The Fair Credit Reporting Act Benefits Credit-Active Consumers
The Fair Credit Reporting Act (FCRA) law went into effect in 1971 and was amended considerably in 1997 by Congress. The original FCRA protected your rights as a credit-active consumer by limiting who has access to your credit report. It mandated that, while you yourself may request a copy at any time, no one else may legally review your report unless they intend to:
- Conduct a credit transaction.
- Make a decision on employment.
- Underwrite insurance.
- Conduct a legitimate business transaction.
The 1971 FCRA also stated that your credit report may be accessed in response to a court order or federal grand jury subpoena.
Fines up to $5,000 and imprisonment for up to one year are consequences of knowingly and willfully obtaining a credit report under false pretenses.
The 1997 version of the FCRA further protects credit-active consumers and gives them more control over their credit information.
Highlights of the updated version of the FCRA are summarized below:
- Anyone who reviews your credit report for any reason other than those listed above is guilty of a felony. Credit bureaus and other information providers must make sure they are disclosing credit information only to users who are obtaining it for legal, permissible reasons as outlined in the FCRA. Any credit grantor or other entity that wants to get credit reports from a credit bureau must present to the bureau the legally authorized purpose(s) for which it will use the reports.
- Free credit reports must be available once a year to victims of identity fraud and the unemployed or poor. Individuals who have been denied credit may obtain a free credit report within 60 days. Anyone else requesting a credit report will be charged up to $8.00 per report (price can be adjusted for inflation).
- Potential employers may no longer use credit reports to make employment decisions without the permission of the job applicant. Before the potential employer can deny a position to an applicant based on the information provided by the report, the applicant must receive a copy of the report.
- Whenever a consumer disputes credit information on his or her credit report, the three major credit bureaus, Experian, Equifax, and Trans Union, must notify each other of the reinvestigation. It was previously the consumer’s responsibility.
- Credit bureaus must use information supplied by the consumer in addition to the credit grantor when reinvestigating incorrect or incomplete credit information.
- Reinvestigations sought out by consumers must be completed within 30 days by the major credit bureaus.
- If information reported by a credit grantor to a credit bureau continues to be be disputed by a consumer after the information has been reinvestigated by the credit grantor, the credit grantor may not report the information to the credit bureaus without stating that the data is still being disputed.
- Bureaus, as well as credit grantors (banks and retailers), must give consumers better notices of their rights. In addition to including the name and address of the credit bureau that supplied the report on which the decision was based, the following information must also be included:
- Phone number of the credit bureau
- A statement that the credit bureau did not decide to take adverse action
- Notice of the consumer’s right of free access to their report from the bureau by submitting a written request within 60 days
- Notice of the consumer’s right to dispute the inaccuracy or completeness of the information in their report with the bureaus.
- Banks, retailers, and credit card issuers that report credit information to credit bureaus are held responsible for making sure that the information reported is as correct as can be. Also, these credit grantors are supposed to help credit bureaus with reinvestigations.
- If a consumer closes out a credit account, the credit bureau, bank, or retailer must label the account as one in good standing that was requested by the consumer to close.
Banks, retailers, and credit card issuers purchase pre-screened lists from credit bureaus and use them to identify qualified and interested consumers to whom they market credit cards and other retail loans. These pre-screened lists have also been affected by the FCRA amendment. Card issuers can deny credit if the consumer does not qualify for the pre-screening criteria.
- Banks are required to give consumers a new pre-screening disclosure that explains that the offer results from pre-screening by a credit bureau, and that the consumers may notify the credit bureau if they want to be excluded from future pre-screening.
- The three major bureaus must provide a joint toll-free number for consumers to call who do not want to be on pre-screened lists.
Credit repair clinics will charge consumers up to thousands of dollars to allegedly “repair” less than perfect credit reports. Although these clinics claim the ability to dispose of negative credit information from a consumer’s file, if the negative information is accurate, it has to stay on the credit report for up to 10 years. This is federally mandated. If the consumer pays the credit repair clinic before the service is performed, the consumer can expect to lose a large amount of money. The new law prohibits credit repair clinics from collecting a fee before a service is performed.