ID Theft Red Flags FAQ IIB3 – Does a financial institution or creditor that makes a small business loan that is guaranteed by a consumer have a “covered account” with that consumer?

Compliance > Lending > FCRA
Q:  Does a financial institution or creditor that makes a small business loan that is guaranteed by a consumer have a “covered account” with that consumer?
 
A:  A guarantor of a small business loan establishes a continuing relationship with a financial institution or creditor because the individual assumes secondary liability on the loan he or she guarantees and thereby receives an extension of credit.  However, a business loan guaranteed by a consumer is not covered by the first part of the definition of “covered account” (set out above under II.B.1) because it is not primarily for personal, family, or household purposes.  Instead, each financial institution or creditor must determine whether a business loan guaranteed by a consumer presents a reasonably foreseeable risk of identity theft under the second part of the definition of a “covered account.”
 
 
ADDITIONAL INFORMATION:
This information was obtained from the Interagency FAQs for Identity Theft Red Flags and Address Discrepancies - https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20090611a1.pdf

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