The Fair Credit Reporting Act
(FCRA) is an American
(codified at et seq.) that regulates the collection, dissemination, and use of consumer credit information. (Full Statute
(PDF).)] Along with the Fair Debt Collection Practices Act
(FDCPA), it forms the base of consumer credit rights in the United States.
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. They hold consumer's credit report
in their databases. CRAs have a number of responsibilities under FCRA, including the following:
- 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 (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.
- 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.
- 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, TransUnion, and Equifax — 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 is a fourth CRA, CSC Credit Services, which is responsible for information found within Equifax. For example, in Texas, if a consumer tries to dispute information with Equifax directly, it will not affect their credit report. They must go through CSC.
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
finance companies and mortgage banking
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:
- They must provide complete and accurate information to the credit rating agencies.
- 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 90 days of receipt of notice of a dispute.
- 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
, or employment purposes (including background checks
) have the following responsibilities under the FCRA:
- They must notify the consumer when an adverse action is taken on the basis of such reports.
- 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
Some fraction of consumer credit reports contain errors. A study released by the U.S. Public Interest Research Group
in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. As a result, many consumers frequently invoke their rights under the FCRA to review and correct their credit reports.
The Fair and Accurate Credit Transactions 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?
While putative database companies like Lexis, Westlaw, ChoicePoint, and eFunds (owner of ChexSystems) 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 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.
excerpt of an 1999 FTC advisory opinion