Fair Credit Reporting
FAIR CREDIT REPORTING ACT
Consumer reporting agencies (CRAs) are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes, including employment. Credit bureaus, a type of consumer reporting agency, hold a consumer’s credit report in their databases. CRAs have a number of responsibilities under FCRA, including the following:
- CRAs must maintain reasonable procedures to ensure the maximum possible accuracy of the information contained within a consumer’s report.
- Provide a consumer with information about them in the agency’s files and take steps to verify the accuracy of information disputed by a consumer.
- If negative information is removed because of a consumer’s dispute, it may not be reinserted without notifying the consumer in writing within five days: and,
- Remove negative information seven years after the date of first delinquency (except for bankruptcies (10 years) and tax liens (seven years from the time they are paid).
The three big CRAs—Experian, TransUnion, and Equifax—do not interact with information furnishers directly as a result of consumer disputes. They use a system called E-Oscar. In some areas of the country, however, there are other credit bureaus.
Nationwide specialty consumer reporting agencies.
In addition to the three big CRAs, the FCRA also classifies dozens of other information technology companies as nationwide specialty consumer reporting agencies that produce individual consumer reports used to make credit determinations. Under Section 603 of the Fair Credit Reporting Act, the term “nationwide specialty consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to:
- Medical records or payments.
- Residential or tenant history.
- Check writing history.
- Employment history; or,
- Insurance claims.
Because these nationwide specialty consumer reporting agencies sell consumer credit report files, they are required to provide annual disclosures of their report files to any consumer who requests disclosure. A partial list of companies classified as nationwide specialty consumer reporting agencies under FCRA includes: Telecheck, ChoicePoint, Acxiom, Integrated Screening Partners, Innovis, the Insurance Services Office, Tenant Data Services, LexisNexis, Retail Equation, Central Credit, Teletrack, the MIB Group, United Health Group (Ingenix Division), and Milliman.
Although the major CRAs Experian, Equifax, and TransUnion are required by law to provide a central source website for consumers to request their reports, the nationwide specialty consumer reporting agencies are not required to provide a centralized online source for disclosure. The FCRA Section 612 merely requires nationwide specialty consumer reporting agencies to establish a streamlined process for consumers to request consumer reports, which shall include, at a minimum, the establishment by each such agency of a toll-free telephone number for such consumer disclosure requests.
Commonly referred to as credit reports, a consumer report contains information about your credit – and some bill repayment history – and the status of your credit accounts. This information includes how often you make your payments on time, how much credit you have, how much credit you have available, how much credit you are using, and whether a debt or bill collector is collecting on money you owe. Credit reports also can contain rental repayment information if you are a property renter. It also can contain public records such as liens, judgments, and bankruptcies that provide insight into your financial status and obligations.
Inaccuracies in consumer reports.
A 2015 study released by the Federal Trade Commission found that 23% of consumers identified inaccurate information in their credit reports. Under the Fair and Accurate Credit Transactions Act (FACTA), an amendment to the FCRA passed in 2003, consumers are able to receive a free copy of their consumer report from each credit reporting agency once a year. The free report can be requested by telephone, mail, or through the government-authorized website: annualcreditreport.com. Consumer reports obtained through annualcreditreport.com make it easy to identify and dispute inaccurate information.
Civil liability The FCRA regulates:
- Consumer reporting agencies.
- Users of consumer reports; and,
- Furnishers of consumer information.
If a consumer’s rights under the FCRA are violated, they can recover:
- Actual or statutory damages.
- Attorney’s fees.
- Court costs; and,
- Punitive damages if the violation was willful. The threat of punitive damages under 1681n of the FCRA is the primary factor deterring erroneous reporting by the reporting industry.
The statute of limitations requires consumers to file suit prior to the earlier of two years after the violation is discovered; or, five years after the violation occurred.
Consumer attorneys often take these cases on a contingency fee basis because the statute allows a consumer to recover attorney’s fees from the offending party.
Users of consumer reports Users of the information for credit, insurance, or employment purposes (including background checks) have the following responsibilities under the FCRA:
- Users can only obtain consumer reports for permissible purposes under the FCRA;
- Users must notify the consumer when an adverse action is taken based on such reports; and,
- Users must identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer
Employment background Checks Employers using consumer reports to screen job applicants or employees must follow specific procedures:
- Get your written permission.
- Tell you how they want to use your credit report.
- Not misuse your information.
- Give you a copy of your credit report if the employer decides not to hire or fires you; and,
- Give you an opportunity to dispute the information contained within your credit report before making a final adverse decision
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