The FCRA: Enumerated List of Consumer Rights
The Fair Credit Reporting Act (FCRA) is a comprehensive federal law that promotes accuracy, privacy, and fairness in the information compiled on consumers by credit reporting agencies. The FCRA was passed in 1970 in the wake of a series of financial scandals that plagued consumers, with the goal of correcting unscrupulous practices by credit reporting agencies.
What Is a Credit Reporting Agency?
The “Big Three” credit reporting agencies are TransUnion, Equifax, and Experian. The Big Three are responsible for the credit rating that dictates the financial solvency of consumers, from the interest rates they get on credit cards to whether they qualify for mortgages.
However, a “credit reporting agency” is a far broader term that includes companies that sell medical history, rental history, and check-writing history. Any company that gathers data on consumers is bound by the provisions of the FCRA.
Basic Rights under FCRA
The FCRA protects consumers using three basic pillars:
- Greater transparency in the compiling of credit history and calculation of credit ratings
- Improved dispute resolution with credit reporting agencies, including the right to correct inaccurate information
- Increased privacy for the information contained in credit histories
Transparency in Credit History and Scores
The FCRA requires credit reporting agencies to alert consumers whenever information in that consumer’s credit history was used against them. Typical examples include denying credit card applications, insurance applications, or employment. Any entity that uses a credit report against a consumer is required to provide to the affected consumer the name, address, and phone number of the agency that supplied the information.
Furthermore, consumers are entitled to know the contents of their credit reports. All consumers are entitled to one free credit report every 12 months. The requested agency must produce it upon the request of the consumer, in its entirety. Beyond that one free report per year, the credit agency can charge a fee to produce the report, except in one of the following situations:
- Someone took an adverse action against the consumer due to the information in the credit report;
- The consumer was the victim of identity theft (in which case the agency must also put a fraud alert on the account);
- The credit report contains inaccurate information due to fraud;
- The consumer is unemployed but plans on securing gainful employment within 60 days; or
- The consumer is on public assistance.
Consumers are also entitled to know their credit score. The credit score is a numerical summary between 0 and 900 points. The higher the score, the more “reliable” the reporting agencies judge the consumer to be. Consumers may request their scores from credit reporting agencies that distribute scores used in residential real property loans.
Consumers are also entitled to dispute inaccurate information in their credit history. If a consumer discovers inaccurate information on their credit history, they are entitled to submit a claim to the affected reporting agency requesting the information be corrected. If the error is substantiated, the credit agency must correct the report.
Additionally, the FCRA places an affirmative burden on credit reporting agencies to correct incomplete, inaccurate, or unverified information. In most circumstances, the credit reporting agency must correct the report within 30 days of discovering the issue. However, if in the course of its investigation, the credit agency verifies the information, it is not required to correct it.
Privacy of Consumers’ Credit Files
The FCRA obligates reporting agencies to limit access to consumers’ credit files. An agency may only disclose information to parties that have a valid need — for example, applications for credit cards, background checks for new renters, or credit checks for a mortgage application. The FCRA provides a specific list of valid requests.
The law specifically prohibits credit agencies from divulging information about consumers to prospective employers and current employers without the express, written consent of the consumer. In response, many employers now require employees to consent to a credit check at the time of hiring.
The FCRA also provides consumers with the ability to limit “prescreened” offers of credit and insurance. Unsolicited prescreened offers must include a toll-free number that enables consumers to call and opt out of these offers. Furthermore, the FCRA created the toll-free number 1-888-5-OPTOUT, which allows consumers to opt out of all prescreened offers.
Credit agencies are also prohibited from using outdated negative information in calculating credit scores and compiling reports. In general, information is “outdated” if it is more than seven years old — or more than ten years for bankruptcies.
Finally, consumers are entitled to pursue damages against credit reporting agencies for violating these rights. The FCRA creates a private right of actions that consumers can pursue in state or federal court.