Fair Credit Reporting Act

The Fair Credit Reporting Act — What It Means To You

The Fair Credit Reporting Act (FCRA) is a federal law created to promote accuracy, fairness and privacy of personal information gathered by credit reporting agencies (CRAs). The FCRA regulates the use of personal information by private businesses. Its purpose is to ensure that CRAs follow “reasonable procedures” to protect the confidentiality, accuracy and relevance of consumer credit information.

 

The formation of the FCRA

Retail Credit Co. was the first major CRA that is furnished by creditors and started in 1899.1 The agency purchased a number of smaller CRAs over time and began to sell consumer credit reports to insurers and employers. At the time, there were no laws governing how CRAs operated. By the 1960s, significant controversy had developed around their practices. Consumers were not allowed to see what was in their reports, which often contained outdated or inaccurate information.

There was abuse using negative information to deny services or opportunities that had nothing to do with creditworthiness. In some cases credit information was even provided to law enforcement and other unauthorized and unrelated parties. Congress investigated the industry when the abuses became public which resulted in the passage of the FCRA in 1970 to protect consumers from misuse of their personal information.

 

What the FCRA means today

The most well known provision of the FCRA is consumers’ right to a free credit report every year from each of the three major CRAs — Equifax, TransUnion and Experian.2

Under the FCRA, a CRA may only provide your credit report for purposes such as evaluation of an application for a loan, credit, service or employment. It can also be used for qualifying consumers for offers of credit.  In some cases, it can be provided for business and legal uses. However, your consent is required before a CRA can provide your credit information to an employer.

Consumers have the right to investigate and dispute any inaccurate information in their credit report. The FCRA requires CRAs to correct or delete information that is inaccurate and delete negative information that is more than seven years old (10 years for bankruptcies).

Your rights also include the following:

  • You must be told if information in your file has been used against you.
  • You have the right to know what’s in your file.
  • Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information.
  • You may seek damages from violators. 3

 

The FCRA is a complex law that contains numerous provisions. To read it in its entirety, visit www.ftc.gov/credit, and consult an attorney if you have specific questions about your rights under the law. To obtain your credit report:

 

1 epic.org/privacy/fcra/

2 https://help.equifax.com/app/answers/detail/a_id/15/session/L2F2LzEvdGltZS8xMzk3ODU3NDkxL3NpZC9ETFBSdDdTbA%3D%3D

3 http://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf

 

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