requires more than policy documents—it requires proof that procedures are followed consistently. When the CFPB examines your dispute handling, they'll pull samples and check:

• Was the dispute received and logged?
• Was investigation completed within 30 days?
• What investigation steps were taken?
• Was the consumer notified of results?
• If inaccurate, were corrections made across all CRAs?

Manual tracking breaks down at scale. A single missed dispute deadline creates liability. Multiply that across thousands of accounts and the risk compounds.

Canarie transforms FCRA requirements into trackable workflows. Disputes generate investigation tasks with 30-day deadlines. Adverse action notices trigger automatically from denial decisions. Permissible purpose is documented as part of the credit pull workflow. When regulators ask for evidence, you export it directly instead of reconstructing from email threads.

See how compliance teams track FCRA requirements automatically →

Frequently Asked Questions

Does FCRA apply if I use alternative data instead of traditional credit reports?

Yes, if you use reports from consumer reporting agencies—including alternative data CRAs. The definition of "consumer report" under 15 USC § 1681a(d) covers any communication bearing on creditworthiness from a CRA. Alternative data providers may qualify as CRAs.

How long must I retain FCRA-related records?

Specific retention requirements vary:

• Prescreened offer records: 3 years
• Adverse action notices: 5 years (recommended, though not explicitly required)
• Dispute investigation records: 5 years (recommended)
• Furnisher policies: During policy period plus reasonable time after

What penalties apply for FCRA violations?

Individual consumers can recover actual damages, statutory damages of $100-$1,000 for willful violations, punitive damages, and attorney fees. Class actions can aggregate statutory damages. The CFPB can impose civil money penalties up to $50,000 per day for knowing violations.

Can consumers dispute directly with us or only through CRAs?

Both. Direct disputes are covered under 12 CFR § 1022.43. You must investigate direct disputes with the same rigor as CRA-forwarded disputes. Many fintechs fail to implement direct dispute procedures.

What's the difference between a hard pull and soft pull for FCRA purposes?

Both require permissible purpose. The distinction relates to impact on consumer credit scores (hard inquiries affect scores, soft inquiries don't) rather than FCRA obligations. Using a "soft pull" for a purpose that wasn't disclosed at the time of consent can still violate permissible purpose rules.