The Fair Credit Reporting Act (FCRA) was passed by by Congress and signed into law by President Nixon in 1970. The law was intended to make the credit reporting process — which uses a consumer’s credit history to determine their credit score — more transparent and fairer for consumers. It did this by creating more opportunities for consumers to access their credit information and dispute errors on their credit reports and by restricting the ways in which credit reporting companies can use and share a consumer’s information.
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History of the FCRA
Prior to the passage of the FCRA, the credit reporting industry was fairly unregulated. Credit reporting companies had no legal obligation to report a consumer’s information accurately. While companies may have made an effort to keep consumer records accurate, there was little outside incentive for them to act on individual consumer disputes in a timely fashion. In 1970, Congress aimed to change that and give more rights to consumers when it came to credit reporting.
The FCRA wasn’t the first attempt to protect consumer rights in the financial sector, though. In fact, the FCRA was passed as an amendment to the Consumer Credit Protection Act of 1968. However, unlike previous laws designed to protect consumers, the FCRA was one of the first laws passed in the computer age, when Congress was aware of how computers could be used to track and share enormous quantities of consumer information.
What Is the Fair Credit Reporting Act?
The FCRA is a federal law that was created in 1970. As it applies to commerce in the United States and consumer debt, it is enforced by the Federal Trade Commision (FTC) and the Consumer Financial Protection Bureau (CFPB) as CFPB Regulation V.
What Is a Consumer Report?
Consumer reports are more commonly known as credit reports. Your consumer report (or credit report) contains information about your credit history, including how well you have kept up with payments on past debt, how much debt you currently have, how much credit you have available, and how much of that you are using. It also contains information about whether or not you are the subject of a debt collection effort.
The FCRA lays out requirements for how credit reporting companies handle consumers’ credit reports. These requirements come in a couple forms, but the most important is the rights that the FCRA gives to consumers when it comes to accessing their credit reports. In particular, the FCRA requires:
Free Copy of Your Credit Report
Credit reporting companies are required to provide you with a free copy of your credit report under the following circumstance:
- A business has denied an application for credit or otherwise made changes to your line of credit that are harmful to you because of information that they saw in your credit report.
- You are unemployed, but seeking employment in the next 60 days.
- You are a recipient of a government-funded welfare program, such as social security.
- You are a victim of identity theft or your credit report is inaccurate because of the actions of someone who stole your identity.
- You are also entitled to a free copy of your credit report once a year, regardless of how any of the above conditions applies to you.
Although the FCRA requires credit report companies to provide you with a copy of your credit report in these circumstances, many banks, credit unions, and credit card companies will provide you with more frequent updates on your credit score if you are a customer.
Investigation of Credit Report Errors
The FCRA requires credit reporting companies to investigate any errors on your credit report as long as you dispute them. They have 30 days following the submission of a dispute or 45 days following the submission of additional information as part of a followup to a dispute to correct errors on your credit report.
Expiration of Information
If you follow your credit report, you may have noticed how negative information (such as late payments, loan default, and so on) falls off of it seven to 10 years after the event. This is thanks to the FCRA, which requires credit reporting companies to remove information that has a negative impact on your credit score seven to 10 years after it was first reported. This allows consumers to move beyond their past mistakes with debt.
Other Requirements of the FCLA
In addition to the above requirements, the FCLA limits the people to whom a credit reporting company can provide your information. Only those with a permissible purpose as defined by the FCLA are allowed to view a copy of your credit report. Companies with a permissible purpose include credit card companies, lenders who are considering a loan application from you, and sometimes employers, though they can only view your credit report with your written consent.
Finally, the FCLA requires credit reporting companies to allow you to opt-out of prescreened credit offers. These are the sorts of offers that show up in your mailbox a few times a month — unsolicited offers from credit card companies to let you open a line of credit.
FCRA Requirements for Businesses
It’s not just credit reporting companies that are regulated by the FCRA. Businesses that provide information that goes on your credit report (also known as information furnishers) and businesses that make use of your credit report are also subject to the FCRA.
FCRA Requirements for Information Furnishers
The FCRA requires that information furnishes:
- Report accurate about consumers.
- Promptly correct inaccurate information with the credit reporting companies whenever applicable.
- Must inform consumers of any negative information that is furnished to credit reporting companies within 30 days after the information was reported.
- Must distinguish between voluntary and involuntary account closures in reports.
- Must respond to identity theft notices in a regular fashion. Identity theft notices are sent out to information furnishers by credit reporting companies. Furthermore, information furnishers cannot continue reporting the information of accounts that are the subject of identity theft.
FCRA Requirements for Information Users
In addition to information furnishers, the FCRA also regulates business that use the information found on consumer reports. For example, credit card companies, mortgage lenders, and banks all use consumer reports to make business decisions. For these businesses, the FCRA requires that they inform consumers when information on a credit report leads to a rejection and that they provide consumers with the identity of the credit reporting company whose credit report informed the rejection decision.
Fair Credit Reporting Act Violations
If you believe that you are working with a company — whether it is a credit reporting company, an information furnisher, or an information user — that is guilty of an FCRA violation, then you are entitled to take action right away. The first thing you can do is to submit complaints to the FTC and CFPB. From there, the company will have 15 days to respond to your complaint, after which it will end up in the CFPB complaint database. Sometimes complaints are enough to resolve an issue on their own and, in more extreme cases, the CFPB and FTC will use complaints against a business as part of a lawsuit. However, if you are unsatisfied with the response to your complaint, you are also free to hire a lawyer and pursue a legal resolution to the violation on your own.
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