PSI Ohio Insurance Practice Exam

If an insurance company obtains an investigative consumer report, what federal law requires them to inform the prospect?

1. The Fair Credit Reporting Act

2. The Privacy Act

3. The Consumer Protection Act

4. The Truth in Lending Act

The correct answer is: The Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is the federal law that requires insurance companies to inform prospects if they obtain an investigative consumer report. This law is designed to promote fairness, accuracy, and privacy of information in the files of consumer reporting agencies. Under the FCRA, when an insurance company uses information from such reports to make decisions regarding a consumer's eligibility for insurance coverage, they must notify the consumer that such a report has been obtained and provide them with the name and address of the consumer reporting agency that supplied the information. This ensures transparency and gives the consumer the opportunity to review and challenge any inaccuracies in their report. The other options refer to different regulations. The Privacy Act primarily addresses the handling of personal information by federal agencies, the Consumer Protection Act involves a broader spectrum of consumer rights, and the Truth in Lending Act focuses on ensuring that consumers are informed about the costs of credit and finance charges in lending scenarios. These laws do not specifically address the requirements surrounding investigative consumer reports as the Fair Credit Reporting Act does.