FCRA (Fair Credit Reporting Act)
The Fair Credit Reporting Act (FCRA) is the federal law governing how consumer credit information is collected, accessed, used, and disclosed — applying to any MCA underwriting that pulls personal credit reports on business owners as part of funding decisions.
Why This Matters
FCRA has direct application to MCA whenever an underwriter pulls personal credit on a business owner — standard for most MCA underwriting since deals are personally guaranteed. FCRA requires permissible purpose for the credit pull (typically the merchant's express written authorization in the application), adverse action notices when credit drives a decline decision, and accuracy obligations on data furnishers reporting to bureaus. Violations carry statutory damages of $100-$1,000 per violation plus actual damages and attorney's fees, frequently producing class-action exposure.
Frequently Asked Questions
Frequently Asked Questions
Does FCRA apply to soft credit pulls used for MCA pre-qualification?
Yes. FCRA covers all consumer credit information access, including soft inquiries used for pre-qualification or marketing. Permissible purpose and consent obligations apply at the same standard as hard pulls used for funding decisions.
What FCRA notices must MCA funders provide?
Adverse Action Notice when credit data drives a decline or unfavorable terms. Risk-Based Pricing Notice when credit drives less-favorable terms than a control group. Permissible Purpose disclosure at credit pull authorization. Data furnishing accuracy obligations if reporting tradelines to bureaus.