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Fair Credit Reporting Act

Fair Credit Reporting Act

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The Fair Credit Reporting Act (FCRA) is a United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 federal law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

 (codified at et seq.) that regulates the collection, dissemination, and use of consumer information, including consumer credit information. (Full Statute (PDF).) Along with the Fair Debt Collection Practices Act
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act , et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act...

 (FDCPA), it forms the base of consumer credit rights in the United States. It was originally passed in 1970, and is enforced by the US Federal Trade Commission
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...

 and private litigants.

History


The Fair Credit Reporting Act, as originally enacted, was title VI of , entitled An Act to amend the Federal Deposit Insurance Act to require insured banks to maintain certain records, to require that certain transactions in United States currency be reported to the Department of the Treasury, and for other purposes. It was written as an amendment to add a title VI to the Consumer Credit Protection Act
Consumer Credit Protection Act
The Consumer Credit Protection Act, , composed of several titles relating to consumer credit, mainly title I, the Truth in Lending Act, title II related to extortionate credit transactions, title III related to restrictions on wage garnishment, and title IV related to the National Commission on...

, .

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, including employment. Credit bureaus, a type of consumer reporting agency, hold a consumer's credit report in their databases. 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 Fair and Accurate Credit Transactions Act
    Fair and Accurate Credit Transactions Act
    The Fair and Accurate Credit Transactions Act of 2003 is a United States federal law, passed by the United States Congress on November 22, 2003, and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act...

     (FACTA), an amendment to the FCRA passed in 2003, consumers are able to receive one free credit report a year. The free report can be requested by telephone, mail, or through the government-authorized website, annualcreditreport.com
    Annualcreditreport.com
    Annualcreditreport.com is a website jointly operated by the three major U.S. credit reporting agencies, Equifax, Experian, and TransUnion. The site was created in order to comply with their obligations under the Fair and Accurate Credit Transactions Act to provide a mechanism for American...

    .
  2. If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within five days, in writing.
  3. CRAs may not retain negative information for an excessive period. The FCRA describes how long negative information, such as late payments, bankruptcies, tax liens or judgments may stay on a consumer's credit report — typically seven years from the date of the delinquency. The exceptions: bankruptcies (10 years) and tax liens (seven years from the time they are paid).


The three big CRAs — Experian
Experian
Experian plc, formerly known as CCN Systems, is a global credit information group with operations in 36 countries. The company employs 15,500 people with corporate headquarters in Dublin, Ireland and operational headquarters in Nottingham, England and Costa Mesa, California, US...

, TransUnion
TransUnion
TransUnion is the third largest credit bureau in the United States, which offers credit-related information to potential creditors. Like major competitors Equifax and Experian, TransUnion markets credit reports directly to consumers.- History :...

, and Equifax
Equifax
Equifax Inc. is a consumer credit reporting agency in the United States, considered one of the three largest American credit agencies along with Experian and TransUnion. Founded in 1899, Equifax is the oldest of the three agencies and gathers and maintains information on over 400 million credit...

 — do not interact with information furnishers directly as a result of consumer disputes. They use a system called E-Oscar. In some areas of the country, however, there are other credit bureaus. For example, in Texas, if a consumer tries to dispute information with Equifax directly, they must go through CSC Credit Services which is linked to the Equifax database.

Nationwide Specialty Consumer Reporting Agencies


In addition to the three big CRAs, the FCRA also classifies dozens of other information technology companies as "nationwide specialty consumer reporting agencies" that produce individual consumer reports used to make credit determinations. Under Section 603(w) of the Fair Credit Reporting Act, the term “nationwide specialty consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to
  1. medical records or payments;
  2. residential or tenant history;
  3. check writing history;
  4. employment history; or
  5. insurance claims.


Because these nationwide specialty consumer reporting agencies sell consumer credit report files, they are required to provide annual disclosures of their report files to any consumers who request disclosure. A partial list of companies classified as nationwide specialty consumer reporting agencies under FCRA includes: ChoicePoint
ChoicePoint
ChoicePoint was a data aggregation company based in Alpharetta, near Atlanta, Georgia, United States, that acted as a private intelligence service to government and industry...

, Acxiom
Acxiom
Acxiom is a global interactive marketing services company that uses consumer data, analytics, information technology, data aggregation, data integration, and consulting solutions to help companies conduct direct marketing programs...

, Integrated Screening Partners, Innovis
Innovis
Innovis is the 4th credit bureau in the United States, the other three being Equifax, Experian and TransUnion. Currently, a much smaller number of companies use Innovis for credit reporting, one being Trade Capital Company...

, the Insurance Services Office
Insurance Services Office
Insurance Services Office, Inc. , a subsidiary of Verisk Analytics, is a provider of data, underwriting, risk management and legal/regulatory services to property-casualty insurers and other clients...

 (ISO), Tenant Data Services, LexisNexis
LexisNexis
LexisNexis Group is a company providing computer-assisted legal research services. In 2006 it had the world's largest electronic database for legal and public-records related information...

, Retail Equation, Central Credit, Teletrack, the Medical Information Bureau
Medical Information Bureau
MIB Group, Inc is a cooperative data exchange formed by the North American life insurance industry in 1909...

 (MIB
MIB
MIB may refer to any of several concepts:* Master of International Business, a postgraduate business degree* Melayu Islam Beraja, the adopted national philosophy of Brunei* Motion induced blindness, a visual illusion in peripheral vision...

 aka, MIB Group, Inc.), UnitedHealth Group
UnitedHealth Group
UnitedHealth Group Incorporated is a diversified health and "well-being" company. Headquartered in Minnetonka, Minnesota, UnitedHealth Group offers a spectrum of products and services through two operating businesses: United Healthcare and Optum. Through its family of subsidiaries and divisions,...

 (Ingenix Division), and Milliman
Milliman
-Corporate Overview:Milliman is a large international, independent actuarial and consulting firm, with revenues of $676 million in 2010. Founded in Seattle in 1947, by Wendell Milliman and Stuart A. Robertson, the firm operates 54 offices worldwide with 2,500 employees, including more than 1,300...

.

Although the major CRAs Experian
Experian
Experian plc, formerly known as CCN Systems, is a global credit information group with operations in 36 countries. The company employs 15,500 people with corporate headquarters in Dublin, Ireland and operational headquarters in Nottingham, England and Costa Mesa, California, US...

, Equifax
Equifax
Equifax Inc. is a consumer credit reporting agency in the United States, considered one of the three largest American credit agencies along with Experian and TransUnion. Founded in 1899, Equifax is the oldest of the three agencies and gathers and maintains information on over 400 million credit...

, and TransUnion
TransUnion
TransUnion is the third largest credit bureau in the United States, which offers credit-related information to potential creditors. Like major competitors Equifax and Experian, TransUnion markets credit reports directly to consumers.- History :...

 are required by law to provide a central source website for consumers to request their reports, the nationwide specialty consumer reporting agencies are not required to provide a centralized online source for disclosure. The FCRA Section 612(c) merely requires nationwide specialty consumer reporting agencies to establish a streamlined process for consumers to request consumer reports, which shall include, at a minimum, the establishment by each such agency of a toll-free telephone number
Toll-free telephone number
A toll-free, Freecall, Freephone, 800, 0800 or 1-800 number is a special telephone number which is free to the calling party, and instead the telephone carrier charges the called party the cost of the call...

 for such consumer disclosure requests.

Information furnishers


An information furnisher, as defined by the FCRA, is a company that provides information to consumer reporting agencies. Typically, these are creditors, with which a consumer has some sort of credit agreement (credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

 companies, auto
Auto
Auto, from Greek αὐτο- auto- "self, one's own", may refer to:*An automobile*An auto rickshaw*Auto, an Israeli car magazine*Short for automatic* Auto , a form of Portuguese dramatic play...

 finance companies and mortgage bank
Mortgage bank
A Mortgage bank specializes in originating and/or servicing mortgage loans.A mortgage bank is a state-licensed banking entity that makes mortgage loans directly to consumers...

ing institutions, to name a few).
However, other examples of information furnishers are collection agencies (third-party collectors), state or municipal courts reporting a judgment of some kind, past and present employers and bonders. Under the FCRA, these information furnishers may only report to a consumer's credit report under the following guidelines:

Lenders have an important role to play in ensuring credit reports are accurate:
  1. They must provide complete and accurate information to the credit reporting agencies.
  2. The duty to investigate disputed information from consumers falls on them, and they must correct an error, or explain why the credit report is correct within 30 days of receipt of notice of a dispute.
  3. They must 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
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

, insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

, or employment purposes (including background check
Background check
A background check or background investigation is the process of looking up and compiling criminal records, commercial records and financial records of an individual....

s) 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


A large portion of consumer credit reports contain errors. A study released by the U.S. Public Interest Research Group
Public Interest Research Groups
The US Public Interest Research Group is a political lobby non-profit organization in the United States and Canada, composed of self-governing affiliates at the state and province level. Its fundraising arm is the Fund for Public Interest Research...

 in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. However, the General Accountability Office released a study disputing US PIRG numbers. The Federal Reserve Board issued a similar study noting that "the proportion of individuals affected by any single type of data problem appears to be small." In 2007, the Consumer Data Industry Association which represents the credit bureaus testified that less than two percent of 52 million credit reports had data deleted because it was in error. The accuracy of credit report data was also mentioned in written testimony by Allstate Insurance
Allstate
The Allstate Corporation is the second-largest personal lines insurer in the United States and the largest that is publicly held. The company also has personal lines insurance operations in Canada. Allstate was founded in 1931 as part of Sears, Roebuck and Co., and was spun off in 1993...

 before the Michigan insurance department in 2002. By law, consumers can invoke their rights under the FCRA to review and correct their credit reports.

The Fair and Accurate Credit Transactions Act
Fair and Accurate Credit Transactions Act
The Fair and Accurate Credit Transactions Act of 2003 is a United States federal law, passed by the United States Congress on November 22, 2003, and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act...

 ("FACTA") of 2003 has allowed easier access to consumers wishing to view their reports and dispute items.

Civil liability for willful or negligent violations of the FCRA


Under § 616 of the Act, , a consumer may recover either actual damages or a minimum of $100 and a maximum of $1000 plus punitive damages and reasonable attorney's fees and costs for willful noncompliance with the Act. Under § 617 of the Act, , recovery for a negligent violation is of actual damages, plus attorney's fees. Under § 618, a consumer may file suit in state or federal court to enforce the Act, and the statute of limitations is the earlier of 2 years from discovery and 5 years from the violation. (.)

Which companies are regulated by the FCRA?


Transunion http://www.transunion.com

Equifax http://www.equifax.com

Experian http://www.experian.com

While database companies like LexisNexis
LexisNexis
LexisNexis Group is a company providing computer-assisted legal research services. In 2006 it had the world's largest electronic database for legal and public-records related information...

, Westlaw
Westlaw
Westlaw is one of the primary online legal research services for lawyers and legal professionals in the United States and is a part of West. In addition, it provides proprietary database services...

, ChoicePoint
ChoicePoint
ChoicePoint was a data aggregation company based in Alpharetta, near Atlanta, Georgia, United States, that acted as a private intelligence service to government and industry...

, and eFunds (owner of ChexSystems
ChexSystems
ChexSystems is an eFunds check verification service and consumer credit reporting agency like Experian, Equifax and TransUnion. While most credit reporting agencies broker data about how a consumer handles credit relationships, ChexSystems provides data related to how a consumer has handled deposit...

) 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 excerpt of the 1999 FTC advisory opinion states:
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.

See also

  • annualcreditreport.com
    Annualcreditreport.com
    Annualcreditreport.com is a website jointly operated by the three major U.S. credit reporting agencies, Equifax, Experian, and TransUnion. The site was created in order to comply with their obligations under the Fair and Accurate Credit Transactions Act to provide a mechanism for American...

  • Identity theft
    Identity theft
    Identity theft is a form of stealing another person's identity in which someone pretends to be someone else by assuming that person's identity, typically in order to access resources or obtain credit and other benefits in that person's name...

  • Fair and Accurate Credit Transactions Act
    Fair and Accurate Credit Transactions Act
    The Fair and Accurate Credit Transactions Act of 2003 is a United States federal law, passed by the United States Congress on November 22, 2003, and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act...

  • Fair Credit Billing Act
    Fair Credit Billing Act
    The Fair Credit Billing Act is a United States federal law enacted in 1975 as an amendment to the Truth in Lending Act...

  • Political and Economic Research Council
    Political and Economic Research Council
    PERC, the Policy and Economic Research Council is a Durham, North Carolina based non-profit, non-partisan think tank that concentrates on market-based economic development, both in the United States and internationally...

     -- think tank who did much of the research for FCRA reauthorization
  • Adverse Credit History
  • Credit card
    Credit card
    A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

  • Credit rating agency
    Credit rating agency
    A Credit rating agency is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves...

  • Credit score
    Credit score
    A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person...

  • Credit history
    Credit history
    Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy...

  • Background check
    Background check
    A background check or background investigation is the process of looking up and compiling criminal records, commercial records and financial records of an individual....

    s

External links