Thursday, September 6, 2012

The Definitive Guide To The Fair Credit Reporting Act

For better or worse, your credit is extremely important in 21st century America, and it can be a tricky thing to negotiate. Because it is largely policed by faceless bureaucratic organizations called consumer reporting agencies, it can be hard to get a handle on the state of your own credit report. Fortunately, the Fair Credit Reporting Act is a law that protects consumers from getting swept up in the credit system and provides base-level rights to credit consumers like you throughout the country.

A Short History

The foundation of consumer credit rights in America, the Fair Credit Reporting Act was originally passed in 1970 and has been amended several times throughout the last three decades. The act is enforced primarily by the Federal Trade Commission (FTC). Prior to this act, consumers did not have the right to know what information was on their credit reports, which meant that people had no way to determine whether or not credit information was accurate and no clear system for disputing inaccurate listings. Fortunately, the FCRA has helped clean up some of the practices of the credit reporting system and helped make it much simpler to ensure that your credit history is accurate and up-to-date.

The Act

Under the Fair Credit Reporting Act (FCRA), consumer reporting agencies have a number of responsibilities to consumers. First, they must provide a consumer access to his or her credit information and they must take steps to verify information that has been disputed by a consumer. In addition, a 2003 amendment to FCRA gives consumers the right to one free credit report a year. FCRA also limits the amount of time under which a consumer reporting agency can retain negative credit information. Things like late payments and tax liens may typically only stay on a consumer's credit report for seven years.

The FCRA also establishes a class of information tech companies as "nationwide specialty consumer reporting agencies," on which it then places regulation. FCRA classifies these agencies as any company that keeps records relating to medical records and payments, residential history, personal check history, employment, or insurance claims. Thanks to this bill, these agencies are required to provide yearly disclosures of their files to any consumers who request it.

FCRA establishes a class of agencies known as "information furnishers," which are usually creditors including credit card companies, auto finance companies, and mortgage banking institutions. FCRA compels these lenders to provide complete and accurate information to credit reporting agencies. They are also saddled with the added responsibility of investigating disputed information from consumers, including cases of errors and fraud. They are obligated to correct a credit report within 30 days of a dispute. Finally, they must inform you of any negative listings which are about to be placed on your credit report within 30 days.

Under FCRA, potential users of credit information, whether for credit, insurance, or employment purposes, have several responsibilities. They are obligated to notify you when negative information causes an adverse action to be taken. Further, they must identify the company that provided the report, so that the report's accuracy may be verified by the customer. Willful noncompliance of the Federal Credit Reporting Act on the part of any of these agencies may result in your ability to seek punitive damages, where appropriate.

The Fair Credit Reporting Act can seem complicated, however its bottom line is quite simple. It provides consumers with a right to easy and full disclosure of their credit history and forces credit companies to take reasonable steps to ensure the accuracy of their records. In spite of this, FCRA only provides you with the tools to protect your credit. It's still up to you to take advantage of the opportunities that FCRA provides you in order to ensure that your credit information is as accurate as possible.

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