Credit Reporting Regulations

Credit reporting is regulated by the federal government under the Fair Credit Protection Act (FCPA). The FCPA passed in 1970 and regulates how credit information can be used and reported. The Federal Trade Commission handles enforcement of the regulations. The FCPA ensures that the information on a credit report is fair and accurate, with recourse for the consumer if the information is inaccurate. The act also regulates how long negative credit information is reported, annual credit reports and rules for reporting disputes. The FCPA affects three main groups: consumer reporting agencies, specialty consumer reporting agencies, and information furnishers.

Consumer Reporting Agencies

A consumer reporting agency is a business that prepares credit reports for lenders checking on a borrower's credit worthiness. The three big consumer reporting agencies are Equifax, Experian, and TransUnion. The FCPA requires the consumer reporting agencies to provide consumers with one free credit report every year. The agencies are required to verify all information on the reports. The agencies are not able to report negative information previously removed on a report without letting the consumer know five days ahead of time. The FCPA puts the following limits on reporting negative information: Bankruptcies are reported for ten years. All other forms of negative information are reported for seven years, then removed from the report.

Speciality Consumer Reporting Agencies

Specialty consumer reporting agencies cover the many different agencies that provide reports based on medical records, rental history, check or banking history, employment and insurance history. Examples of specialty CRAs include Lexis Nexis, Innovis, and Chex System. Like the main CRAs, the specialty agencies are required to provide a yearly report upon request.

Information Furnishers

Information furnishers are companies that provide credit information to the CRAs. An information furnisher is a creditor, bank, collection agency, court or employer. An information furnisher may report to many different CRAs, only one or two, or report to a single specialty CRA. For example, banks report unpaid bounced checks and closed accounts to Chex Systems, which is referenced by other banks when opening a checking account.

Information furnishers have three responsibilities under the FCPA. Any information a furnisher sends to the CRA must be accurate in all ways. It must investigate all information disputes a consumer initiates to ensure the information is correctly reported. Investigations are required to take place within 30 days of a consumer dispute request. A furnisher reporting negative information to a CRA must inform the consumer before and after the negative information is reported.