What does the Fair Credit Reporting Act require of insurers that use third-party sources for credit information?

The Fair Credit Reporting Act (FCRA) mandates that insurers who utilize third-party sources to gather credit information must inform applicants of the identity of those sources if coverage is denied based on that information. This is a consumer protection measure designed to ensure transparency. When an application for insurance is denied or adversely affected due to information obtained from a credit report, the insurer must notify the applicant about which specific credit reporting agency provided the information that influenced the decision.

This requirement promotes accountability and allows consumers to verify their credit information, providing them with the opportunity to dispute any inaccuracies found in their credit reports. It also helps ensure that decisions related to insurance coverage are based on fair and accurate credit data.

The options related to denying coverage outright, providing free credit reports, or charging lower premiums based on credit scores do not align with the specific requirements set forth by the FCRA, which focuses on the obligation for transparency and notification rather than altering coverage terms or financial benefits based on credit information.