PART THREE: FCRA – FAIR CREDIT REPORTING ACT
I. WHAT?
The Fair Credit Reporting Act was enacted in 1970 to regulate the collection and reporting of consumer credit data. It requires credit reporting agencies to follow strict guidelines in how they collect data, how they keep that data safe from misuse, and how and under what circumstances they may release that information. It requires business entities providing credit data to certify that their data is accurate, provide disclaimers and information to consumers regarding what information they report and how to dispute it, and have clear procedures in place to ensure that information security is maintained. It allows for severe civil and criminal penalties for violations, including both actual and punitive damages, and in some situations, imprisonment.
II. HUH?
Basically, the FCRA operates in two halves. One half regulates credit reporting agencies, the other half regulates the providers and users (often the same businesses, actually) of credit information. The basic idea behind the FCRA is that credit reporting must be fair and secure – disputes must be handled fairly, credit information cannot be used inappropriately, and consumer privacy must be maintained at all times.
Credit reporting agencies are required to only give out information under certain circumstances known as ‘permissible purposes’. These include subpoenas and other court orders; clear and specific written instructions from the consumer whose credit information is to be released; applications for and reviews, servicing, and collection of credit accounts; legitimate business needs in connection with a consumer-initiated transaction (for instance, opening a savings or checking account); employment purposes such as consideration of employment, promotion, reassignment, or use of an independent contractor (all of which require specific written consent); insurance underwriting; and consideration of government-issued license or other government benefit.
Businesses that provide information to credit reporting agencies are required to ensure that the information they report is fair and accurate. Part of this requirement is that the burden of proof falls on them in case of dispute – if an individual reports to a credit reporting agency that the information contained in their credit report is inaccurate, the furnisher of the information is required to either correct the inaccuracy or provide proof that the information is accurate within 30 days of being made aware of the inaccuracy. They are also required to notify individuals of negative information that has been or is about to be reported to a credit reporting agency within 30 days.
Businesses that recieve and use information from credit reporting agencies are required to notify individuals if the information contained in the credit report contributed to a decision made that was not in the individual’s favor – for instance, if a loan or job application was denied, or a credit limit on an existing account reduced. They are also required to notify the individual what credit reporting agency the information was recieved from, and how to contact them to verify the accuracy of their credit report.
III. WHY?
If credit reporting agencies are going to collect information about you, it only makes sense that there are laws in place to make sure it’s accurate and that problems can be fixed quickly when they’re discovered.
IV. WHAT ELSE?
Your privacy is closely protected by this law – there are very limited circumstances in which your information is permitted to be accessed, and there are specific fines and other sanctions laid out in the law, including punitive damages if your information is accessed improperly or adminimstrated improperly.
V. WHAT DOES THIS MEAN TO ME?
Check your credit report as often as you can. Federal law allows you to recieve one free copy of your credit report from each of the three major credit reporting agencies (Trans Union, Experian, and Equifax) each year. Information that appears on a report from one agency is likely to appear on the others, so if you rotate requests, you can get a copy of your credit report every four months. If there’s anything on your credit report that is inaccurate in even the least little bit, IMMEDIATELY contact the credit reporting agency and dispute it. You can not be penalized or punished for disputing information on your credit report even if it turns out the information is accurate.
