When Can a Dealer Obtain a Credit Report on a Consumer Seeking Credit?

Sept. 18, 2022

By Michael G. Charapp
Charapp & Weiss LLP


While we are discussing consumer reports, we should also take a moment to remind dealers of the circumstances under which they can access a credit report of a consumer seeking credit to purchase a vehicle from the dealership.

Under the Fair Credit Reporting Act (“FCRA”), one who requests a consumer report can do so only for specific uses. A proposed user of a credit report is “strictly prohibited” from requesting it without a permissible purpose for a specific use under the FCRA.  We have long advised dealers that the FTC has been clear about what does NOT constitute a permissible purpose in sales of motor vehicles.

Some dealers feel they may run a credit report to check that the person taking a test drive is a legitimate buyer. However, two decades ago the FTC issued guidance that a request for a test drive is not necessarily related to credit, and it does not provide a permissible purpose under the FCRA.

Recently, the CFPB emphasized how seriously the federal agencies with FCRA enforcement roles take the permissible purpose requirement. On July 7, 2022, The Consumer Financial Protection Bureau issued an advisory opinion titled “Fair Credit Reporting: Permissible Purposes for Furnishing, Using and Obtaining Consumer Reports”. The advisory opinion clarified that the permissible purposes under the FCRA for requesting a consumer report are strictly limited to the uses provided in the statute.

What does a dealer do to safely obtain a credit report on a consumer? Under the law, a user of a credit report need not have the written permission of the consumer to access a credit report, as long as the user has a permissible purpose related to credit. But if challenged later, how does the user prove beyond question a permissible purpose.

That is why obtaining written authorization of a credit report by a consumer is so important. The FCRA states that a user has a permissible purpose to obtain a consumer report “in accordance with the written instructions of the consumer to whom it relates”. A signed, written authorization from a consumer seeking credit eliminates guesswork about whether the dealership had a permissible purpose in obtaining a credit report on the consumer.