Fair Credit Reporting Act (FCRA)

A clear guide to the rights and responsibilities surrounding consumer credit reports.

Overview

The Fair Credit Reporting Act (FCRA), enacted in 1970, is a federal law that promotes the accuracy, fairness, and privacy of information contained in consumer credit reports. It applies to consumer reporting agencies (CRAs), entities that use credit reports (referred to as users), and businesses that furnish information to CRAs.

Who Is Covered?

Consumer Reporting Agencies (CRAs): Companies like Experian, Equifax, and TransUnion that compile and sell credit information.
Users of Credit Reports: Employers, lenders, landlords, insurers, and others who obtain reports for a permissible purpose.
Furnishers of Information: Banks, credit card issuers, collection agencies, and other entities that provide data to CRAs.

Key Provisions

Permissible Purposes

A user may request a consumer report only for a lawful purpose, such as:

Credit underwriting or loan approval
Employment background checks (with written consent)
Insurance underwriting
Rental housing decisions
Debt collection

Accuracy and Dispute Resolution

CRAs must follow reasonable procedures to ensure maximum possible accuracy of the data they maintain. Consumers have the right to dispute inaccurate or incomplete information. The CRA must investigate the dispute, usually within 30 days, and correct any errors.

Consumer Notification

If adverse action (e.g., denial of credit, employment, or insurance) is taken based on a credit report, the consumer must receive a written notice that includes:

Name of the CRA
Contact information for the CRA
A statement of the consumers right to obtain a free copy of the report
A summary of the consumers rights under the FCRA

Consumer Rights Under the FCRA

Right to a free annual credit report from each major CRA.
Right to request a copy of a report if a prescreened credit offer was received.
Right to correct or dispute inaccurate information.
Right to limit the disclosure of a credit score and to be told if a score was used in a decision.
Right to optout of prescreened offers by calling 18885OPTOUT or visiting optoutprescreen.com.

Obligations for Users of Credit Reports

Any entity that obtains a consumer report must:

Obtain written consent from the consumer (except in cases like mortgage lending where consent is implied).
Certify the purpose for which the report is requested.
Provide an adverseaction notice if a decision is based on the report.
Implement policies to safeguard the report and protect it from unauthorized access.

Tip: Keep a record of all authorizations and notices. Documentation can be vital if a dispute arises.

Enforcement & Penalties

The Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and state attorneys general enforce the FCRA. Violations can result in:

Civil penalties up to $1,000 per violation (higher for willful violations).
Statutory damages ranging from $100 to $1,000 per negligent violation, and up to $2,500 per willful violation.
Attorneys fees and court costs.

Consumers may also bring private lawsuits for willful or negligent noncompliance.