The Fair Credit Reporting Act pertains to consumer
credit and has very little relevance to businesses that
extend credit to other businesses.  However, since
some businesses may be operated as a sole
proprietorship, it is advisable for credit granters to
familiarize themselves with some of the key aspects of
the law.
Section 604 of the Fair Credit Reporting Act discusses
the permissible purposes and uses of a consumer
report. The Section states that a consumer reporting
agency may furnish a consumer report to a person,
where person is defined to mean any individual,
partnership or corporation, who “intends to use the
information in connection with a credit transaction
involving the consumer on whom the information is to be
furnished and involving the extension of credit to, or
review or collection of an account of the consumer or
otherwise has a legitimate business need.”
How we choose to interpret this law is extremely important
for business to business credit grantors.  It is very
common for corporate creditors to receive an application
for the extension of open, unsecured business or trade
credit for a sole proprietor or partnership.  Additionally, in
response to a request for unsecured business or trade
credit, business creditors often seek personal guaranties
from a principal, owner or officer of the applicant
company, which requires the investigation of the
guarantor, who may be considered a consumer under the
law.  The question is whether the FCRA applies to
business credit transactions and if business creditors
have a legitimate business need to obtain consumer
credit reports, and if they can do so without obtaining
specific written permission.

The FTC, who administers this law, has not yet written an
opinion on the topic of business creditors getting credit
reports on individuals that are sole proprietors, partners
or have personally pledged assets as part of a personal

Since the law is rather vague with regard to this, we
suggest that you seek written permission from the
person(s) before you attempt to gather consumer credit
information about an individual. is not in the business of
providing legal advice.  Laws change over time and vary
widely by state and jurisdiction.  For professional legal
advice, we highly recommend that you consult an
attorney in your area that specializes in business credit
and collections.
Fair Credit Reporting Act
The Law
Business Credit
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