Examples of when Adverse Action Notices must be Given.

The following examples illustrate situations where the adverse action notice must be given to insurance applicants:

• A life insurance company orders a consumer report from a CRA, such as the Medical Information Bureau (MIB). Information contained in the MIB report leads to further investigation of the applicant. The application for insurance is rated or declined in whole or in part because of information obtained from the investigation. Section 604(g) of the FCRA requires an insurance company, or any other user of medical information, to get the consumer’s consent—orally, electronically, or in writing—before obtaining medical information. That means the life insurance company in this situation would have to get the consumer’s consent before obtaining the consumer report from the MIB. In addition, since the MIB report formed part of the basis for the adverse decision in this case, the full Section 615(a) adverse action notice described above must be sent to the consumer.

• A person with an unfavorable credit history, such as a bankruptcy, is denied automobile insurance at standard rates. Although the credit history was considered in the decision, the applicant’s limited driving experience was even more important. The applicant is entitled to the Section 615(a) adverse action notice because the credit report played a part, however minor, in the insurer’s decision to charge a higher premium.
  

What Happens if an Insurer fails to Comply with the FCRA?

There are legal consequences for insurers who fail to get an applicant’s permission before requesting a consumer report containing medical information or who fail to provide required disclosure notices. The FCRA allows individuals to sue insurers for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations. In addition, the Federal Trade Commission, other federal agencies, and the states may sue insurers for non-compliance and obtain civil penalties.