In recent years, more and more consumers have been denied a loan or a credit card because their credit report came back with an alert regarding a specialized list held by the Office of Foreign Assets Control (OFAC) within the United States government. But what exactly does this OFAC alert mean, and how is it placed on your credit report in the first place?
The Office of Foreign Assets Control (OFAC) is a branch within the U.S. Department of the Treasury that administers and enforces economic sanctions primarily against countries and groups of individuals, such as terrorists and narcotics traffickers.
An OFAC alert is a notification that appears on a consumer’s credit report and tells the lender that the consumer’s name matches a name on the U.S. Department of the Treasury’s Specially Designated Nationals (SDN) list. The SDN list includes names of suspected terrorists, drug traffickers, money launderers and arms dealers who are prohibited from doing business in the United States.
Under the USA Patriot Act, lenders are required to check the potential customer’s information against the SDN list every time there is a new application for credit. This rule is meant to prohibit terrorists and others on the SDN list the ability to finance a life in the United States. Soon after this rule was established, credit reporting agencies, like Experian, TransUnion and Equifax, started offering OFAC alert services.
When a consumer applies for a loan or credit, the lender will request a copy of the consumer’s credit report from a credit reporting agency (CRA) or credit bureau.
The CRA will pull the consumer’s information for the credit report along with a search against the SDN list. Searches against the SDN list may use different and potentially less stringent matching procedures.
If there is a match, the credit report will contain a notation related to the SDN list. If the CRA uses only first and last names, there may be a disclaimer stating that the match is only a “possible” or “potential” match.
Lenders are not supposed to make a credit decision based solely on the fact that the report included an OFAC alert. It is the lender’s responsibility to check the official list provided by the Treasury Department if a consumer’s report comes back from the credit bureau with an OFAC alert.
In practice, however, many lenders and other businesses will deny the application and move on to the next transaction rather than risk the penalties associated with doing business with a person on the SDN list.
As a consumer, you have rights that protect you from incorrect information on your credit report, including an OFAC alert. If there is a false alert on your credit report, here’s what you can do next:
In June 2017, Francis Mailman Soumilas, P.C. represented a California man in a historic class action lawsuit against TransUnion because of an incorrect OFAC alert that wasn’t fixed. It resulted in a $60 million verdict — the largest FCRA verdict in history.
You have the right to dispute and remove errors on your credit report. If your credit report contains an incorrect OFAC alert and you’ve disputed the error or can’t receive a copy of your file, you may be entitled to damages. Fill out your free case review form or call 1-877-735-8600 today to take the next steps.