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The Fair Credit Reporting Act – What is it?

The Fair Credit Reporting Act (“FCRA”) is a federal consumer protection statute that was passed in 1970 in order to regulate how a consumer’s credit information is collected and accessed by credit reporting agencies. The law helps to ensure that the information on a consumer’s credit report is kept private and treated with fairness and accuracy. It also protects consumers from having inaccurate financial information used against them. The three major credit reporting bureaus that collect and sell consumers’ financial information are TransUnion, Equifax, and Experian, and they are required to follow the rules that are outlined in the FCRA. Other parties subject to the rules of the FCRA include information furnishers and users of consumer reports. The FCRA contains guidelines on how credit reporting agencies can obtain a consumer’s credit information, how long information can be kept, and how the information can be shared. Pursuant to the FCRA, consumers are provided with certain rights. If a consumer’s rights under the FCRA are violated by a credit bureau or by any other party, the consumer may be entitled to compensation.

Consumers Are Entitled to Copies of their Credit Report(s) and Credit Score

If a consumer wishes to have a copy of their credit report, a credit bureau must provide them with a copy of their report. Consumers have the right to know the information that is recorded in their credit files. The law indicates that consumers are entitled to one free credit report every 12 months from each of the three major credit bureaus. It may be beneficial for consumers to stagger their requests in order to monitor the accuracy of their credit information. Consumers can obtain a free copy of their credit report from AnnualCreditReport.com, an official government-authorized website. Consumers can also request their credit reports from a number of other locations, including the official websites of any of the three major bureaus. When making a request, a consumer must be able to verify their identity by providing information like their name, address, date of birth, and Social Security number. This step is in place in order to ensure the safety of consumers’ credit information and to prevent possible identity theft or other problematic situations. Upon successfully requesting a copy of their credit report, a consumer’s credit report should be provided to the consumer within 15 days of the request being made. If a consumer has already requested their free credit report from each of the three bureaus and the 12-month span of time has not passed yet, they are still entitled to make requests for additional credit reports. In the case of additional requests, the consumer would be charged a reasonable amount for each subsequent report.

There are also cases in which a consumer can be eligible for a free credit report. For example, if a business takes adverse action against a consumer (for example, denying an application, charging a higher interest rate, etc.) due to information in their credit report, the consumer can ask for a free copy of their report within 60 days of receiving notice of the action. The consumer must be notified in the case that an adverse business action occurs and they should be given the name, address, and phone number of the credit reporting agency that provided the information. Additionally, consumers who are on welfare and those who are unemployed and are planning to look for a job within 60 days are entitled to a free credit report. The credit bureaus must also provide free reports to consumers who are victims of identity theft or consumers who have inaccurate information on their reports due to fraud.

Additionally, the FCRA provides consumers with the right to ask for their credit scores. Consumers can request their scores from consumer reporting agencies or they may be given a free score from certain lenders during transactions. It is possible for a consumer to receive a different credit score from each of the credit bureaus.

Consumers Have the Right to Have Their Credit Information Reported Accurately

Under the FCRA, consumers are entitled to accurately reported credit information. If a consumer believes that their credit file contains incomplete or inaccurate information, they have the right to dispute the information and to report it to a consumer reporting agency. If there is inaccurate, incomplete, or unverifiable information on a consumer’s credit report, the consumer reporting agencies must correct or remove such information within 30 days. In order to dispute inaccurate information, a consumer should notify the reporting company in writing about the information that they believe is incorrect. The company should then launch an investigation in order to determine the status of the information in question. The disputed information must be removed from a consumer’s report if it is inaccurate and the information cannot be put back until it is verified as accurate and complete. If a dispute cannot be resolved, the consumer can ask for a statement that explains the dispute to be added to their credit file.

Furthermore, consumers are entitled to have outdated negative information removed from their credit reports. Pursuant to the FCRA, consumer reporting agencies cannot report negative information that is older than seven years or bankruptcy information that is older than 10 years. However, there is no time limit on how long agencies can report information about criminal convictions, information that is reported due to an application for a job that has a yearly pay of over $75,000, or information that is reported due to an application of over $150,000 for credit or life insurance. In the case that a lawsuit or an unpaid judgment has been made against a consumer, information regarding these two cases can be reported for seven years or until the statute of limitations runs out, whichever is longer. If a consumer cannot remove outdated information from their report, they can submit an explanatory statement to be added to their credit file.

Consumers are Entitled to Privacy Regarding the Collecting and Sharing of Credit Report Information

The FCRA outlines what type of data and information that credit bureaus are allowed to collect. This can include information like the bill payment history of a consumer, current debts, past loans, employment information, whether the consumer has filed for bankruptcy before, whether the consumer has an arrest record, what the consumer’s past and present addresses are, and if the consumer is behind on child support.

Pursuant to the FCRA, access to a consumer’s credit report is restricted to most other parties aside from the consumer themself. Access is limited to people or companies with a “permissible purpose,” which means that they must have a valid reason for checking the consumer’s credit. The three major bureaus as well as any other consumer reporting agency must make sure that a party has a permissible purpose before allowing them to access a consumer’s credit report. Some examples of those who may have permissible purposes include lenders and creditors that a consumer is applying for credit with, existing creditors that a consumer has a relationship with, debt collection companies that are collecting payment, rental companies, insurance companies, and certain government agencies.

Generally, a mortgage lender, or a credit card provider, or a loan financer, or a vehicle loan provider, or a landlord, or an insurance company can only request a credit report when one of those loans or cards or policies or rental applications is applied for by the consumer. The government can request the credit report of an individual person in response to a federal grand jury subpoena, or a court order, or if the person is applying for a specific type of license that is government-issued. Employers can also request access to a consumer’s credit report but a consumer must give written permission before their credit report can be released. Employers who are in the trucking industry generally are not required to have attained the written consent of a job applicant before requesting the credit report of a job applicant. Consumers’ medical information remains private, as consumers are protected from having their medical information disclosed in their credit reports. Creditors are prohibited from obtaining or using medical information when they are making decisions in regard to credit. In almost all circumstances, the consumer must be the one who initiates the transaction or they would have to have agreed in writing for the report to be released before any credit bureau can release it.

Consumers also have the right to know the parties that have requested to look at their credit report in the last 12 months. For employment purposes, consumers have the right to know which companies have requested to look at their credit reports in the past two years.

Consumers’ Rights Regarding Information Furnishers

The rules outlined in the FCRA also apply to information furnishers which are businesses that furnish and provide information to the credit bureaus. These businesses are legally obligated to report accurate information and to update and correct inaccurate information. They cannot refuse to do so.

If an information furnisher has reported inaccurate negative information to any credit bureau, they must notify the consumer within 30 days. Information furnishers must also notify consumers about negative information that they are planning to submit to any of the bureaus. This must also be done within 30 days. Information furnishers can notify consumers via letters like billing statements or default notices.

Additionally, information furnishers cannot report accounts that a consumer has claimed were affected by identity theft. There are procedures in place for these businesses to notify the credit bureaus of identity theft. Information furnishers also have to inform credit bureaus of consumers’ voluntary account closures. They cannot publish a consumer’s full credit card number or Social Security number on paperwork — they must use truncated versions.

Consumers’ Rights Regarding Pre-Screened Offers and Security Freezes

According to the FCRA, credit bureaus must give consumers the opportunity to opt-out of prescreened offers and insurance offers. Unsolicited prescreened offers for credit and insurance must include a toll-free number that a consumer can call in order to remove their name and address from the caller list. Consumers can also opt-out with the major credit bureaus by calling 1-888-5-OPTOUT (1-888-567-8688).

Furthermore, consumers have the right to place a security freeze on their account which prevents a consumer reporting agency from releasing credit information to a third party without first obtaining a consumer’s express consent and authorization. Having a security freeze in place can potentially delay, prohibit, or interfere with the timely approval of a subsequent request or application made regarding a new loan, credit, mortgage, and so on. Security freezes do not apply to entities (or affiliates or collection agencies that are acting on their behalf) that a consumer already has an account with.

As an alternative to a security freeze, consumers can also place an initial or an extended fraud alert on their credit files. If a consumer believes that they are a victim of identity theft, they can add a free one-year initial alert to their credit file. When a fraud alert is in place, businesses must take steps to verify the consumer’s identity before extending new credit opportunities. Consumers who have been past victims of identity theft can add an extended fraud alert to their profiles. These alerts last seven years. Additionally, consumers who are active-duty military have the option to place a one-year military alert on their file that also guards against identity theft.

Options for Victimized Consumers

Consumers have the right to sue and seek damages from credit bureaus, users of consumer reports, and information furnishers that act in violation of the FCRA. Additionally, many states have their own consumer reporting laws, and so it is possible that consumers have additional rights under state law. If a consumer believes that their rights have been violated under the FCRA, they should contact a law firm or a consumer protection attorney who is licensed in the state that they reside in. It is important for a consumer to have an accurate reporting of their credit history. Professional legal assistance can provide consumers with guidance, help them seek restitution, and assist them in determining the answers to any questions that they may have in regard to the FCRA.