An insurer denies a life insurance application based on information contained in a consumer report. Under the federal Fair Credit Reporting Act (15 USC 1681), what must the insurer do?

Why C is correct

The Fair Credit Reporting Act (15 USC 1681) requires an adverse action notice when a consumer report contributes to an unfavorable underwriting decision. The notice must identify the consumer reporting agency that supplied the report, and the consumer then has the right to obtain a copy of the report from that agency and dispute inaccurate information.

Why the other options are wrong

• A) The Act requires notice, not compensation; a cash settlement is not part of the adverse action process.
• B) Destroying the report is not the remedy; the consumer's right is disclosure of the agency's identity and access to the report.
• D) A coverage denial based on a consumer report is a routine underwriting decision, not suspected fraud.

Memory hook

Denied on a report? Tell the applicant who supplied it — the adverse action notice.

Why C is correct

Under the Fair Credit Reporting Act, 15 USC 1681-1681d, a user of a consumer report that takes adverse action, such as declining or rating up an application, must give the applicant a notice identifying the consumer reporting agency, so the consumer can obtain the report and dispute inaccurate information. This keeps underwriting decisions transparent and lets applicants correct errors that follow them.

Why the other options are wrong

• A) the statute requires an adverse action notice, not delivery of the report itself.
• B) the Act requires notice to the applicant; there is no DIFI pre-use notification requirement.
• D) the insurer need not destroy the report; the duty is to give the notice identifying the agency.

Memory hook

Decline on a report? Tell them who reported.