If a lender receives a consumer report that contains a fraud alert, the lender must not extend credit unless it believes it knows the identity of the person requesting it.

• A. True
• B. False
• C. It must verify the identity with the CRA
• D. It may extend credit if the applicant is known locally

Answer: (A)

A fraud alert on a consumer report signals a higher risk of identity theft and requires the lender to take steps to verify the applicant’s identity before extending credit. Because of the alert, the lender should not approve credit unless it reasonably believes it knows who is requesting it, ensuring the person is who they say they are.

Verifying identity with the credit bureau isn’t a mandated step; the lender typically verifies identity through its own procedures or by confirming information with the applicant, rather than relying solely on the CRA to do the verification. And being known locally does not override the need to verify identity when a fraud alert is present.