An insurer declines a Pennsylvania life insurance application because of information in the applicant's consumer credit report. Under the federal Fair Credit Reporting Act, what is the insurer expected to do?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The federal Fair Credit Reporting Act, named here in words only, requires an insurer that takes adverse action based on information in a consumer report to notify the applicant, so the applicant can learn of the report's role and obtain the report to check and correct it. In Pennsylvania this federal duty operates alongside the state's own privacy protections for consumer financial information under 40 P.S. § 310.77(a) and 31 Pa. Code Ch. 146a, and the Pennsylvania Insurance Department polices unfair and deceptive application-handling practices under 40 P.S. § 1171.5. The applicant, not the insurer, controls access to the report.
Why the other options are wrong
- A) The underwriting manual is not what the adverse-action notice is about; the duty centers on telling the applicant about the consumer report used.
- C) Silence until the applicant asks defeats the notification duty; the insurer must initiate the adverse-action notice.
- D) A lawful adverse action based on a consumer report is not a privacy breach; the required step is notifying the applicant, not reporting a violation.
Memory hook
Denied on a report? The applicant must be told, and the report is theirs to fetch.