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The Fair Credit Reporting Act | Your Rights and Duties

5 the consumerWhat is the Fair Credit Reporting Act?

The Fair Credit Reporting Act is law by the U.S. Federal Government, enacted to foster the accuracy, fairness, and confidentiality of consumer information contained in the records of consumer reporting agencies.

This law protects consumers and prevents reporting agencies from the inclusion of erroneous information in their credit reports either intentionally or unintentionally.

The FCRA controls the collection, distribution, and use of consumer information, including consumer credit information.

The FCRA coupled with the Fair Debt Collection Practices Act (“FDCPA”), prove to be strong pillars of consumer rights law in the United States.

These are the major entities controlled by the FCRA:

  1. Consumer reporting agencies
  2. Users of consumer reports and
  3. Providers of consumer information

What happens when the consumer’s right under FCRA are violated?

If an entity or an individual is found guilty of violating a consumer’s rights under the FCRA, they following monetary compensations shall be recovered from the violator:

  1. Actual or legal damages
  2. Attorney’s fees
  3. Court expenses and,
  4. Penal damages if the violation was done willfully.

What is the consumer credit report?

A consumer credit report is a report that contains information about a consumer’s credit details such as loan paying history and the status of all his credit accounts. This actually portrays overall financial status and credit worthiness of a person.

Contents of Consumer Credit Report:

This total credit report contains the A-Z of all your recorded financial transactions. The gist of details found in the credit reportinclude:

  • If your payments are made on time?
  • How much credit you have and your available credit limit?
  • The amount of credit that is actually used.
  • If a bill or debt collector is collecting on the money you owe.
  • Public Records such as liens, mortgage, judgments, bankruptcies and so on.
  • Rental payment details if in case you are a property renter.

To sum up, it contains all information that provides insight into your financial status and commitments.

This Credit Report is formulated and recorded by Credit reporting companies (also known as credit bureaus or consumer reporting agencies) and the same is been used by Lenders to decide whether to lend or not. The three major CRA’s are The Experian, The TransUnion and the Equifax, however there are other CRA’s too discharging the same services.

Some of the information’s that are included in the credit reports by CRA’s include:

  1. Personal Data
  2. Credit History
  3. Account Details
  4. Inquiries – Soft Inquiries & Hard Inquiries
  5. Collections
  6. Dispute Issues

These Credit Report Agencies (CRA’s) have a set of duties to be followed as per the FCRA.

  1. To ensure and maintain maximum possible Accuracy of their data’s, CRAs must follow sensible procedures while preparing the reports.
  2. The CRA’s are bound to provide information about the consumer in the agency’s files and in case of any disputes that may be raised by the consumer; it ought to take necessary steps to verify the accuracy of information.
  3. Once negative information is removed as a result of a consumer’s interference and dispute, it cannot be reinserted without informing the consumer in writing within five days.
  4. CRA’s should remove negative information seven years after the date of first delinquency, in case ofbankruptcies and tax liens the term gets extended to 10 years and 7 seven years respectively.

Credit Scores:

These CRA’s compile the credit reports of a consumer and credit scoring is formulated based on this report. Most of the credit rating models use a credit score range of 300 to 850, 300 being the lowest and 850 the highest.

It is a person’s credit scores that determine their credit worthiness and financial status. Lenders stick on these scores for decision-making purposes. A fair credit score is somewhere between the low and mid-600’s (400-650)

What Is Fair Credit?

5 benjamin billFair Credit is the requirement and obligation of a Credit Reporting Agency to arrive at credit reports in a fair and accurate manner and without any intentional or unintentional errors. The procedures for compiling the reports should be carefully formulated and done with utmost care. It is because this report decides upon the financial future and status of the person.

The credit report has the power to build or ruin a person’s future.  Hence it should be done in the fairest way possible. 

The Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) is the principal federal law that controls debt collection practices. The FDCPA forbids debt collection companies from using abusive, unfair, unjust or deceiving practices to collect past due debts from a consumer.

This FDCPA has control over all debts that are taken either for family or domestic purposes, which might include mortgages, credit cards, medical debts and so on.

This FDCPA generally covers only personal and domestic debt and does not have anything to do with debts for business purposes. It also does not cover collection by the original creditor, the person who actually lends you the money. So this is actually to protect consumers from unfair practices of collection agencies if any.

The Equal Credit Opportunity Act

The Equal Credit Opportunity Act [ECOA] is an act that prohibits creditors from performing discerning actions against credit applicants on the basis of their race, color, religion, national origin, sex, marital status and age. Provided an applicant receives income from a public assistance program, or an applicant has in good faith implemented any right under the Consumer Credit Protection Act (CCPA).

In case of any such discrimination act being reported, The Department of Justice can file a lawsuit under. According to the Equal Credit Opportunity Act’s Regulation B, failure to abide by this act can subject a financial institution to civil liability for actual and punitive damages in individual or class actions.

In instances of punitive damages, the liability can be as much as $10,000 in individual actions and  $500,000 or 1% of the creditor’s net worth in class actions whichever is lesser.

What are the prohibitions under EOCA?

The ECOA states that it is unlawful for creditors to:

  • Discriminate based on race, sex, age, national origin, or marital status, or due to the fact that one receives public assistance.
  • Inquire about marital status in case a candidate applies for separate, unsecured credit, however one can be inquired about marital status if one lives in acommunity property  Joint credit or credit secured with property is exempt from this without considering the state of residence.
  • Ask the candidate about their plans as to when they have decided to have children or additional children, however creditors have the right to request about the number, ages, and financial commitments pertaining to all existing children.
  • Disregard regular sources of income, such as reliableold-age benefits, welfare payments, Social Security payments, allowance, child support, etc. Nor they may decline to consider or discount any income earned from a part-time job, pension, annuity, or retirement benefits program.

What are the Requirements of EOCA?

The ECOA also has laid forth a set of requirements to be followed by the creditors.

The creditors are bound to

  • Inform the candidate about the status of their application, if they have been denied or granted credit within 30 days of receipt of their completed application. This can be either done through oral communication, however a written notification does well.
  • Clarify the applicant with justifiable reasons as to
  • Why the applicant is refused credit or
  • Why has the credit been granted differently than what was originally applied for.
  • Why the creditor closes the account?
  • Why does the creditor refuse to increase aline of credit or makes a negative change in the terms of the credit discretely only to your application.
  • Why does the creditor refuse to give the credit that was initially applied?

To keep a constant check and to ensure fair and proper lending practices, the Consumer Financial Protection Bureau has issued regulations under EOCA, named as Regulation B. Under this regulation, the EOCA has appointed certain agencies to monitor and help in regulating fair practices.

The agencies and creditors that they have regulated for this purpose under EOCA are:

  1. Consumer Financial Protection Bureau (CFPB)
  2. Comptroller of Currency (OCC)
  3. Federal Reserve Board (FRB)
  4. Federal Deposit Insurance Corporation (FDIC)
  5. National Credit Union Association (NCUA)
  6. Federal Trade Commission (FTC)

The Fair Credit Reporting Act Consumer Rights & Duties:

5 consumer tabletThe Fair Credit Reporting Act (FCRA) was formulated exclusively to promote the accuracy, fairness, and privacy of information in the records of CRA’s (Consumer reporting agencies).

There are quite a good number of Consumer Reporting Agencies; including credit bureaus and the major CRA’s being agencies like the Equifax, FICO, TransUnion and Experian.

Here is a gist of Your Rights under the FCRA.

  • You must be made known in case when information in your file has been put to use against you.
  • You are entitled to receive the information of anyone who uses your credit report or any other type of consumer report to reject your credit application, insurance, or employment or to take other adverse actions against you.
  • You must be also provided with the name, address, and phone number of the agency that provided your credit information.
  • You have the absolute right to know what is in your file. You are free will to request and attain all the information pertaining to you in the records of a consumer-reporting agency.

In many cases, you are allowed to receive a free file disclosure:

  • If adverse action has been taken against you due to the information mentioned in your credit report;
  • If you fall victim to crimes such as identify theft and if you want to place a fraud alert in your file;
  • If you doubt that your file contains erroneous data as a result of possible fraud;
  • If you are a person receiving public assistance;
  • If you are a person, planning to apply for a jobin the next 60 days.

Apart from these scenarios, all consumers will be entitled to one free disclosure every 12 months upon request. You are entitled to receive one report each from nationwide credit bureau and from nationwide specialty consumer reporting agencies.

  • You have the right to request for your credit score. As already discussed, Credit scores are nothing but a numerical value that portrays your credit-worthiness based and financial status based on information from credit bureaus. These credit scores can be requested from CRA’s who compile the credit reports. In case of Mortgage loans, some Mortgage lenders give you your credit scores for free.
  • You have the right to raise your concern overimperfect or inaccurate information. In case you detectinaccurate information in your file, and report it to the consumer-reporting agency, the CRA musttake all necessary actions and investigate your dispute.
  • CRA’s must correct or delete inaccurate, incomplete, or unverifiable informationusually within 30 days of the consumer’s dispute. However, a consumer-reporting agency may continue to hold the same information in its records if it has confirmedthe information as accurate.

Always remember that all matter relating to financial records is dealt with utmost care and privacy and protection of data is given major importance. So the level of access to your file from a consumer-reporting agency is indeed limited.

The CRA provides information about you only to people with a legaland valid need. In most cases, these credit reports are usually obtained to consider an application with a creditor, insurer, employer, property-owner, or any other business as such.

Unless and until you give your written consent for reports to be provided to employers, aconsumer-reporting agency may not give out information about you to your current employer or a prospective employer.

In case you find a consumer reporting agency ora user of consumer reports or a provider of information to a consumer-reporting agency violating the FCRA, you may be able to sue them in either the state court or federal court.

Duties under FCRA:

Just like you have your rights under FCRA, there are also certain duties you ought to follow under this act. It is not possible for any person to get his credit report just like that for vague or no reason. The FCRA has formulated duties to be followed by various entities separately.

Here are the duties to be followed by General Users in total:

  • Users Must Have a Legitimate Purpose
  • Users must provide for all certification that might be asked for verification purposes.
  • Users must inform consumers as and when adverse actions are taken.
  • Users have the responsibility to revert with proper information, when notified of an address discrepancy.
  • Users are responsible for the safe custody of records.
  • Users should be socially and ethically responsible regarding the information in the records.

And finally, remember that there is no such thing as too much information. Especially when it comes to money and money-related matters, the more you know, the better off you will be in tackling any difficult scenarios.

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