The Fair Credit Reporting Act, or FCRA, is a federal law that protects the accuracy, fairness and privacy of consumer information in credit reporting. Whenever a credit report is pulled or a credit check conducted, individuals have the right to be told what information is in their report, whether it has been used to deny an application for a loan or a job and to dispute anything they know to be false. As a consumer, you are guaranteed a reasonable expectation of privacy under the FCRA.
TL;DR (Too Long; Didn't Read)
The Fair Credit Reporting Act protects consumer information in credit reporting and gives individuals the opportunity to dispute errors in their credit history. Background investigations and credit checks rely on information from the FCRA.
What Is the Fair Credit Reporting Act For?
The Fair Credit Reporting Act protects your rights as a consumer. For instance, if you are applying for a credit card, vehicle loan or mortgage, the lending institution will first seek your authorization to pull your credit report. They will use information from this report in making their lending decision. Under the FCRA, you have the right to see the information they use and to correct any false information contained in the report.
The FCRA also oversees background checks conducted by potential employers, property managers or organizations who need volunteers. In such instances, you have a right to view any information returned in your background investigation and dispute any incorrect information.
How the Fair Credit Reporting Act Affects Consumers
The Fair Credit Reporting Act offers consumers a variety of protections as outlined above. You always have the right to view or contest information in a credit report. In addition, the FCRA requires that certain items not be included in a credit report after a certain period of time has passed. For instance, the legislation contains a so-called “seven-year rule,” which requires that civil suits, civil judgments, arrest records and paid tax liens be removed from a consumer report after seven years. While this applies to every state in the U.S., some states do not permit reporting of these records at all, regardless of the amount of time that has passed.
The History of the Fair Credit Reporting Act
The Fair Credit Reporting Act was passed in 1970 by the federal government to regulate the use of personal information by businesses. Credit reporting agencies like Retail Credit Co. had been around since 1899, and by the 1960s, there was growing sentiment that public’s rights were being violated. At the time, credit reports were being used to deny access to opportunities and services, and consumers were not given the opportunity to view the reports for themselves.
The Consumer Credit Reporting Reform Act of 1996 instituted many updates to the FCRA, including allowing companies to conduct pre-screening of potential borrowers and share credit reports with certain affiliates.
In 2003, Congress passed the Fair and Accurate Credit Transactions Act amending the FCRA, which overrides some of the privacy protections found in various state laws. However, it also adds several protections to protect consumers against identity theft and also ensures that consumers have the opportunity to receive a free annual credit report from each of the major reporting agencies.
- Federal Trade Commission: A Summary of Your Rights under the Fair Credit Reporting Act
- Alliance Worldwide Investigative Group: FCRA Violations
- Federal Trade Commission: The Fair Credit Reporting Act
- Alliance Worldwide Investigative Group: FCRA Guidelines and Reporting Procedure
- Electronic Privacy Information Center: The Fair Credit Reporting Act (FCRA) and the Privacy of Your Credit Report