#what is the fair credit reporting act
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is a federal law created to protect consumers and their personal financial information. Passed in 1970, the FCRA was the first law to require accurate and fair consumer reporting. Over the years, small additions have been made to keep up with the need for extended consumer rights.
The lengthy and comprehensive act safeguards you and your credit by requiring consumer reporting agencies to follow protective standards. It regulates how consumer reporting agencies – such as Equifax, TransUnion and Experian – use the information they receive regarding your credit. The law also helps limit the number of people who view your personal information.
Portions of the law go into greater detail. It specifies what actions are allowable and what actions are unfairly utilized by credit bureaus and large credit companies. It also gives instructions for members of the military and victims of identity theft.
The first portion of the FCRA provides a list of consumer rights regarding individuals’ credit history information.
Under the Fair Credit Reporting Act, you have a right to:
- Access your credit report. The act requires credit reporting agencies provide you with any information in your credit file upon request, as long as you have proper identification. You have a right to a free copy of your credit report within 15 days of your request by phone, Internet or mail on an annual basis.
- Protected access. The act limits access to your file, so that it’s visible only to those with a reasonable need to see your credit report. This includes credit grantors, collection agencies, insurance companies and landlords. Employers may only view your report with your permission. Others, such as your neighbors, co-workers and family members, are not authorized to access such information. You also have the right to know who has requested your credit report in the last year or, for employment-related requests, two years.
- Accurate reporting. If inaccurate information is discovered in your file, the consumer reporting agency must re-examine the disputed information in a timely manner. If the inaccurate information cannot be verified, the consumer reporting agency has a responsibility to remove it. If you are not able to clear up the matter, you are allowed to add a statement to your credit file explaining the situation.
- Have outdated information removed. Negative information must be removed from your file after seven years. Bankruptcy, however, may remain on record for 10 years, and criminal record information can remain indefinitely.
- Maintain medical information privacy. You are protected from having medical information in a consumer report, as creditors are prohibited from obtaining or using medical information when making a credit decision.
- Limit unsolicited credit offers. The law allows you to request to have your name and address removed from unsolicited prescreened offer lists for credit and insurance. To opt out of such correspondence, call (888) 5-OPTOUT (888-567-8688).
- Protect your personal account numbers. Credit card machines must truncate all credit and debit card numbers on receipts. The law also allows you to protect your Social Security number by having it truncated on your credit report.
- Receive notification of possible negative information. You have the right to be notified if any financial institution submits, or plans to submit, negative information to a credit reporting agency. This information may be included in a billing statement or a notice of default.
- Seek damages. You have the right to sue and seek damages in a state or federal court from anyone, such as a consumer reporting agency or a user of consumer reports, who violates the Fair Credit Reporting Act.
- Know when your credit report is used against you. If you are denied credit, insurance or employment because of your credit report, you can ask for the specific reason for the denial.
- Know your credit scores. You have a unique credit score with each credit bureau. which you can request. In some cases, you may be required to pay for this information.
The Fair Credit Reporting Act includes three smaller acts: the Credit CARD Act, the Dodd-Frank Act, and the Fair and Accurate Credit Transactions Act. These deal with the accountability of credit card companies and credit associations, as well as the rights of identity theft victims and active duty military personnel.
Credit CARD Act
Under the Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act), credit card companies are not allowed to increase your interest rate on an existing balance. The act also requires a company to give you 45 days’ notice prior to increasing the rate on new balances. It additionally requires credit card companies to keep regular and consistent payment deadlines.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) was enacted in 2010 to stop ongoing unfair practices by major financial institutions and creditors. The act is intended to prevent a major recession like the one that started in 2007.
The DFA created an independent watchdog system to monitor information given to consumers and ensure that consumers receive clear and accurate credit information.
It ended bailouts, meaning that taxpayer money cannot be used to save failing financial firms. It also imposed new requirements on big companies to deter them from growing.
And it implemented a new warning system to give the government more advanced notice of problems, before they significantly weaken the national economy.
The DFA also forces big financial institutions to be more transparent and accountable. It gave investors a greater say in company issues, strengthened enforcement of existing laws and eliminated loopholes that allowed risky and detrimental behavior.
Fair and Accurate Credit Transactions Act
If someone assumes your identity through the use of stolen personal information and commits fraud, the event is likely to damage your credit report. The Fair Credit Reporting Act’s Fair and Accurate Credit Transactions Act (FACTA) outlines rights to protect consumers’ finances and repair damage to the credit report. It specifically protects identity theft victims and active duty military personnel.
If you are an identity theft victim, the FACTA gives you the right to:
- Place a “fraud alert” in your credit reports. An alert makes potential creditors more wary of credit applications and inquiries in your name, protecting you from additional fraud. This can be short term (90 days) or long term (seven years).
- Receive free copies of your credit reports. Check these documents for signs of fraud, such as an unauthorized line of credit or a change in address.
- Request and obtain copies of documents related to fraudulent dealings. You may be required to show proof of potential identity theft, such as a police report.
- Request and obtain relevant information from debt collectors. This includes details of the debt, such as the creditor and amount due.
- Request a “block” on information resulting from identity theft. When supplied with adequate proof, credit reporting agencies can prevent an identity thief’s actions from appearing on your credit report and negatively affecting your credit score.
- Similarly, request that businesses not report information related to your identity theft. Once you provide proof that a thief did business in your name, the involved businesses can stop reporting the false information to credit reporting agencies, preventing negative effects to your credit report.
Active duty military personnel have one additional right under FACTA. Special regulations allow military personnel to place “active duty alerts” in their credit reports.
If you place an active duty alert in your report, creditors must take extra steps to verify your identity. This protects against identity theft while you are deployed by making it more difficult for thieves to impersonate you. The alert typically lasts one year but may be canceled sooner or renewed.
To place or remove an active duty alert, as with a fraud alert, you must call only one of the three national reporting agencies: TransUnion, Experian or Equifax. The agency you contact will then notify the remaining two.