The Fair Credit Reporting Act (FCRA) is a federal law, passed in 1970, that regulates and controls access to information collected by consumer reporting agencies. This act is necessary to ensure accuracy and fairness in the way these agencies handle private and personal information of consumers, and how long they keep this information.
Among other things, the Fair Credit Reporting Act closely specifies the type of information that the bureaus are privy to, which typically includes a person's history of bill payment, current debts, employment information, past and present addresses, past loans, and arrest records. By the same token, the Act also restricts access to a credit report in a number of circumstances.
The FCRA is enforced by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). In addition to this act, many states in the USA have established laws for regulating credit reporting.
FCRA Summary Rights
The FCRA mandates consumer reporting agencies to give consumers access to the contents of their own file whenever they ask for them. Consumer reporting agencies are also barred from sharing consumers' information with third parties, except for a permissible purpose.
Under the FCRA, a number of such permissible purposes are defined, and they include:
Credit reports for lenders when a consumer applies for a loan, mortgage, or other types of credit.
Consumer records to employers or potential employers.
A legal mandate, such as a court order or federal grand jury subpoena.
On the second point, while a consumer reporting agency may provide consumers' details to employers or potential employers, they're not permitted to submit personal information without the consumer's approval. In most cases, consumers need to initiate a transaction or submit written acceptance before their report can be released by the credit bureau.
Consumers are entitled to check their credit report information for free once every year. Subsequent checks would typically attract a fee.
Consumer Rights Under The FCRA
In addition to the right to check their credit report information every 12 months for free, consumers are also granted several other rights under the FCRA. In the event that information contained in their credit report leads to an adverse decision against them (such as the denial of employment or declining of loan requests), the consumer must be notified. Further, the party that took the decision must inform the consumer which agency gave them the information.
Secondly, consumers have a right to contest information in their credit reports that they feel is inaccurate or misleading. Since this information is used to calculate their credit score, consumers can, in effect, attempt to contest and improve their credit score by having inaccurate information rectified. Consumer reporting agencies have a maximum of thirty days to correct or delete inaccurate information once they have been proven to be so.
Consumers also have the right to remove negative information from their credit reports that they can provide is outdated. For instance, a consumer that is recorded as bankrupt can apply to remove that information from their record after a period of financial stability, usually ten years. In most other cases, however, they can do so after seven years.
Consumers can hold the credit bureau accountable, if any of these requests are not handled satisfactorily, by filing a complaint with the CFPB. Violation of any of the FCRA regulations also carries a fine of between $100 to $1000. Actual and punitive damages, as well as attorney's fees, may be awarded if damages are incurred. If someone acquires information from a consumer reporting agency under false pretenses, they may face criminal prosecution.
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