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Onsite Physical Inspection Requirement

Question: Why do you require an onsite physical inspection of our business and what does such onsite inspection entail?

Response & Analysis:

An onsite physical inspection by consumer reporting agencies (“CRAs”) of all private clients was mandated by the credit bureaus in 2003. This requirement was expanded in 2005 to include all clients, with few exceptions. It formalizes the Fair Credit Reporting Act (“FCRA”) requirement that CRAs make a reasonable effort to verify the identity of a new end-user prior to furnishing such end-user with a consumer report.

The requirement of an onsite physical was primarily instituted in an effort to provide additional protections to consumers of CRAs, to validate the commercial business address of the end-user of the consumer report and to ensure that reasonable security is present at such end-user to protect the privacy of the consumer’s data.

The inspection must be conducted at the physical location where consumer reports are received, managed and stored, and is typically conducted by an independent third party. The inspection, which takes about 10-15 minutes, is normally completed a few days after the CRA and the end-user finalize a services agreement.

The onsite inspector will take digital photographs consisting of the building exterior, secure storage areas, workspace and proper disposal method in order to confirm that consumer reports will be maintained in a secure area. It is important to note that the inspector will not review documentation, actual files or other data. The inspector will also ask a series of questions covering the following types of topics:

  • The type of facility and whether or not it is a permanent office location
  • Whether or not there is a permanent sign identifying the business exactly as requested by the CRA
  • Whether or not the facility maintains appropriate office equipment, telephones, file cabinets, etc.
  • A description of the services the business provides
  • Whether or not there is evidence of a running business, including letterhead, business cards, etc.
  • What security features are utilized at the business
  • How consumer reports will be stored and secured
  • How sensitive information is disposed

While the onsite physical inspection may seem to add a layer onto the onboarding process of an end-user of consumer reports, it is a necessary layer of protection for consumers. The practical reality is that it is a straightforward and expedient process.

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This document and/or presentation is provided as a service to our customers. Its contents are designed solely for informational purposes, and should not be inferred or understood as legal advice or binding case law, nor shared with any third parties. Persons in need of legal assistance should seek the advice of competent legal counsel. Although care has been taken in preparation of these materials, we cannot guarantee the accuracy, currency or completeness of the information contained within it. Anyone using this information does so at his or her own risk.

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