State RegulationsAZ specificDifficulty 2/5
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?
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Answer & full 3-part explanation (select an option above, or peek)
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.