Consumer reporting agencies collect, maintain and sell information on millions of consumers. Consumer reporting agencies include the three major credit bureaus Experian, Transunion and Equifax but they also include specialty agencies like ChexSystems that maintain and sell information about consumers’ banking history.
The FCRA covers all consumer reporting agencies that gather, retain, compile, issue, and use credit reports, insurance reports, medical records, rental history, employee background reports, tenant screening, bank bad check and overdraft reports, and other consumer reports based on consumer information like Lexis-Nexis which gathers public information like court records. reporting information such as consumer credit experiences, court records, and other personal consumer information.
With so many consumer reporting agencies storing, maintaining and selling consumer information there has to be a central law to protect consumers. The Federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies. It not only protects consumers by specifying their rights, it also lists the responsibilities of companies who collect the credit information, distribute the credit reports, and use the information.
Summary of how the FCRA helps consumers
You have the right to know if information in your file has been used against you. Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment – or to take another adverse action against you – must tell you, and must give you the name, address, and phone number of the agency that provided the information.
Who can view your information. Access to your file is limited. A consumer reporting agency may provide information about you only to people with a valid need — usually to consider an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for access.
Errors in your credit report. You have the right to dispute incomplete or inaccurate information. If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous. Consumer reporting agencies must only report accurate information. Inaccurate information must be corrected or deleted. This is your main weapon against in repairing your credit. Learn how to dispute your credit. If you are unsatisfied with the investigation results or correction, you have the right to add a brief statement (100 words or less) about the issue to your credit report.
You have the right to know what is in your file. A consumer reporting agency must disclose your file to your upon request. You are entitled to a free report once every 12 months. To obtain a free credit report from Experian, Transunion and Equifax visit: www.annualcreditreport.com. Other specialty consumer reporting agencies must also provide a free report upon request once every 12 months.
You have the right to ask for a credit score. Credit scores are numerical summaries of your credit-worthiness based on information from credit bureaus. You may request a credit score from consumer reporting agencies that create scores or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender.
Consumer reporting agencies must correct or delete inaccurate, incomplete or unverifiable information. Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a consumer reporting agency may continue to report information it has verified as accurate.
Consumer reporting agencies may not report outdated negative information. In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.
Delete outdated information. In general, most negative information must be removed from credit reports after 7 years. But here is a more accurate breakdown of specific negative information:
- Chapter 7 Bankruptcy: 10 years. If your case was dismissed (meaning you did not get an order discharging your debts), the ten years starts from the date of the dismissal.
- Chapter 13 Bankruptcy: 7 years.
- Repossession: 7 years.
- Foreclosure: 7 years.
- Charge-offs: The 7-year period begins 180 days after the delinquency (the first missed payment) that led to the collection activity or charge-off. The clock does not start ticking again if the account is sold to a collection agency.
- Lawsuits and Judgments: 7 years from the date a lawsuit was filed and 7 years from the date a judgment was entered against you or until the governing statute of limitations has expired, whichever is longer. Paid judgments may be reported no more than seven years after the date of the judgment.
- Paid tax liens: May be reported from the date of payment for up to 7 years.
- Delinquent accounts: May be reported for 7 years after the date of the account first went delinquent and no other payments were made. Even if you later pay off the delinquent amount, the account may show on your credit reports that you were previously delinquent.
- Student Loans: Student loans made, guaranteed, or insured by the U.S. government, or national direct student loans, may be reported for much longer than seven years. Perkins loans may be reported until they are paid in full.
- Federal Family Educational Loans: These include guaranteed student loans, Stafford, SLS, and PLUS loans and Direct Student Loans may be reported for 7 years after the last of these three dates:
- Date the original lender or later holder of the loan, the guarantee agency, or the Department of Education first reported the account to the consumer reporting agency
- Date when the Department of Education took over the loan from a guarantee agency (usually years after you last made a payment)
- If you were previously in default, started repaying, and then went into default again, the date you went into default again
You may seek damages from violators. If a consumer reporting agency, or, in some cases, a user of consumer reports or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.
Add identity theft and active duty alerts. Identity theft victims may place fraud alerts and active duty military personnel serving away from their regular duty station may place “active duty” alerts to help prevent identity theft.
Remedying the Effects of Identity Theft. If you are, or believe that you are, the victim of identity theft, you have specific rights under the FCRA. These rights will help you deal with the effects of identity theft.
Overview of the FCRA
- Section 601 – The popular name of the law is the “Fair Credit Reporting Act” or the FCRA for short.
- Section 602 – Why Congress found a need for the law, i.e. a credit reporting system that is fair and accurate to the consumer, and protects the privacy and specifies the permitted uses of consumer information.
- Section 603 – Important definitions of key terms used in the Act. For example, a person is defined as an individual or an organization, but a consumer is defined only as a natural person. The law also defines what is a consumer report, a consumer reporting agency, consumer reports for employment purposes, and adverse actions.
- Section 604 – This section is about the situations in which consumer reporting agencies may provide a consumer report. These situations are also called the “Permissible Purposes” to obtain a report. The section also lists some purposes where a consumer report may not obtain a report, e.g. marketing, curiosity, law enforcement.
- Section 605 – Controls the time limit of when consumer information can be reported. In general that is 7 years for adverse data other than bankruptcy which can be up to 10 years. This section also controls when the time period limit starts running.
- Section 605A – About Identity Theft including filing initial fraud alerts, extended alerts and active duty alerts.
- Section 605B – In certain situations the Consumer Reporting Agencies (CRA’s) must block information as a result of Identity Theft.
- Section 606 – One of the main point of this section on investigate consumer reports, like employment reports, is that there are required disclosures that must be made to consumers.
- Section 607 – Compliance section, which means that CRA’s must maintain reasonable procedures to avoid violating Section 604 and 605 of the Act, such as providing obsolete information or furnishing reports for non permitted purposes.
- Section 608 – When a government agency can see your report and what they can see.
- Section 609 – What must be disclosed to consumers upon request.
- Section 610 – To obtain your own report, consumers must provide identification, and disclosures must generally be in writing.
- Section 611 – Procedures when the consumer disputes the accuracy or completeness of an item in their file.
- Section 612 – Not all credit reports are free, some may incur a fee.
- Section 613 – CRA’s must be careful about furnishing public records for employment reports.
- Section 614 – Talks about investigative consumer reports and using information from an old report.
- Section 615 – Users and others who obtain consumer reports have important responsibilities.
- Section 616 – Dollar liability for those who willfully violate the Act.
- Section 617 – Liability for those who are negligent in failing to comply with the Act.
- Section 618 – Bring actions in US district courts within a specified time frame.
- Section 619 – Fines and potential imprisonment for obtaining information under false pretenses.
- Section 620 – Fines and potential imprisonment for the officers and employees of the CRA.
- Section 621 – The Federal Trade Commission is the main enforcer of the Act.
- Section 622 – Requirements regarding the reporting of overdue child support.
- Section 623 – Companies that report your credit information have important responsibilities.
- Section 624 – Governs affiliates who may have access to the report for marketing etc.
- Section 625 – Does not exempt state laws except to extent state law is inconsistent with this law.
- Section 626 – The FBI has special rights to see your file.
- Section 627 – Counterterrorism has special rights to see your file.
- Section 628 – Properly dispose of consumer information to protect the confidentiality of the information.
- Section 629 – Prevents consumer reporting agencies from circumventing the law.