ANOTHER BRIEF HISTORY ON THE FAIR CREDIT REPORTING ACT
The Fair Credit Reporting Act (FCRA) is a United States federal law that was established in 1970. Comprehensive amendments were made to the FCRA in 1996 and again in 2003 when the Fair and Accurate Credit Transactions Act (FACTA) was created. The FCRA regulates the collection, dissemination and use of consumer information. It was the first federal law that was specifically designed to regulate the use of personal information by private businesses. The FCRA is enforced by the Federal Trade Commission (FTC) and other private litigants. Companies that are regulated or partially regulated by the FCRA include Credit Reporting Agencies (CRAs), Nationwide Specialty Consumer Reporting Agencies and Information Furnishers. Those who utilize credit reporting services, such as employers, are also subject to guidelines outlined by the FCRA as well.
CRAs are organizations that collect and distribute information about consumers which is then used for things like credit evaluations and employment. CRAs have several responsibilities under the FCRA including: Providing consumers with information about themselves that can be found in the agency’s files and taking steps to verify the accuracy of any information disputed by a consumer (under FACTA, consumers can receive one free credit report per year); If negative information is removed as a result of a consumer’s dispute, CRAs may not add the information without notifying the consumer in writing within five days; and CRAs cannot retain negative information about a consumer for an extensive period of time. The FCRA describes the amount of time that negative information, such as bankruptcies and judgments, may stay on a consumer’s credit report–typically seven years from the date of the delinquency, with some exceptions. There are three major CRAs that are regulated by the FCRA including Experian, TransUnion and Equifax.
In addition to CRAs, there are also a number of information technology companies that the FCRA has classified as Nationwide Specialty Consumer Reporting Agencies. These companies report things like medical history and payments, residential history, check-writing history, employment history and insurance claims. Because these companies sell consumer credit report files, they are also required to disclose annual reports to the consumers who request them.
Information Furnishers (also known as creditors) are companies that provide information to CRAs. Under the FCRA, these information furnishers may only report a consumer’s credit report under the following guidelines: They must provide complete and accurate information; they must investigate disputed information from consumers, and they must correct errors or explain why a credit report is correct within 30 days of receipt of notice of dispute; and they must inform consumers about negative information which has been or will be placed on a consumer’s credit report within 30 days.
The FCRA limits the use of the credit reports to certain purposes including:
- Applications for credit, insurance and rentals for personal, family or household purposes.
- Employment including hiring, promotion, reassignment or retention. (A CRA may not release a credit report for employment decisions without consent.)
- Court orders.
- “Legitimate” business needs in transactions initiated by the consumer for personal, family or household purposes.
- Account review.
- Child support payment determinations.
- Law enforcement access.
A 2004 study released by the U.S. Public Interest Research Group found that 79 percent of the consumer credit reports surveyed contained some kind of error. However, the General Accountability Office also released a study disputing those numbers. The Federal Reserve Board issued a similar report. In 2007, the Consumer Data Industry Association testified that less than two percent of 52 million credit reports had data removed because it was in error.
Ultimately, the FCRA was created to offer protection to consumers. Companies and individuals who fail to remain in compliance with the FCRA’s guidelines could eventually be subjected to costly and disadvantageous consequences.