OBTAINING AND USING CREDIT REPORTS

A Section 1.0 Introduction

OMB Circular A-129, "Managing Federal Credit Programs," requires that information presented in applications submitted by financial assistance applicants be verified by comparison to credit reports and by use of other verification procedures. The Circular also provides general guidance to Federal agencies on the use of private sector commercial and consumer credit reports.

This appendix provides:

(1) Information on how private sector credit bureau reports will be obtained through the General Services Administration (GSA) Federal Supply Schedule contracts for such items and services;

(2) Guidance on when credit reports will be obtained throughout the credit/debt management cycle--from extending credit through debt collection and write-off; and

(3) Information on supplemental services provided by credit bureaus, as well as other sources of information that are available to determine an applicant's financial status and ability to repay a debt owed the Federal Government.

A Section 2.0 Background

The Debt Collection Act of 1982 permits all Federal departments and agencies to report all non-tax commercial debts, and all delinquent non-tax consumer (individual) debts, to private sector credit reporting bureaus. Government originated credit, debt, and contracting information is now added by the credit reporting bureaus to similar information which has been gathered for some years in the private business community. As a result, any Federal Government agency should now be able to obtain a complete credit profile of a financial assistance applicant or contractor, not only in terms of the financial or debt relationship that an applicant or prospective contractor may have with private sector businesses and financial entities, but also with other Federal agencies. A schematic layout of the information exchange is provided in Exhibit B-1, Appendix B. Some credit bureaus specialize in either consumer or commercial credit reporting, whereas others cover both categories of credit reporting. The GSA-approved supply schedule for obtaining routine credit reports consists of awards to several firms that have the automated capacity to incorporate Governmentwide credit, debt, and contracting information into their credit reports. With the greater exchange of credit and debt information between the Government and the private sector, the use of credit bureau services is expected to enable agencies to improve the quality of their credit decisions as well as enhance their debt collection capabilities.

A Section 3.0 Policy

The services of credit bureaus will be employed to obtain credit reports. Credit reports will be obtained and used by organization units:

(1) To help verify application data and determine the creditworthiness of all loan, loan guarantee, and grant applicants, and of potential contractors for contracts over $25,000;

(2) To assist in establishing whether such applicants or contractors have any outstanding debts with another Federal Government agency;

(3) When a loan, loan guarantee, or audit disallowance in excess of $10,000 is delinquent for thirty (30) or more days; or

(4) If the organization unit must refer the delinquent debt to GAO for resolution and instructions prior to proceeding with collection action and/or referral to the Department of Justice for litigation.

Each organization unit must determine the relative importance to be assigned credit reports. The importance given to credit reports by organization units in providing financial assistance or contracts should be based on such factors as the amount of the potential award, the risk of default or nonpayment, the organization unit's prior experience with the applicant or contractor, and the existence of other possible means of evaluating the credit or financial reliability of the applicant or prospective contractor.

A Section 4.0 Source of Procurement

GSA has awarded contracts to a number of credit reporting companies from which Federal departments and agencies can purchase credit reports. The GSA Federal Supply Schedule, dated September 10, 1990, entitled "Factual Data Reports: Consumer and Commercial Credit" lists current contractors and is provided in this appendix as Exhibit A-1. The GSA Federal Supply Schedule is the mandatory source of supply for organization units directly acquiring routine credit reports; no other contracts can be executed to obtain credit report services. Those contracts awarded by individual organization units which were in effect at the time GSA awarded its supply schedule contracts may remain in effect and be used until their expiration date. Questions regarding the GSA Federal Supply Schedule and the items and services included should be directed to: General Services Administration FSS, Information Center (FFN), Washington, D.C. 20406, telephone (703) 557-8177. Product lists and prices of individual services can be obtained directly from the GSA-approved vendors.

However, if an organization unit determines that an item or service included on the GSA Federal Supply Schedule will not serve the end purpose required by the organization unit, procurement of a similar article or service having the same general characteristics of the GSA Federal Supply Schedule article or service is authorized, provided that a written waiver of the requirement for using the GSA Federal Supply Schedule is obtained from the Director for Financial Management (OFM). The Director for Financial Management must request a waiver from the Commissioner, Federal Supply Service, General Services Administration, Washington, D.C. 20406, in accordance with Federal Property Management Regulations 101-26.100-2.

A Section 5.0 Routine Credit Report Requirements

To ensure that credit reports are used when necessary and in the most efficient and timely manner, organization units will:

.01 Identify the grant, loan, loan guarantee, or contracting activities for which credit reports will be used in accordance with the following guidelines.

a. When considering a new application from individuals or businesses for loans, loan guarantees, contracts over $25,000, or grants;

b. When individuals or businesses are refinancing or rescheduling any type of debt payments;

c. When a debtor claims the financial inability to pay a debt in a lump sum, and verification is required of the debtor's financial status prior to entering into an installment arrangement;

d. When a loan, loan guarantee, grant, cooperative agreement, or contract with a balance in excess of $10,000 is delinquent or non-performing for thirty (30) or more days;

e. When a delinquent debt is referred to GAO for recommended action in terms of validity of the claim or propriety of compromise, suspension, or termination of collection action, or the Department of Justice for litigation;

f. To identify applicants in default on other Federal programs;

g. To identify other financial relationships that delinquent debtors may have with other Federal agencies in order to take advantage of opportunities for administrative offset; or

h. To facilitate the organization unit's determination of the next collection step(s) to be pursued when a defaulted guaranteed loan is purchased from the lender under the guarantee agreement.

.02 Obtain credit reports by telephone, mail, or on-line terminals.

.03 Provide guidance to bureau officials on how credit reports will be used/weighed in the decision-making process when awarding a loan, loan guarantee, contract, or grant.

A Section 6.0 Retention of Credit Reports

Credit reports will be made a part of the official award file.

Credit reports will also be made a part of the records maintained by organization units in performing risk analyses required by OMB Circular A-129. In performing and updating such analyses, organization units will obtain credit reports on loan and loan guarantee recipients at least semiannually.

A Section 7.0 Supplemental Reports

In addition to covering routine credit reports, the GSA Federal Supply Schedule (Exhibit A-1) also provides for supplemental business information services and special customized business information reports. A list of these supplies and services is provided in the GSA Federal Supply Schedule. These supplemental reports may be of valuable assistance in performing portfolio risk analyses and supporting the debt collection effort.

A Section 8.0 Main Library Resources

The Main Library, Room 7046 Herbert C. Hoover Building, Washington, D.C., has on-line terminals for obtaining routine commercial credit reports. Organization units may use these resources by calling the Reader Services Division (RSD) on (202) 377-1916, if they are not able to procure the services directly, or in the event that they may want to supplement existing unit credit report resources on an occasional basis. However, organization units must first notify the Chief of RSD of those individuals who are authorized to request credit reports for the organization unit.

In addition to routine credit reports, the Main Library also subscribes to a number of private sector business and financial information retrieval services and CD ROM-based systems. These data files contain a collection of company reports, industry reports, and industry analyses and are compiled by widely respected investment banking, brokerage, and research firms. For information or a demonstration, call the Main Library on (202) 377-5511.

A Section 9.0 Outstanding Federal Debts

Where a credit report discloses that an applicant is delinquent on a Federal debt, has been debarred or suspended as a contractor by a Federal agency, or has otherwise failed to meet debt obligations to the Federal Government, no award shall be made without consulting the other affected Federal agency(s). Where a credit report discloses that a delinquent debtor is a current or prospective recipient of another Federal loan, contract, or grant, the debt may be collected by administrative offset against payments due to the individual or business, using procedures set forth in the Federal Claims Collection Standards, and the Department's regulations on offsets. The Department's regulations on administrative offset, as published in 15 CFR 21, are contained in Appendix E of this Handbook.

A Section 10.0 Identification of Offset Opportunity

If a debtor fails to make payment on any debt owed the Department--whether relating to a loan, loan guarantee, grant, contract, or any other debt--a credit report on the debtor will be immediately obtained by the organization unit workout group(s) when the debt is referred to the group to determine whether the opportunity exists for the organization unit to execute an administrative or salary offset in cooperation with another Federal agency against the amount owed. Since the content of credit reports varies by credit bureau, with some bureaus providing more detailed credit/debt information, organization units may determine that obtaining one or more credit reports is justified to ensure that any possible opportunity for offset is identified.

A Section 11.0 Privacy Act of 1974 Compliance

Organization units shall ensure that debt information on individuals is managed and used in accordance with the Privacy Act (P.L. 93-579, 5 U.S.C. 552a). Specifically, in regard to financial transactions the Privacy Act states, in part, that:

"No agency shall disclose any record which is contained in a system of records by any means of communication to any person, or to another agency, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains, unless disclosure of the record would be to those officers and employees of the agency which maintains the record who have a need for the record in the performance of their duties."

A Section 12.0 Fair Credit Reporting Act (P.L. 91-508) Compliance

.01 Organization unit officials must ensure that credit reports on individuals are only obtained and used for the following reasons:

a. For the purpose of evaluating a credit transaction or reviewing or collecting an outstanding debt; or

b. For the purpose of determining an applicant's financial responsibility or status.

.02 Organization unit officials must be aware that under the Act any user of credit report information who fails to comply with the privacy requirements of the Act is subject to civil liability for willful or negligent noncompliance with the requirements of the Act. Further, any person who knowingly and willfully obtains information on an individual from a consumer reporting agency under false pretense, and/or who is not authorized to obtain such information, is subject to fine and/or imprisonment.

A Section 13.0 Currency of Credit Data

There may be occasions when credit reports obtained by organization units are not current or appear incomplete. The credit bureaus preparing these reports are required under the GSA Federal Supply Schedule to make every effort to provide the most up-to-date credit information available on individuals and businesses, as well as nonprofit entities. However, organization units should be aware that credit bureau procedures are such that inquiries from the using public, as well as financial transactions of the credit recipient, by and large control the continuous updating of individual accounts. These updating procedures vary among credit bureaus. Consequently, if inquires are not made over a period of time, or transactions do not occur, individual files become "stale." Therefore, if a credit report does not appear current, or if an organization unit wants to ensure the most current information is available, direct contact with the credit bureau should be made and an assurance check should be requested from these companies. If problems with "stale" information from credit bureaus persist, contact the Office of Financial Policy, OFM.

A Section 14.0 State, Local, and Other Governments

OMB Circular A-129 exempts State and local governments, as well as Federally-recognized Indian Tribal Governments, from the credit report requirement. However, organization units should be aware that quasi-governmental entities, such as educational institutions and various State and local government quasi-public operating entities, such as harbor and port authorities, are not necessarily exempted. Moreover, credit reports are generally available on these quasi-governmental entities from credit reporting bureaus. If questions exist on the creditworthiness of such an entity and its ability to repay a loan in a timely manner, a credit report on the applicant should be obtained. Organization units should obtain these reports when warranted to determine whether financial assistance should be granted to a grant, loan, or loan guarantee applicant.

If organization units are unsure whether the credit report requirement applies to a particular financial assistance applicant because of its relationship to a particular State or local government or Federally-recognized Indian Tribal Government, guidance should be obtained from the organization unit's Office of General Counsel as to whether the organization is or is not an exempted entity.