Business, Legal & Accounting Glossary
The Fair Credit Reporting Act (FCRA) is an American federal law (codified at 15 U.S.C. § 1681 et seq.) that regulates the collection, dissemination, and use of consumer credit information. Along with the Fair Debt Collection Practices Act (FDCPA), it forms the base of consumer credit rights in the United States.
Consumer reporting agencies (CRAs) are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes. They hold the databases that are the origins of a consumer’s credit report. CRAs have a number of responsibilities under FCRA, including the following:
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.
An information furnisher, as defined by the FCRA, is a company that provides information to consumer reporting agencies. Typically, these are creditors, with which a consumer has some sort of credit agreement (credit card companies, auto finance companies and mortgage banking institutions, to name a few). However, other examples of information furnishers are collection agencies (third-party collectors), state or municipal courts reporting a judgment of some kind, past and present employers and bonders.
Under the FCRA, these information furnishers may only report to a consumer’s credit report under the following guidelines:
(This notice doesn’t have to be sent as a separate notice, but may be placed on a consumer’s monthly statement. If sent as part as the monthly statement, it needs to be conspicuous, but need not be in bold type. Required wording (developed by the US Federal Treasury Department):
Notice before negative information is reported: We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.
Notice after negative information is reported: We have told a credit bureau about a late payment, missed payment or other default on your account. This information may be reflected in your credit report.)
Users of the information for credit, insurance, or employment purposes (including background checks) have the following responsibilities under the FCRA:
Some fraction of consumer credit reports contain errors. A study released by the U.S. Public Interest Research Group in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. As a result, many consumers frequently invoke their rights under the FCRA to review and correct their credit reports.
The Fair and Accurate Credit Transactions Act (“FACTA”) of 2003 has allowed easier access to consumers wishing to view their reports and dispute items.
Under § 602 of the Act, a consumer may seek a maximum of $1000 in statutory damages, plus actual damages, punitive damages and reasonable attorney’s fees and costs for willful noncompliance with the Act. Any consumer may file suit in state or federal court to enforce the Act.
While putative database companies like Lexis, Westlaw, ChoicePoint, and eFunds (owner of ChexSystems) do not create credit reports, they may gather the same types of information and as a result, may subject some of their actions to FCRA.
An entity that meets the definitional requirement for a “consumer reporting agency” (CRA) in Section 603(f) of the FCRA is covered by the law even if the only information it collects, maintains, and disseminates is obtained from “public record” sources.
Section 603(f) defines a “consumer reporting agency” as any person “which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information … for the purpose of furnishing consumer reports to third parties …”. In turn, Section 603(d) defines a “consumer report” as the communication of “any information” by a CRA that bears on a consumer’s “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” that is “used or expected to be used or collected in whole or in part” for the purpose of serving as a factor in establishing eligibility for credit or insurance to be used primarily for personal, family, or household purposes, employment purposes, or any other purpose authorized under Section 604.
If the commercial service you describe regularly provides information for the purposes set forth in the definition of consumer report in Section 603(d), the agency is a consumer reporting agency and the information it collects from public record sources and maintains in its computerized files is subject to the FCRA. excerpt of a 1999 FTC advisory opinion
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This glossary post was last updated: 23rd April, 2020 | 1 Views.