What is the Fair Credit Reporting Act?
Simply put, the Fair Credit Reporting Act (FCRA) is the federal law that governs credit reporting. The FCRA is enforced by the Federal Trade Commission. It was designed to protect consumers regarding the use, accuracy and privacy of consumer credit reports. The law was originally passed in 1970 to ensure that consumers have access to information being reported about them by the credit bureaus. It gave consumers the right to see the exact information that creditors, insurers and employers use to make decisions about providing credit and other services.
Amendments
Amendments to the FCRA were passed in 1996 to provide new consumer rights to improve the accuracy of credit reports. Another amendment was made in 2003, called the Fair and Accurate Credit Transactions Act (FACTA). Under FACTA, consumers are able to receive one free credit report a year.
Consumer Reporting Agency Guidelines
FACTA also gave the consumer reporting agencies (CRAs) new guidelines, including the following:
1. CRAs must take steps to verify the accuracy of information disputed by a consumer.
2. If negative information is removed as a result of a consumer’s dispute, it may not be reinserted without notifying the consumer within 5 days, in writing.
3. CRAs may not report negative information for an excessive period. Most negative items must be removed within 7 years from the date of delinquency with exceptions to bankruptcies (10 years) and tax liens (7 years from the time they are paid).
Creditor Guidelines
Creditors and other information furnishers were also given new guidelines:
1. They must provide complete and accurate information to the CRAs.
2. They must to investigate disputed information by consumers.
3. They must inform consumers about negative information which has been or is about to be placed on a consumer’s credit report within 30 days.
Users of Information Guidelines
Users of consumer information for credit, insurance, or employment purposes (including background checks) also have guidelines in which they must follow under the FCRA:
1. Users must notify the consumer when an adverse action is taken on the basis of such reports.
2. They must identify the company that provided the report, so that the accuracy of the report may be verified or contested by the consumer.
Civil Liability for Violations of the FCRA
A consumer may seek a maximum of $1,000 in statutory damages, plus actual damages, punitive damages and reasonable attorney’s fees and costs for willful noncompliance of the FCRA. If you believe your rights are being violated you may consult with an attorney and file suit in state or federal court.
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