Fair Credit Reporting Act (FCRA) - Provisions and Civil Liabilities for Wilful Violations

  • By: Staff Editor
  • Date: July 08, 2009
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The Fair Credit Reporting Act (FCRA), Public Law No. 91-508, was enacted in 1970 to promote accuracy, fairness, and the privacy of personal information assembled by Credit Reporting Agencies (CRAs). The FCRA was passed to address a growing credit reporting industry in the United States that compiled "consumer credit reports" and "investigative consumer reports" on individuals. The FCRA was the first federal law to regulate the use of personal information by private businesses.

The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, is designed to promote accuracy and ensure privacy of the information used in consumer reports. Recent amendments to the Act expanded an individual’s rights and placed additional requirements on CRAs. Businesses that supply information about individuals to CRAs and those that use consumer reports also have new responsibilities under the law.

The FCRA Provisions
Since credit reports can include sensitive personal information and are used to evaluate the ability to participate in different activities in modern life, they are subject to regulations that follow a framework of fair information practices. The FCRA establishes rights and responsibilities for "consumers," "furnishers," and "users" of credit reports.  Accordingly,

  • Consumers are individuals.
  • Furnishers are entities that send information to CRAs regarding creditworthiness in the normal course of business.
  • Users of credit reports are entities that request a report to evaluate a consumer for some purpose.

What is a Consumer Reporting Agency (CRA)?
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. CRAs assemble reports on individuals for businesses, including credit card companies, banks, employers, landlords, and others. The FCRA provides protection for credit reports, consumer investigatory reports, and employment background checks. CRAs have a number of responsibilities under FCRA, including the following:

  1. To provide a consumer with information about him or her in the agency's files and to take steps to verify the accuracy of information disputed by a consumer.
  2. If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within five days, in writing.
  3. CRAs may not retain negative information for an excessive period. The FCRA describes how long negative information, such as late payments, bankruptcies, tax liens or judgments may stay on a consumer's credit report (typically seven years from the date of the delinquency). Exceptions: bankruptcies (10 years) and tax liens (seven years from the time they are paid).

CRAs in US

  • There are three national CRAs in the United States: Experian (formerly TRW), Trans Union, and Equifax (formerly Retail Credit Co.).
  • There are also many smaller credit reporting agencies that usually concentrate on reporting on individuals living in certain regions of the country. For example, in Texas, if a consumer tries to dispute information with Equifax directly, they must go through CSC Credit Services which is linked to the Equifax database.
  • Inspection bureaus, companies that sell information to insurance companies and assist in performing background checks, are considered CRAs as well, often.
  • Tenant screening and check approval companies are also considered CRAs.
  • Depending on the nature of the operation, other companies can be considered CRAs.
  • Courts have held that private investigators, detective agencies, collection agencies, and even college placement offices can be CRAs under the law.

Nationwide Specialty Consumer Reporting Agencies
Under Section 603(w) 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.

Since, these nationwide specialty CRAs sell consumer credit report files, they are required to provide annual disclosures of their report files to any consumers who request disclosure. A partial list of companies classified as nationwide specialty consumer reporting agencies under FCRA includes:

  1. ChoicePoint,
  2. Acxiom,
  3. Integrated Screening Partners,
  4. Innovis, the Insurance Services Office (ISO),
  5. Tenant Data Services, LexisNexis,
  6. Retail Equation, Central Credit,
  7. Teletrack,
  8. The Medical Information Bureau (MIB aka, MIB Group, Inc.),
  9. UnitedHealth Group (Ingenix Division), and
  10. Milliman.

Information furnishers
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:

  1. They must provide complete and accurate information to the credit reporting agencies.
  2. The duty to investigate disputed information from consumers falls on them, and they must correct an error, or explain why the credit report is correct within 30 days of receipt of notice of a dispute.
  3. They must inform consumers about negative information which has been or is about to be placed on a consumer's credit report within 30 days.

Users of the information for credit, insurance, or employment purposes
Users of the information for credit, insurance, or employment purposes (including background checks) have the following responsibilities under the FCRA:

  1. They must notify the consumer when an adverse action is taken on the basis of such reports.
  2. 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.

Consumer Credit Reports and Investigative Consumer Reports (ICRs)
Consumer credit reports contain information on financial accounts, and include credit card balances and mortgage information. Credit reports are used for evaluating:

  • eligibility for credit, insurance, employment, and tenancy;
  • the ability to pay child support;
  • professional licensing (for instance, to become an attorney); or
  • for any purpose that a consumer approves.

A consumer credit report will contain basic identifying information (name, address, previous address, Social Security Number, marital status, employment information, number of children) along with:

Relevant Information
Financial information Estimated income, employment, bank accounts, value of car and home.
Public records information Arrests, bankruptcies, and tax liens.
Tradelines Credit accounts and their status. This will also include the data subject's payment habits on credit accounts.
Collection items Whether the subject has unpaid or disputed bills.
Employment record Current Employment and employment history.
Requests for the credit report The number of requests for the subject's report and the identity of the requestors.
Narrative information A statement by the data subject or by the furnisher regarding disputed items on the credit report.
Health information Medical history.

Likelihood of errors on a credit report
A large portion of consumer credit reports contains errors. Therefore, by law, consumers can 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 desiring to view their reports and dispute items.

Civil liability for willful or negligent violations of the FCRA

  • Under § 616 of the Act, a consumer may recover either actual damages or a minimum of USD 100 and a maximum of USD 1000 plus punitive damages and reasonable attorney's fees and costs for willful noncompliance with the Act.
  • Under § 617 of the Act, recovery for a negligent violation is of actual damages, plus attorney's fees.
  • Under § 618, a consumer may file a suit in a state or federal court to enforce the Act.




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