When a creditor fails to receive repayment of a debt, it will often choose to hire a collection agency to attempt to receive payment, usually by paying the agency a portion of the money it successfully collects. This collection agency may attempt to secure repayment in different ways, such as contacting the debtor or suing him in civil court. In addition, the agency may choose to examine the debtor's credit report. However, it cannot legally access the debtor's relatives' reports.
Credit Report
Credit reports are documents held by credit reporting agencies that contain information about an individual's credit history. They list all the loans that the person has taken out and whether he has paid them back on time. This information is not public record, but is privately held by credit reporting agencies. Because of the information's sensitivity, laws restrict who can access this information, and credit reporting companies will only show the reports to certain parties.
Legitimate Business Obligation
Under U.S. law, only parties with a legitimate business interest can access a person's credit report. For example, a creditor considering whether a person should receive a loan will have a legitimate business interest in knowing the prospective borrower's lending history, as will a landlord who is considering renting the person an apartment. While a debt collection agency would have a legitimate business interest in knowing a debtor's credit history, it would not have a legitimate reason for accessing her relatives' reports and would therefore be forbidden from doing so.
Exception
Under U.S. law, only a person who signs for a loan can be held responsible for its payment. If a debtor's relative cosigned a loan for which a debt collection agency is seeking payment -- meaning that the relative is partially responsible for the debt -- then the collection agency would have a valid interest in viewing his credit report. However, the Fair Debt Collection Practices Act, a federal law, prohibits creditors or debt collection agencies from harassing relatives for any other reason; all creditors or debt collectors may do is call a relative in an effort to ascertain the debtor's whereabouts, and they must cease calling when the relative tells them to stop.
Penalties
A party who accesses a person's credit report under false pretenses can face civil penalties, as this is a violation of federal law. In addition, the party is likely to lose her right to view other credit reports, even for legitimate reasons. If the party were to violate the Fair Debt Collection Practices Act by harassing a debtor's relative, she would also face civil fines that would be paid in compensation to the debtor.
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