Adapted from Federal Trade Commission's Model
The federal Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every consumer maintained by a credit reporting agency--CRA. The law was significantly amended by the1996 Congress. The new changes took effect on 30 September, 1997.
Most credit bureaus gather and sell information about you -- such as if you pay your bills on time or have filed bankruptcy -- to creditors, employers, landlords, and other businesses. You may not know that check verification companies and tenant screening firms, as well as the Medical Information Bureau, are all credit bureaus. You can find the complete text of the FCRA at the Federal Trade Commission's web site FTC.gov.
Consumers must be told if information in your file has been used against you. Anyone who uses information from a CRA to take action against you -- such as denying an application for credit, insurance, or employment -- must tell you, and give you the name, address, and phone number of the CRA that provided the consumer report, plus disclose your right to a free report after denial.
Consumers can find out what is in their own credit files. At your request, a CRA must give you the information in your file, and a list of everyone who has requested it recently. There is no charge for the report if a person has taken action against you because of information supplied by the CRA, if you request the report within 60 days of receiving notice of the action. Consumers also are entitled to one free report every twelve months upon request if you certify that
- you are unemployed and plan to seek employment within 60 days,
- you are on welfare, or
- your report is inaccurate due to fraud.
Otherwise, a CRA may charge you up to eight dollars, unless you live in a free or low cost report state. Of course, if denied credit, you can request additional free reports under federal law in these states.
Consumers may dispute inaccurate information with the CRA. If you tell a CRA that your file contains inaccurate information, the CRA must investigate the items (usually within 30 days) by presenting to its information source all relevant evidence you submit, unless your dispute is frivolous. The source must review your evidence and report its findings to the CRA. (The source also must advise national CRAs -- to which it has provided the data -- of any error.) The CRA must give you a written report of the investigation, and a copy of your report if the investigation results in any change. If the CRA's investigation does not resolve the dispute, you may add a brief statement to your file. The CRA must normally include a summary of your statement in future reports. If an item is deleted or a dispute statement is filed, you may ask that anyone who has recently received your report be notified of the change.
Inaccurate information must be corrected or deleted. A CRA must remove or correct inaccurate or unverified information from its files, usually within 30 days after you dispute it. However, the CRA is not required to remove accurate data from your file unless it is outdated (as described below) or cannot be verified. If your dispute results in any change to your report, the CRA cannot reinsert into your file a disputed item unless the information source verifies its accuracy and completeness. In addition, the CRA must give you a written notice telling you it has reinserted the item. The notice must include the name, address and phone number of the information source.
Consumers may dispute inaccurate items with the source of the information. If you tell anyone -- such as a creditor who reports to a CRA -- that you dispute an item, they may not then report the information to a CRA without including a notice of your dispute. In addition, once you've notified the source of the error in writing, it may not continue to report the information if it is, in fact, an error.
Outdated information may not be reported. In most cases, a CRA may not report negative information that is more than seven years old; ten years for bankruptcies.
Your consent is required for reports that are provided to employers, or reports that contain medical information. A CRA may not give out information about you to your employer, or prospective employer, without your written consent. A CRA may not report medical information about you to creditors, insurers, or employers without your permission. An employer considering adverse action must show you the report.
Consumers may seek damages from violators. If a CRA, a user or (in some cases) a provider of CRA data, violates the FCRA, you may sue them in state or federal court.
"Credit Repair Doctors" are strictly regulated under the new law. Their promises that they can "change your social security number" to hide your negative credit background are illegal. Don't give credit doctors your money, use it to pay your bills and rebuild your credit.
The new law also gives big banks the right to share your credit report and other information with "affiliates." Your mutual fund may be owned by a bank that will make a credit card offer to you, for example. Those banks that desire to take advantage of "affiliate-sharing" must send you a onetime offer to opt-out. The law does not require that this notice be very clear. You may have received it and tossed it, or never noticed it. They're not required to have toll-free numbers. We encourage you to opt-out. Shop around when you need financial products instead of letting your own bank send you mediocre offers. You'll need to send your bank a letter stating that you want to exercise your FCRA right to opt-out of information sharing among affiliates.
The ICFE's "Do-It-Yourself Credit File Correction Guide" 2006 edition is still available for $10. Included are step-by-step instructions, answers to the most often asked questions, consumer credit rights, sample letters to use when communicating with the various credit reporting agencies about credit file questions and difficulties and much more.