One of the most comprehensive consumer protection laws regulating credit is known as the fair credit reporting act. Enforced by the Federal Trade Commission, this federal law requires credit reporting agencies (CRAs) to act fairly and equitably when collecting, disseminating, and utilizing consumer credit information. The act ensures that credit bureaus ensure the accuracy, pertinence, confidentiality, and proper use of consumer data. Some of its key provisions are as follows:1. Access to informationCredit reporting agencies must provide consumers access to the data in their credit report and inform them of the individuals or entities that have requested it recently. 2. Opportunity to correct informationNot only does the fair credit reporting act grant borrowers the right to review their credit report, it also sets forth a procedure for rectifying any errors on their record. Consumers may dispute the accuracy of information contained in their file, and the credit reporting bureau must take prompt steps to conduct an investigation- usually within 30 days- with the source that supplied the data. The CRA must correct or delete any inaccurate information and furnish a copy of the report (if modified and updated) and results of the investigation. The information supplier or source of the incorrect information is required to notify the CRAs where the data was sent. When a consumer disputes an item with credit services that report to a CRA, the creditor many not disclose the information to a CRA without attaching a notice of the dispute. 3. Adverse informationThe fair credit reporting act places an obligation on lenders that reject credit applications due to adverse information or an error in the consumer’s file, such as credit ratings, to inform the applicant. Furthermore, the creditor must inform consumers of the source of that information by providing them the name, phone number, and address of the CRA that supplied the report. The applicant then has 30 days to obtain a free copy from the credit reporting agency. The fair credit reporting act allows consumers to request that the CRA re-issue the amended reports to employers who received a report in the last two years or creditors who received one in the past six months.4. Duty on the part of information suppliersThe fair credit reporting act places responsibilities on creditors or companies that furnish information to CRAs to provide accurate and complete data to the latter. 5. Fairness and confidentialityCredit reporting agencies must maintain complete and accurate files and have a duty to safeguard the privacy and confidentiality of borrowers’ credit information. The fair credit reporting act requires credit bureaus to furnish accurate credit histories and to exercise confidentiality and act impartially when preparing and disseminating consumer reports. 6. Limited access to credit reportsUnder the fair credit reporting act, credit reporting agencies can only disclose consumer information to entities with a legitimate business or legal need, a permissible purpose, or the borrower’s written consent. The following third parties may obtain a copy of a consumer’s credit report:
Those evaluating a borrower’s loan/credit application and considering the extension of credit Insurance providers Employers and prospective employers, but only with the applicant’s consent; Landlords Governmental agencies, in connection with the issuance of a government benefit or license (information generally restricted to the individual’s name, former address, current address, present and past employers) Local or state child support enforcement agency; and Companies holding an applicant’s account for purposes of account monitoring.
The fair credit reporting act punishes (1) CRA employees who disclose credit reports to unauthorized third parties and (2) unauthorized individuals who receive credit reports. Those who negligently or willfully violate provisions of the fair credit reporting act are subject to civil liability. Consumers may bring suit against credit reporting agencies in federal or state court and seek damages for violations. 7. Duration of negative information on recordThe fair credit reporting act sets forth the length of time that adverse information may remain on a consumer’s credit report. Negative entries such as judgments, tax liens, bankruptcies, and late payments may stay on the report typically no longer than seven years from the time of the delinquency. Tax liens may only be posted on the credit report for seven years from the date that borrowers pay them. As for bankruptcies, they must be removed from the credit report after ten years.
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