The Fair Credit Reporting Act, originally passed in 1970, underwent extensive substantive modifications in 1996. The revisions to the FCRA went into effect Sept. 30, 1997, and granted consumers the right to have accurate, timely information reflected in their credit reports. Another revision of the FCRA that went into effect in 2004 might be more familiar to consumers--this law entitles them to receive a free annual credit report from the three consumer reporting agencies (CRAs).
Background and Purpose
In the FCRA's statement of purpose, Congress emphasized the need for fair and accurate reporting by CRAs so the public wouldn't lose confidence in the credit reporting system. Although the FCRA contains numerous provisions to ensure the consumer's privacy, key to this federal law are processes put in place that allow consumers to dispute inaccurate negative information, as well as an investigative procedure that a CRA is required to follow subsequent to the dispute.
Accurate Reporting
Under the FCRA, consumers are allowed to dispute errors noted on credit reports maintained by the three nationwide CRAs--Experian, Equifax and TransUnion. According to Bankrate.com, errors can be reflected in a credit report for many reasons. For example, in cases of identity theft, someone other than the consumer might have used the consumer's personal information to open a credit card account or get a loan. The Federal Reserve Bank indicates that sometimes negative records may linger on a credit report past their expiration date (typically seven years, except in the case of bankruptcies). But sometimes inaccurate information is reflected in a credit report due to the reporting or entry of erroneous information by the CRA or reporting creditor (such as a mathematical error).
Dispute Process
The dispute process requires the consumer to contact the CRA directly regarding credit report errors. The Federal Trade Commission advises disputing errors in writing and sending communication to the CRA through certified mail service, return receipt requested. It takes the CRA 30 days to investigate the consumer's complaint, which entails contacting the reporting creditor to verify the information. The CRA is required to notify the consumer in writing of its findings. If changes are made to the consumer's credit report, a corrected copy is included. If the information is deemed to be erroneous, the reporting creditor must inform all other CRAs and credit bureaus to which it reported so it can be removed or corrected. Finally, if the consumer is not satisfied with the results of the CRA's investigation, he is entitled to send the CRA a 100-word statement for purposes of clarification. This statement is included in the consumer's credit history.
FACTA
Another important modification to the FCRA was the Fair and Accurate Credit Transactions Act of 2003 (FACTA), enacted in 2004. FACTA allows consumers to receive a free copy of their reports from the three major CRAs once a year and more frequently if they were denied credit, employment, a rental agreement or insurance based on negative information in their credit history. This led to the creation of a centralized website, AnnualCreditReport.com, maintained by the three CRAs through which free credit reports could be viewed or ordered over the phone or by mail. But the FTC notes CRAs are not required to supply consumers a "risk score" or "credit score;" these can be purchased through the Annual Credit Report website or from the individual CRAs.
Other Rights
The FCRA also ensures the consumer's right to privacy by requiring credit reports to be accessed for purposes of legitimate business only. Additionally, the FRB indicates that consumers can ask CRAs not to include their name on lists supplied to credit card issuers and insurers who make unsolicited offers of credit or insurance.
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