The New Law

The use of consumer credit reports is controlled by a Federal Law known as the Fair Credit Reporting Act. The law is 15 U.S.C. 1681-1681u. You can obtain the full text of this law at the Federal Trade Commission's web site (http://www.ftc.gov).

This law changed on October 1, 1997.

The salient points of the law are as follows. You can get the complete law by contacting the Federal Trade Commission, Consumer Response Center - FCRA, Washington, DC 20580; telephone: (202-326-3761); or, go to their website at http://www.ftc.gov.

1. You must be told if information in your file has been used against you in credit extension, employment, etc. And, you must be told the name, address and telephone number of the bureau furnishing the information.
2. You can find out what is in your file and a list of everyone who has requested it recently. You can request a free copy of your report within 60 days of being adversely affected by information in your report. You are also entitled to a free report every twelve months 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, you can be charged up to $8.00. In addition, some states have enacted legislation that requires the three major credit bureaus to provide consumers with one free credit report per year. These states are MA, VT, MD, NJ, GA and CO.
3. You can dispute inaccurate information. If you dispute information in your report, the bureau must investigate the item(s) by presenting to its information source all of the relevant information you submit. The source must review your evidence and report its findings to the bureau, advising the bureau of any errors. If the investigation results in any change in your report, the bureau must notify you in writing and give you a copy of your new report. If the dispute is not resolved, the bureau must allow you to add a brief statement to your report. If your report is changed or a dispute statement is filed, you may ask that anyone who has recently received your report be notified.
4. Inaccurate information must be corrected or deleted. The bureau must remove or correct inaccurate or unverified information from its files; generally within 30 days after you dispute it. However, the bureau is not required to remove accurate data from your file unless it is outdated or cannot be verified. The bureau cannot reinsert into your file a disputed item unless the information source verifies its accuracy and completeness. If the bureau reinserts the item, it must give you written notice that it has done so and must give you the name, address and phone number of the information source.
5. You can dispute inaccurate items with the source of the information. If you tell a source of an item that you dispute the accuracy of that item, they may not then report that item to the bureau without including notice of your dispute. In addition, the source may not continue to report the information if it is, in fact, an error.
6. Outdated information may not be reported. In most cases, the bureau may not report negative information that is more than seven years old; ten years for bankruptcies.
7. Access to your file is limited. A bureau may provide information about you only to those with a need to know recognized by the FCRA.
8. Your consent is required for reports that are provided to employers, or for release of reports that contain medical information.
9. You may choose to remove your name from bureau lists for unsolicited credit and insurance offers. Such offers must include a toll-free phone number for you to call to have your name removed from future lists for two years. If you request from the bureau the form provided for the purpose, and return same, you must be removed from the list indefinitely.
10. You may seek damages from violators. If a bureau, a user or (in some cases) a provider of data violates the FCRA, you may sue them in state of federal court. For more information, contact the Federal Trade Commission, Consumer Response Center - FCRA, Washington, DC 20580 (202-326-3761).

The act is, essentially, a privacy act enacted to prevent abuses in credit reporting. A small part of the language of the act is that "It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title."

Permissible Purposes Of Reports (Section 604)

A consumer reporting agency may furnish a consumer report under the following circumstances and no other:

• In response to the order of a court having jurisdiction to issue such an order. Section 604(a)(1).
• In accordance with the written instructions of the consumer to whom it relates. Section 604(a)(2).
• For the extension of credit as a result of an application from a consumer, or the review or collection of a consumer's account. Section 604(a)(3)(A).
• For employment purposes, including hiring and promotion decisions, where the consumer has given written permission. Section 604(a)(3)(B) and 604(b).
• For the underwriting of insurance as a result of an application from a consumer. Section 604(a)(3)(C).
• Where there is a legitimate business need for the information in connection with a business transaction initiated by and involving the consumer. Section 604(a)(3)(F)(i).
• To review a consumer's account to determine whether the consumer continues to meet the terms of the account. Section 604(a)(3)(F)(ii).
• To determine a consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status. Section 604(a)(3)(D).
• For use by a potential investor or servicer, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation. Section 604(a)(3)(E).
• For use by state and local officials in connection with the determination of child support payments, or modifications and enforcement thereof. Section 604(a)(4) and (a)(5).

Adverse Action

If a user takes any type of adverse action (an action that can be considered to have a negative impact) based at least in part on the information contained in a consumer credit report, the user is required by Section 615(a) of the FCRA to notify the consumer of that fact. The notification can be oral, in writing or by electronic means and must contain:

• The name, address and telephone number of the bureau from which the report was drawn.
• A statement that the bureau did not make the adverse decision and has no knowledge of why the decision was made.
• A statement notifying the consumer of his/her right to obtain a free consumer credit report from the bureau if requested within 60 days.
• A statement advising the consumer of his/her right to dispute the accuracy or completeness of information with the bureau that provided it.

Employment

If information is obtained for employment purposes, the user must:

• Make a clear and conspicuous written disclosure, in a document that consists solely of that disclosure, to the consumer before a consumer credit report is obtained.
• Obtain prior written authorization from the consumer.
• Before taking an adverse action, provide a copy of the consumer credit report to the consumer, as well as a summary of the consumer's rights.

The "bottom line" is that consumer credit reports are still available on the same basis as before. Now, however, those requesting the reports must be more careful than ever to comply with the regulations imposed by the FCRA.

Remember - the consumer must initiate the action for which you to request a credit report!

Liability For Violations Of The FCRA

Failure to comply with the FCRA can result in state or federal enforcement actions, as well as private lawsuits. In addition, any person who obtains a credit report under false pretenses may face criminal prosecution (Section 619).