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Fair Credit Reporting Act of 1970 (FCRA)

The Fair Credit Reporting Act (FCRA) was enacted in 1970 to promote accuracy, fairness and the privacy of personal information assembled by Credit Reporting Agencies (CRAs). The Act was passed largely to address the credit reporting industry in the US that compiled “consumer credit reports” and “investigative consumer reports” on individuals. It represents the first federal law to regulate the use of personal information by private businesses.

What does the FCRA do?

The federal FCRA promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies.

Credit reports can include a wide range of sensitive personal information and are used to evaluate an individual’s ability to participate in many different activities. They are subject to regulations within a framework of Fair Information Practices.

Here is a summary of the major rights protected by the FCRA:

  • You must be told if the information in your file has been used against you.

Anyone who uses a credit or consumer report against you must provide you with the name, address and phone number of the agency that provided the information.

  • You have the right to know what is in your file.

You are entitled to a free file disclosure if:

  • A person has taken adverse action against you because of information in your credit report.
  • You are the victim of identity theft and place a fraud alert in your file.
  • Your file contains inaccurate information as a result of fraud.
  • You are on public assistance.
  • You are unemployed, but expect to apply for employment within 60 days.
  • Also, all consumers are entitled to a free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.
  • You have the right to ask for a credit score.

Individuals may request a credit score from consumer reporting agencies, at a cost.

  • You have the right to dispute incomplete or inaccurate information.
  • Consumer reporting agencies must correct or delete inaccurate, incomplete or unverifiable information.

Problematic information must be removed or corrected, usually within 30 days. A CRA may continue to report information it has verified as accurate.

  • Consumer reporting agencies may not report outdated negative information.

CRAs may not report negative information over 7 years old, or bankruptcies that are more than 10 years old.

  • Access to your file is limited.

Information may only be provided if it is necessary (e.g. for an application with a creditor, insurer, employer, landlord, etc.).

  • You must give your consent for reports to be provided to employers.

Consent must be in written form and provided to the employer (except for those working in the trucking industry).

  • You may limit “prescreened” offers of credit and insurance you get based on information in your credit report.

Unsolicited “prescreened” offers must include a toll-free phone number for individuals to call, should they choose to remove their name and address from the lists.

  • You may seek damages from violators.

If a CRA, or in certain cases, a user of consumer reports or a furnisher of information to a CRA, violates the FCRA, individuals may be able to sue in state or federal court.

  • Identity theft victims and active duty military personnel have additional rights.

It’s also important to note that states have the authority to enforce the FCRA and many states have their own consumer reporting laws which may be even more stringent than the federal Act.

FCRA Basics

The FCRA establishes rights and responsibilities for “consumers,” “furnishers,” and “users” of credit reports:

  • Consumers – individuals
  • Furnishers – entities that send information to CRAs regarding credit worthiness in the normal course of business
  • Users – entities that request a report to evaluate a consumer for some purpose

A consumer reporting agency (CRA) is an entity that assembles and sells credit-related and financial information about individuals. There are three national CRAs in the US:

  1. Experian
  2. Trans Union
  3. Equifax

There are also smaller, regional credit reporting agencies. Inspection bureaus (i.e. companies that sell information to insurance companies and assist in background checks), tenant screening and check approval companies are often considered to be CRAs as well.

What’s in a CRA?

Consumer credit reports may contain information on financial accounts, including credit card balances and mortgage information. Credit reports may be used for evaluating:

  • Eligibility (e.g. for credit, insurance, employment, tenancy)
  • The ability to pay child support
  • Professional licensing (e.g. to become an attorney)
  • For any purpose that a consumer approves

Consumer credit reports contain basic identifying information (e.g. name, address, previous address, SSN, marital status, employment information, number of children), as well as the following information:

  • Financial information (e.g. estimated income, employment, bank accounts, value of car and home)
  • Public records information (e.g. arrests, bankruptcies, tax liens)
  • Tradelines (e.g. credit accounts and their status; payment habits on credit accounts)
  • Collection items (i.e. whether there are unpaid or disputed bills)
  • Current employment and employment history
  • Requests for the credit report (i.e. the number of requests for the individual’s report and the identity of the requestors)
  • Narrative information (i.e. a statement by the individual, or the furnisher regarding disputed items on the credit report)
  • Health information

Summary

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies. This article provides a summary of the basic rights under the FCRA as well as a definition of the most important terms.

CIPP Exam Preparation

In preparation for the Certified Information Privacy Professional/United States (CIPP/US) exam,  a privacy professional should be comfortable with topics related to this post, including:

  • Fair Credit Reporting Act of 1970 (II.C.a.)
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