In the U.S., you have rights regarding how your credit and personal history is collected, accessed, and shared. This has become increasingly important today, as credit reports are used for various purposes, from employment and housing decisions to loan and insurance approvals. These laws protect consumers from inaccurate, incomplete, or outdated credit reporting, as well as ensure that they are treated fairly and with respect by credit reporting agencies and other entities that use credit information. The Fair Credit Reporting Act is central to these consumer protection laws.
The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is a federal law. Its design ensures that credit reporting agencies, like credit bureaus, report accurate information about you. The law outlines critical factors, including how your data is collected, accessed, and shared.
The law went into place in 1970. It was deemed an essential law because numerous organizations can gather and report credit information on you, and there was little regulation overseeing this process before the law.
In our digital world, the amount of information readily available about consumers is incredible. There is always information being reported about you to the credit bureaus and others. For that reason, these laws provide a type of protection for you. There are various components to FCRA.
Consumer Rights and Protections
Under FCRA, you have specific consumer rights, including the following:
- You have the right to verify the accuracy of your credit report any time it is requested for employment purposes.
- Consumers have the right to have negative and outdated information removed from their credit report 7 to 10 years after it's reported.
- Any time you apply for a loan or your data is used against you when applying for a loan or line of credit, you have the right to be notified.
- You also have the right to dispute and require the credit bureau to fix any information that is not accurate or incomplete.
Credit Reporting Agency Responsibilities
Credit reporting agencies, such as TransUnion, Equifax, and Experian, also have rules under the FCRA. They must report accurate information and delete any inaccurate information reported on you. If they cannot verify the information provided to them about your credit use, they must remove it.
Credit reporting agencies also have to provide limited access to your file. They can only share information about you with those with a valid reason for that information, such as a creditor you are applying for a loan through or a potential employer if you've given permission.
You also have the right to place a security freeze on your credit report. That means the credit reporting agency cannot release any information on your info without express authorization. This can help you to prevent being approved for a loan or service without your full consent and may be beneficial in some situations related to identity theft.
Compliance and Enforcement
If you receive a copy of your credit report and there are errors, it is up to you to report them to the credit bureau. The credit bureau then turns to the reporting part to prove its accuracy. If the company says the information cannot provide verification, the credit monitoring agency must remove that data from your report.
A violation of the FCRA could mean a fine of $100 to $1,000, dependent on the situation. Additional costs may be applied, and criminal charges may be involved in identity theft or other concerns.
The Federal Trade Commission and the Consumer Financial Protection Bureau oversee and enforce this law.
Amendments and Updates
Over time, many laws are updated to include information and support for a changing world. There have been several amendments and updates over the years to the FCRA, and some of the most notable include:
- Address Discrepancy Rule
- Affiliate Marketing Rule
- Furnisher Rule
- Pre-Screen Opt-Out Notice Rule
- Risk-Based Pricing Rule
These rules were updated in 2021 for more technical-based changes, such as adding a website to allow consumers to opt out of credit offers.
Other significant amendments to these rules include the following:
Consumer Credit Reporting Reform Act of 1996
This update created significant revisions to FCRA, expanding the duties of the credit reporting agencies to respond to consumer disputes (requiring them to do so within 30 days) and requiring written notice to the consumer of the results of those actions. It also altered the way employers could gain access to and use information from a credit report.
Fair and Accurate Credit Transaction Act of 2003
This update expanded FCRA further. It gives consumers the right to receive a free copy of their credit report from each of the three credit bureaus once a year. It also required that information placed on a report due to identity theft be blocked, including any identity theft issues.
This law adjustment took numerous steps to help provide ways to protect against identity theft. A national fraud alert system was established. It also required merchants to only offer a shortened account number, called a truncated number, on all receipts to help minimize the risk of others obtaining that information. The law adjustment also created steps for businesses to take when they suspected identity theft was occurring.
This is a fundamental law for consumers and may change in the future. Yet, as a consumer, you should know your rights under it and take full advantage of using them to protect your financial health.