Can a Note Buyer Legally Obtain a Credit Report?
The Note Business has numerous strategies and techniques that allow anyone, from consultants to investors, to generate several income streams and build wealth. At NoteSchool, we teach the entire note business and are often innovators of new techniques and approaches to the business and we can say without a doubt that one skill that you must obtain is the ability to determine what a note is worth!
If you have ever attended one of our training classes, you know that we teach this in great detail because it doesn’t matter whether you are:
- Consulting with someone to create a note,
- Are creating a seller-financed note for one of your own properties,
- Or buying a performing or non-performing note,
The bottom line is that you have to know how to value a note. While teaching this skill at our live and on-line trainings, we use a triangle to represent the major components involved. One of the sides of the triangle is… the credit worthiness of the payer
The payers credit report and credit score determines their credit worthiness. So if we are to evaluate the value of a note we must obtain the credit report from a consumer-reporting agency. These consumer-reporting agencies operate under the guidelines of the Fair Credit Reporting Act. One of the things this Act does is regulate who may receive credit reports. So…
Can a Note Buyer Legally Pull Someone’s Credit?
To answer that question, one would have to refer to the Fair Credit Reporting Act. As a public service the FTC provides a copy on their website, www.ftc.gov/os/statutes/031224fcra.pdf . While neither the author of this article nor the NoteSchool can provide legal advise, we would invite you to look at…
§ 604 Permissible purposes of consumer reports
“Consumer reports”, by the way, has a rather lengthy definition in this Act as you can see on the bottom of page three of the report at the above website. For our purposes, it includes a credit report from a consumer-reporting agency.
Under the permissible purposes clause, it says that “any consumer reporting agency may furnish a consumer report under the following circumstances and no other”, and then goes on to list numerous circumstances. As it pertains to the Note Business, item subsection “E” says…
Intends to use the information as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation
In addition, subsection “F” says…
Otherwise has a legitimate business need for information in connection with a business transaction that is initiated by the consumer or to review an account to determine whether the consumer continues to meet the terms of the account
These two clauses make it pretty clear that we are able to request the consumer report in the course of our business. Having said that, there are a few other things that you should be aware of:
- The information in these reports are considered private and should be treated that way
- Having the ability to pull the credit doesn’t necessarily give you the right to run it several times
- Although it isn’t needed, it is a good business practice in some instances to get written permission from the payer before running the report if you are able to