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Law Pro
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Category: Consumer Protection Law
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Experience:  20 years experience in consumer advocacy, debt collection violations, contracts, construction
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I was told by a relative of mine that if a mortgage company

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I was told by a relative of mine that if a mortgage company mails you a form letter which states you are pre-approved for a mortgage refinance, that is considered illegal. He's stating that it's a deceptive act of itself since the said company must have had authorization to run one's credit. Is he right?
Submitted: 11 months ago.
Category: Consumer Protection Law
Expert:  Law Pro replied 11 months ago.

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Two separate issues:

1) the preapproval, and

2) their running a credit check.


The preapproval probably has "fine" print and or some disclaimers within the notice that you have to meet their requirements (including a credit check, loan approval, informal property appraisal, etc.).


As to their running a credit check without his consent:

Your credit report is your private financial information. This information is every bit as private as any private financial information you keep in a locked drawer in your home or office. You have an absolute right to keep it private.

 

Your credit reports are maintained by various credit bureaus. The three largest and most famous credit bureaus are Transunion, Equifax and Experian.

 

Unlike a locked drawer in your home or office, however, the only thing someone needs to obtain your credit report from a credit bureau is an account with that bureau. Thus, anyone with an account has access to your credit report, whether or not you have given them permission to access it.

 

Examples abound where businesses have accessed credit reports wrongfully, without permission and without a proper purpose. I have heard of insurance industry law firms and insurance companies pulling credit reports for personal injury plaintiffs to find out if they're financially strapped, and thus more likely to accept an insufficient settlement offer. Some unscrupulous companies pull credit reports to find out if you qualify for a loan they are offering, before they have even contacted you about the loan. Some pull it for less savory purposes yet, such as to determine where you shop and spend your money. These are all improper purposes for accessing someone's private credit report.

 

All of this information is private and legally is supposed to remain private unless one of two things happens:

 

1. You give someone permission to pull your credit report, or,

 

2. The person pulling your credit report has a permissible purpose for pulling it.

 

There are very few permissible purposes. The law is really your only safeguard against unscrupulous persons pulling your credit report for improper purposes.

 

Examples of Giving Someone Permission to Pull Your Credit Report

 

Whenever you apply for a loan or a credit card, you normally sign a form which gives the prospective creditor permission to pull your credit report. This is the usual manner in which credit card companies, car dealerships and lenders access your credit report.

 

Beware, however, that some companies forge consumer signatures on forms to gain permission when they don't have the consumer's legitimate permission to pull your credit report. Thus, telemarketers cannot pull your credit report without your permission even if they are trying to sell you a loan. Car dealerships do not have permission to pull your credit report simply because you walk onto their lot to look at a few cars. If you pull your credit report and you find instances where companies have pulled your credit report without your permission, suspect that they may have done so by forging your signature. This happens more often than most consumers realize.

 

Examples of Permissible Purposes for Pulling Your Credit Report

 

There are very few: in response to a court order, in connection with an employment application and when a consumer actually applies for credit or insurance.

If you do not initiate the transaction, then a credit card company may only pull your credit report if they are making you a ¡°firm offer of credit,¡± which is definitely quite a bit more than those endless letters from credit card companies telling us that we¡¯ve been ¡°Pre-Approved¡±, but we have to fill out an application anyway.

 

Persons or companies who pull your credit report must certify that they are pulling it for a permissible purpose. If a company pulls your credit report for a permissible purpose and then uses it for an impermissible purpose, then that company has violated your rights and the law. Companies may only pull and use your report for a permissible purpose.

 

In general, you need to pull your credit report and inquire into any credit entry for a credit card company, a finance company or an insurance company you do not recognize. It may well turn out that some company has pulled your credit report without your permission and without a permissible purpose.

 

How Do I Find Out if Someone Has Pulled My Credit Report Without A Permissible Purpose?

 

Pull your credit report from the three major credit reporting bureaus. They often share information among themselves, so negative credit entries to one bureau frequently find their way onto your credit reports with the other two bureaus.

 

If you see entries on your credit report concerning companies pulling your report without your permission, or companies you do not recognize, then you should inquire further as to whether someone has improperly accessed your credit report.

 

The answer, unfortunately, may well be a yes.

 

Why is Impermissible Access to One¡¯s Credit Report Harmful?

 

Apart from being an invasion of your privacy, credit ¡°pulls¡± actually lower your credit score. Someone who pulls your credit report without permission and without a legitimate purpose directly harms you by affecting your credit score.

 

What are My Remedies If I Discover that Someone Has Wrongfully Pulled My Credit Report?

 

If you have any questions or doubts, first contact the company which pulled your credit report and ask them, in writing, why their company name appears on your credit report. Sometimes there is an innocent explanation, but don¡¯t be surprised if you get the run-around or if it turns out that this company did not have any permissible purpose when they pulled your credit report.

 

If you do find out that there has been an impermissible pull of your report, or if you just cannot get good answers to your questions, then see a lawyer. You are entitled to a penalty per violation of your right to financial privacy, even if you do not directly suffer damage as a consequence of the improper pull. There is also the potential of punitive damages, as well as any out-of-pocket losses you have suffered. The statute also provides that the person who improperly pulled your credit report must pay for your attorney's fees, so these cases are frequently affordable even to consumers who cannot otherwise afford an attorney.



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Expert:  Law Pro replied 11 months ago.
Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!

If you have any questions, about this or anything else, please ask for me, Law Pro, directly in the question and I will try to assist you as best I can.

For example, you would state, "This question is for Law Pro . . . (then on with your question).

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