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The Fair Credit Reporting Act (FCRA) is an American federal law (codified at et seq.) that regulates the collection, dissemination, and use of consumer credit information.

Consumer reporting agencies

Consumer reporting agencies (CRAs) are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes. They hold the databases which are the origins of a consumer's credit report. CRAs have a number of responsibilities under FCRA, including the following:

1. Provide a consumer with information about him or her in the agency's files and to take steps to verify the accuracy of information disputed by a consumer. Under the FACTA laws passed in 2003, consumers are now able to receive one free credit report a year. Free reports are obtainable at annualcreditreport.com

2. Conduct reasonable investigations into consumer disputes about incorrect information on their credit reports.

3. If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within 5 days, in writing.

4. CRAs may not retain negative information for an excessive period of time. The FCRA spells out how long negative information, such as late payments, bankruptcies, tax liens or judgments may stay on a consumer's credit report - typically 7 years from the date of the delinquency. The exceptions: bankruptcies (10 years) and tax liens (7 years from the time they are paid).

The 3 big CRAs Experian, Trans Union and Equifax, do not interact with information furnishers directly as a result of consumer disputes. They use a system called E-Oscar.

Information Furnishers

An information furnisher, as defined by the FCRA, is a company that provide information to consumer reporting agencies. Some good examples of information furnishers are credit card companies, auto finance companies and mortgage banking institutions. Their specific legal obligations under the FCRA:

1. Provide complete, accurate information to the credit rating agencies.

2. The duty to investigate disputed information from consumers.

3. Inform consumers about negative information which has been or is about to be placed on a consumer's credit report within 30 days. This notice doesn't have to be sent as a separate notice, but may be placed on a consumer's monthly statement. If sent as part as the monthly statement, it needs to be conspicuous, but need not be in bold type. Required wording (developed by the US Federal Treasury Department):

Notice before negative information is reported: We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.

Notice after negative information is reported: We have told a credit bureau about a late payment, missed payment or other default on your account. This information may be reflected in your credit report.

Users of the information for credit, insurance, or employment purposes

Users of the information for credit, insurance, or employment purposes have the following responsibilities under the FCRA:

1. They must notify the consumer when an adverse action is taken on the basis of such reports.

2. Users must identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer.

Likelihood of errors on a credit report

Some fraction of consumer credit reports contain errors.www.federalreserve.gov/pubs/bulletin/2003/0203lead.pdf Different studies report different fractions (from 0.2% to 70%), but most well-done studies find around a 20-30% significant negative error rate. As a result, many consumers frequently invoke their rights under the FCRA to review and correct their credit reports.

Fines for violations of the FCRA

Under section 15 U.S.C. ยง 1681s of the FCRA, a wronged party may collect $1000 for each willful or negligent act which results in the violation of the FCRA. Any person may file suit in local court to enforce the FCRA.

Which companies are regulated by the FCRA?

While putative database companies like Lexis, Westlaw, Choicepoint do not create credit reports, they may gather the same types of information and as a result may subject some of their actions to FCRA.

An entity that meets the definitional requirement for a "consumer reporting agency" (CRA) in Section 603(f) of the FCRA is covered by the law even if the only information it collects, maintains, and disseminates is obtained from "public record" sources.

Section 603(f) defines a "consumer reporting agency" as any person "which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information ... for the purpose of furnishing consumer reports to third parties ...". In turn, Section 603(d) defines a "consumer report" as the communication of "any information" by a CRA that bears on a consumer's "credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" that is "used or expected to be used or collected in whole or in part" for the purpose of serving as a factor in establishing eligibility for credit or insurance to be used primarily for personal, family, or household purposes, employment purposes, or any other purpose authorized under Section 604.

If the commercial service you describe regularly provides information for the purposes set forth in the definition of consumer report in Section 603(d), the agency is a consumer reporting agency and the information it collects from public record sources and maintains in its computerized files is subject to the FCRA. FTC advisory opinion

Other notes

In 2003 FCRA was amended by Fair and Accurate Credit Transactions Act to guard against identity theft.

See also

External links

United States federal legislation | Credit

References

 

This article is licensed under the GNU Free Documentation License. It uses material from the "Fair Credit Reporting Act".

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