Fair Credit Reporting Act Explanation

The Fair Credit Reporting Act (FCRA) is all about protecting you as a credit consumer. Starting in 1970 with a mission to "promote accuracy, fairness and the privacy of personal information assembled by Credit Reporting Agencies," the FCRA became the first bill of its kind to focus on regulating the credit reporting industry. Amendments to the bill in 1996, 2003 and 2010 established additional protections and gave consumers a way to dispute incomplete or inaccurate information on their credit report.

Background

The core objective of the original FCRA was to stop credit reporting business practices permitting the inclusion of untrue, inaccurate and/or outdated credit file information and the distribution of this information to unauthorized individuals. For example, before 1970 it was not unusual for credit reporting agencies to collect and distribute information not only about your financial life, but also about your sexual orientation, marital status and drinking habits. The FCRA of 1970 brought credit reporting agencies under federal regulation and established your right to expect that your credit information will be confidential, accurate and relevant. In April 1971, the Federal Trade Commission began prosecuting FCRA violations by credit reporting agencies.

1996 Amendment

The Credit Reporting Reform Act of 1996, the first major amendment to the FCRA , targeted employers. It set a framework within which an employer must first inform you that credit information is part of the hiring process. An employer must then get your permission in writing before accessing your credit file. If credit information is a factor in a denial of employment, or, for example, a promotion, this amendment also allows you to review your credit file and dispute incorrect or inaccurate information. On the flip side, however, this amendment gave credit card companies the right to prescreen your credit report and send out unsolicited offers of credit.

2003 Amendments

Issues relating to identity theft were a major focus of the Fair and Accurate Credit Transactions Act of 2003, the next set of amendments to the FCRA. Provisions protect your rights if you fall victim to identity theft, allow you to place fraud alerts in your credit file and require business owners to take steps to prevent identity theft. For example, the FACTA requires merchants to truncate, or shorten, credit and debit card account numbers on purchase receipts. Additionally, your right to review a free copy of your credit report once every 12 months and opt out of credit prescreening is part of the FACTA amendment.

2010 Amendments

2010 changes to the FACTA focused on those who furnish information to credit reporting agencies. The act placed greater responsibility on furnishers to verify the accuracy and integrity of all information submissions. If you initiate a dispute regarding inaccurate or old information in your credit report, reporting agencies and information furnishers must acknowledge and complete an investigation in a timely manner, and correct or remove inaccurate, unverifiable or old information within 30 days.