Why the Fair Credit Reporting Act Exists Today
As the credit reporting industry grew, so did the need to regulate its reach. Until the passing of the Fair Credit Reporting Act, there were no protections for the individuals whose personal information was being compiled in the form of “investigative consumer reports” and provided to private businesses to make hiring (for employers) and lending decisions (for loan officers and crediting agencies).
Concerns about consumers’ rights arose in the 60s, when Retail Credit Co. began buying out CRAs and selling consumer credit reports to insurers and employers. The information included in these reports was being used to deny individuals services and opportunities, but these same individuals had no right to see what was being reported.
Other controversial practices included:
- quotas for retrieving negative information on consumers, which incentivized investigators to falsify reports
- collection of “lifestyle” information, including sexual orientation, marital status, drinking habits, and hygiene
- retaining and reporting outdated information
- no authorization process for who could view reports
When the public became aware of these unregulated breaches in privacy and confidentiality, the outcry resulted in Congressional inquiry and the passing of the Fair Credit Reporting Act (FCRA) in 1970. Despite the passing of the act, efforts to enforce its provisions are ongoing. In 2000, three CRAs were pursued for violations and made to pay $2.5 million in a case settlement. A few years previously, in 1996, amendments were passed in the Consumer Credit Reporting Reform Act to improve the FCRA, but also to:
- allow affiliate sharing of credit reports
- unsolicited offers of credit to consumers (prescreening)
- and limited preemption of stronger state laws on credit
In the Fair and Accurate Credit Transactions Act of 2003, more amendments were made, including a provision that allows free credit reports annually. Read more.