What 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:
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:
What is the consumer credit report?
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:
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:
These Credit Report Agencies (CRA’s) have a set of duties to be followed as per the FCRA.
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?
Fair 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:
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
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:
The Fair Credit Reporting Act Consumer Rights & Duties:
The 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.
In many cases, you are allowed to receive a free file disclosure:
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.
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:
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.