An Act concerning adverse actions based on consumer credit reports and amending P.L.1997, c.172.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 4 of P.L.1997, c.172 (C.56:11-31) is amended to read as follows:

4. a. A consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(1) In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a State or federal grand jury.

(2) In accordance with the written instructions of the consumer to whom it relates.

(3) To a person which it has reason to believe:

(a) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer;

(b) intends to use the information for employment purposes;

(d) intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status;

(e) 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; or

(f) otherwise has a legitimate business need for the information:

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

(4) In response to a request by the head of a State or local child support enforcement agency (or a State or local government official authorized by the head of such an agency), if the person making the request certifies to the consumer reporting agency that:

(a) the consumer report is needed for the purpose of establishing an individual's capacity to make child support payments or determining the appropriate level of those payments;

(b) the paternity of the consumer for the child to which the obligation relates has been established or acknowledged by the consumer in accordance with State laws under which the obligation arises (if required by those laws);

(c) the person has provided at least 10 days' prior notice to the consumer whose report is requested, by certified or registered mail to the last known address of the consumer, that the report will be requested; and

(d) the consumer report will be kept confidential, will be used solely for a purpose described in paragraph (1) of this subsection, and will not be used in connection with any other civil, administrative, or criminal proceeding, or for any other purpose.

(5) To an agency administering a state plan under 42 U.S.C. s.654 for use to set an initial or modified child support award.

b. A consumer reporting agency may furnish a consumer report for employment purposes only if:

(1) the person who obtains the report from the agency certifies to the agency that:

(a) the person has complied with subsection c. of this section with respect to the consumer report, and the person will comply with subsection d. of this section with respect to the consumer report if that subsection becomes applicable; and

(b) information from the consumer report will not be used in violation of any applicable federal or state equal employment opportunity law or regulation; and

(2) the consumer reporting agency provides with the report a summary of the consumer's rights under the federal "Fair Credit Reporting Act," 15 U.S.C. s.1681 et seq.

c. A person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless:

(1) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and

(2) the consumer has authorized in writing the procurement of the report by that person.

d. A consumer reporting agency shall not furnish for employment purposes, or in connection with a credit or insurance transaction or a direct marketing transaction, a consumer report that contains medical information about a consumer unless the consumer consents to the furnishing of the report in writing.

e. In using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take an adverse action shall provide to the consumer to whom the report relates:

(1) a copy of the report; and

(2) a description in writing of the rights of the consumer under this act and the federal "Fair Credit Reporting Act," 15 U.S.C. s.1681 et seq.

f. Consumer reporting agencies may furnish a consumer report relating to any consumer pursuant to subparagraph (a) or (c) of paragraph (3) of subsection a. of this section in connection with any credit or insurance transaction that is not authorized by the consumer only if the consumer reporting agency complies with the requirements of subsections (c) and (e) of section 604 of the federal "Fair Credit Reporting Act," 15 U.S.C. s.1681b.

g. A person shall not use or obtain a consumer report for any purpose unless:

(1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and

(2) the purpose for its use is certified in accordance with section 5 of this act by a prospective user of the report.

h. (1) If any person uses a consumer report in connection with an application for, or a grant, extension or other provision of, credit on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers from or through that person, based in whole or in part on a consumer report, the person shall provide to the consumer to whom the report relates:

(a) a copy of the report; and

(b) a description in writing of the rights of the consumer under P.L.1997, c.172 (C.56:11-28 et seq.) and the federal "Fair Credit Reporting Act," 15 U.S.C. s.1681 et seq.

(2) A person shall provide the information required under paragraph (1) of this subsection at the time of an application for, or a grant, extension or other provision of, credit or the time of communication of an approval of an application for, or grant, extension, or other provision of, credit, except as provided in the federal "Fair Credit Reporting Act," 15 U.S.C. s.1681 et seq. and regulations promulgated thereunder.

(3) No person shall be required to provide the information required under paragraph (1) of this subsection if the consumer applied for specific material terms and was granted those terms, unless those terms were initially specified by the person after the transaction was initiated by the consumer and after the person obtained a credit report.

(cf: P.L.1997, c.172, s.4)

2. This act shall take effect immediately.

STATEMENT

This bill requires a person who offers or grants a consumer credit on terms that are less favorable than terms offered or granted to a substantial proportion of its other consumers and bases those less favorable terms on information contained in the consumer's credit report, to give the consumer a copy of the consumer's credit report and any other information required under the federal "Fair Credit Reporting Act" (FCRA). The consumer must be given this information at the time of application for the credit or when the credit is granted. These provisions do not apply to circumstances in which a consumer applies for and was granted specific credit terms, unless those terms were set after the person obtained the consumer's credit report.

The federal FCRA provides consumers protection with respect to consumer credit reports and credit reporting agencies. The "New Jersey Fair Credit Reporting Act," which is consistent with the federal FCRA, enables the State to investigate and prosecute individuals who violate these consumer protection laws. The federal FCRA was amended in 2003 to require persons to give consumers notice if they are offered or granted terms of credit that are less favorable than the terms offered or granted to a substantial proportion of other consumers. This bill is consistent with that federal amendment.

This bill ensures that the State can effectively identify and investigate instances of discriminatory credit practices. The notification provisions of this bill will allow the State to discern when the subjective mark-ups of interest rates are based on the credit-worthiness of a consumer or when the mark-ups are based on illegal discriminatory factors, such as the race of the consumer.