FAIR CREDIT REPORTING ACT – FCRA

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May 7, 2023

                                           FAIR CREDIT REPORTING ACT – FCRA

INTRODUCTION

The Fair Credit Reporting Act (FCRA) is a federal law that regulates credit reporting agencies and compels them to insure the information they gather and distribute is a fair and accurate summary of a consumer’s credit history.

The FCRA is chiefly concerned with the way credit reporting agencies use the information they receive regarding your credit history. The law is intended to protect consumers from misinformation being used against them. It offers very specific guidelines on the methods credit reporting agencies use to collect and verify information and outlines reasons that information can be released.

The law was enacted October 26, 1970 as title VI of Public Law 91-508, 84 Stat. 1114, the act represents the amendment to the Consumer Protection Act of 1968 and is enforced by the Federal Trade Commission.

It is primarily aimed at the three major credit reporting agencies  Experian, Equifax and TransUnion because of the widespread use of the information those bureaus collect and sell. The law also applies to banks, credit unions and agencies that sell medical records and check writing or rental history records, as well as any businesses that use information on credit reports for hiring purposes.

The FCRA has come up often in media reports because advocacy groups question the accuracy of the information credit reporting agencies gather and consumers’ ability to dispute that information and have it removed from their credit report.

OBJECTIVE OF THE ACT

The federal Fair Credit Reporting Act (FCRA) of 1970 was the first federal law to regulate the use of personal information by private businesses. The intent of the law was to protect consumers from having misinformation used against them, and with consumer protection in mind the FCRA implemented several very specific guidelines including:

  • Governing the collection, assembly, and use of consumer report information.
  • Promoting the accuracy, fairness, and privacy of information in the files of consumer reporting agencies (CRA)
  • Covering how a consumer’s credit information is obtained, how long it is kept, and how it is shared with others-including consumers themselves.
  • Describing the kind of data that bureaus are allowed to collect.
  • Limiting who is allowed to see a credit report and under what circumstances.
  • Giving consumers certain rights, including free access to their own credit reports as well as the right to dispute.

AMENDMENTS MADE TO THE FCRA

Since the enactment of the original act, two major amendments have been made: the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003 (“FACT ACT” or “FACTA”).

PLAYERS UNDER THE FAIR CREDIT REPORTING ACT

The following groups are affected by the provisions of the FCRA they include furnishers, resellers, consumers, consumer reporting agencies, and end-users.

PERMISSIBLE PURPOSES OF CONSUMER REPORTS

Credit Reporting Agencies (CRA) are accountable for gathering, processing and archiving credit information on consumers. They sell that information to help businesses make decisions about granting loans or credit.

The agencies collect information on every consumer’s use of credit and their bill-paying habits. The data comes from “information suppliers,” or any business that extends credit to customers. Information also is taken from public records like court judgments and bankruptcy filings. Information suppliers transmit consumer credit information electronically to the credit reporting agencies on a continuous basis, thus credit reports could change almost daily, depending on the level of a consumer’s activity.

The CRAs feed the data they receive into their own set of algorithms to come up with a score that predicts a consumer’s creditworthiness.

The Fair Credit Reporting Act compels a consumer reporting agency to furnish a consumer report if any of the following apply. The consumer must have initiated the “business transaction” (this covers new transactions and renewing/renewable transactions for continued eligibility sake).

  1. A court order or subpoena by a Federal grand jury.
  2. A request by the consumer on and for their own account.
  3. A request by a third party whose purpose concerning the consumer is a business,employment, or government transaction (e.g. a state insurance license) such as:-
  4. a credit transaction
  5. employment application
  6. an insurance application or claim
  7. governmental licensure (again, e.g. an insurance license)
  8. investment purposes (e.g. stocks, bonds, notes, ipos and the like)
  9. omnibus business reasons stated as “a legitimate business need for the information”

CONDITIONS FOR FURNISHINGS AND USING CONSUMER REPORTS FOR EMPLOYMENT PURPOSES

  • Certification from user.

 When it comes to Employment matters a CRA may be complelled to furnish a consumer report for the following purposes but on condition that the person who gets the report from the CRA will prove to the agency that;-

(i) He has complied with the necessary requirements with respect to the consumer report and the information contained in the report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation.

(2) Disclosure to Consumer.

Any  person  who wants to obtain a consumer report, for employment purposes with respect to any consumer, they must ensure that a clear and noticeable disclosure has been made in writing to the consumer, this is to be done before the report is acquired.

It is supposed to be in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes and that the consumer has given authority in writing that the person should obtain the report.

(B) Application by mail, telephone, computer, or other similar means.

Whenever  a consumer applies for employment by mail, telephone, computer, or other similar means, at any time before a consumer report is obtained. The person who obtaines  the consumer report for employment purposes should provide to the consumer, a notice that a consumer report should be obtained for employment purposes and should also include a summary of the consumer’s rights. The consumer should consent, either orally, in writing, or electronically to the procurement of the report by that person.

  • CONDITIONS ON USE FOR ADVERSE ACTIONS.

FCRA defines “adverse actions” to mean all business, credit, and employment actions affecting consumers that can be considered to have a negative impact. They includes denying or canceling credit or insurance, denying employment or promotion, denying a rental application, increasing a security deposit or rent, or requiring more restrictive lease terms because of a report. 

Before taking any adverse action that is based at least in part on information contained in a consumer report, the person intending to take such adverse action shall provide to the consumer to whom the report relates:-

(i) a copy of the report

(ii) a description in writing of the rights of the consumer,

(B) Application by mail, telephone, computer, or other similar means.

 A consumer who  applies for employment by mail, telephone, computer, or other similar means, and  has obtained a consumer report for employment purposes and goes ahead to take adverse action on the employment application based in whole or in part on the report. The notification may be done in writing, orally, or by electronic means and must include:

  • The name, address, and telephone number of the CRA (including a toll-free telephone number, if it is a nationwide CRA) that provided the report.
  • A statement that the CRA did not make the adverse decision and is not able to explain why the decision was made.
  • A statement setting forth the consumer’s right to obtain a free disclosure of the consumer’s file from the CRA if the consumer makes a request within 60 days.
  • A statement setting forth the consumer’s right to dispute directly with the CRA the accuracy or completeness of any information provided by the CRA.

PROTECTION OF MEDICAL INFORMATION

  • Limitation on consumer reporting agencies.

Whenever a  consumer reporting agency is expected to supply a consumer report, it should never provide  a report that contains medical information about a consumer, unless –

  • The consumer himself consents to such information being included in the consumer report. The consent must in writing.
    • The medical information is needed for the purposes of securing employment or relevant for credit transactions

The medical  information  provided relates only to the following transactions;-

  • Accounts,
  • Balances relating to debts arising from the receipt of medical services,
  • Products, or devises.

 (4) Limitation on redisclosure of medical information.

Any person that receives medical information of a consumer shall have the  responsibility to ensure that they do not disclose such information to any other person. Expect when it is permitted by statute, regulation, or order.

REQUIREMENTS RELATING TO INFORMATION CONTAINED IN CONSUMER REPORTS

For a report to be considered  a  consumer report it must meet the following three requirements;-

  • Consumer reports must be prepared by a Consumer Reporting Agency.
  • A consumer report is any written, oral or other form of communication of any information by a CRA bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.
  • A consumer report is a report expected to be used or collected in whole or part for the purpose of serving as a factor used in establishing the consumers eligibility for credit or insurance used primarily for personal, family, household, or employment purposes.

Examples of consumer reporting agencies include Equifax, TransUnion, and Experian.

It is important to note that Consumer Reporting Agencies do not have direct transactions or experiences with applicants and information is not on a firsthand basis. CRAs get their information from third-parties and thus are not the originating source of information.

INFORMATION EXCLUDED FROM CONSUMER REPORTS

Reports including personal knowledge or firsthand interaction, reports made among persons under common control, and reports other than credit (including skip tracing, law enforcement, dating, and laboratory reports) are not consumer reports. Information collected from internet providers, which collect “header data” consisting purely of identifying information from sources like public records, mailing lists, surveys, public social media profiles, are also not considered consumer reports.

Information excluded from consumer reports  include:

  • Arrest records more than 7 years old.
  • Items of adverse information, except criminal convictions older than 7 years.
  • Negative credit data, civil judgments, paid tax liens, and/or collections accounts older than 7 years. Time limits apply only to “negative” information about consumers as favorable information never goes stale. Time limits apply only to CRAs.
  • End-users can use “stale data” (older than 7 years) if information is obtained from a source other than a CRA.

IDENTITY THEFT PREVENTION; FRAUD ALERTS AND ACTIVE DUTY ALERTS

ONE-CALL FRAUD ALERTS

  • Initial alerts.

Upon the direct request of a consumer, or a person acting on his behalf or his  personal representative  who is acting in good faith or is suspicious that he is about to become a victim of fraud or a related crime, that may include identity theft.

 A consumer reporting such an incident must maintain a file on the consumer and has received appropriate proof of the identity of the requester shall include a fraud alert in the file of that consumer and any credit score.

 (2) Access to free reports.

In any event where a consumer reporting agency includes a fraud alert in the file of a consumer, the consumer reporting agency should disclose to the consumer that the he can request for a free copy of the file. The consumer should be provided  all disclosures required to be made under the Act, without charging the consumer, not later than 3 business days after the making of a request.

  • Access to free reports.

When a CRA includes a fraud alert in the file of a consumer the consumer reporting agency shall;-

 (A) disclose to the consumer that the he can make  a request to obtain free copies of his file  during the 12-month period beginning on the date on which the fraud alert was included in the file; and

 (B) provide to the consumer all disclosures required to be made, without charge to the consumer, not later than 3 business days after any request.

ACTIVE DUTY ALERTS.

Active duty alerts should apply to active duty military consumers, persons acting on their behalfs or their personal representatives, who are acting in good faith or are suspicious  that the active duty military consumer is about to become a victim of fraud or a related crime, that may include identity theft.

Active duty military personnel have a right under FACTA that allows  military personnel to place “active duty alerts” in their credit reports.

If you place an active duty alert in your report, creditors must take extra steps to verify your identity. This protects against identity theft while you are deployed by making it more difficult for thieves to impersonate you. The alert typically lasts one year but may be cancelled or renewed.

To place or remove an active duty alert, as with a fraud alert, you must call only one of the three national reporting agencies TransUnion, Experian or Equifax. The agency you contact will then notify the remaining two.

PROCEDURES.

Every consumer reporting agency has a duty to establish policies and procedures that will govern fraud alerts and active duty alerts. The policies should include the necessary procedures that will inform consumers of the availability of initial, extended, and active duty alerts and also allow consumers and active duty military consumers to request initial, extended, or active duty alerts in a simple and easy manner, including by telephone.

 REFERRALS OF ALERTS.

Whenever a CRA receives a referral of a fraud alert or active duty alert from another consumer reporting agency they should follow the required  procedures, as though the agency received the request from the consumer directly,

DUTY OF RESELLER TO RECONVEY ALERT.

A reseller has a duty to include in its report any fraud alert or active duty alert placed in the file of a consumer  in accordance with the Act by another consumer reporting agency.

DUTY OF OTHER CONSUMER REPORTING AGENCIES TO PROVIDE CONTACT INFORMATION.

If a consumer contacts any consumer reporting agency to communicate a suspicion that the consumer has been or is about to become a victim of fraud or related crime, including identity theft, the agency shall provide information to the consumer on how to contact the Bureau and the consumer reporting agencies to obtain more detailed information and request alerts.

NATIONAL SECURITY FREEZE.

The term ‘security freeze’ means a restriction that prohibits a consumer reporting agency from disclosing the contents of a consumer report that is subject to such security freeze to any person requesting the consumer report.

On May 24, 2018, the President signed Public Law 115-174 into law. Section 301 of Public Law 115- 174 amended the Fair Credit Reporting Act, and established a new federal right for consumers to implement a security freeze of their credit file. The freezes are free of charge. The new legislation became effective on September 21, 2018.

A security freeze is the single most effective tool to minimize the risk of identity theft. Identity thieves often target unsuspecting older adults, luring them into giving out personal information. The scammers then use this information to steal the older adults’ identity and ruin a lifetime of positive credit.

As a general rule, security freezes allow a consumer to prohibit the release of their credit report. When a thief applies for credit in the victim’s name, often the intended creditor will attempt to obtain the victim’s credit report or score. The idea behind a security freeze is that, when the credit reporting agency returns no information or a notice that the consumer has frozen the file, the creditor will deny the thief’s application, thereby thwarting the thief and protecting the consumer’s credit reputation as well as the business interests of the creditor. The legislation establishes standards for the creation, temporary lifting or “thaw,” and permanent removal of security freezes from the nationwide consumer reporting agencies. The security freezes are essentially limited to parties seeking the consumer’s information for credit purposes.

The freeze does not apply to parties who seek the report for employment, insurance, or tenant-screening purposes. It also does not apply to existing creditors or their agents or assignees conducting an account review, collecting on a financial obligation owed them, or seeking to extend a “firm offer of credit” (i.e., prescreening). The legislation also preempts state security freeze laws and extends initial fraud alerts from 90 days to one year. A fraud alert notifies users that the consumer has been or may become a victim of fraud or identity theft. The legislation’s preemption extends to any state requirement or prohibition with respect to subject matter regulated by the statute’s provisions relating to security freezes. For example, some state statutes are stronger than the new federal standards by allowing consumers to freeze access to credit reports for employment or insurance purposes.

FCRA was amended to allow a consumer to request a security freeze from a consumer reporting agency by phone or secure electronic means (online), whereas previously consumers generally had to request such freezes by mail. The Act sets the deadline for a consumer reporting agency to place a security freeze requested by phone or secure electronic means at 1 business day after receiving the request, whereas such agencies have up to 3 business days to place a security freeze in response to a request received by mail. Similarly, the Act requires a consumer reporting agency to lift a security freeze within 1 hour of receiving a request to do so via secure electronic means or telephone, but gives such agencies 3 business days to remove a security freeze in response to a mailed request. A security freeze will remain in place until a consumer requests its removal (except that a consumer reporting agency can lift a security freeze if it finds that the freeze was obtained on the basis of a material misrepresentation).

The Act correspondingly implements a new requirement that consumer reporting agencies establish websites that allow a consumer to request;-

 (i) a security freeze,

 (ii) an initial fraud alert,

(iii) an extended fraud alert, or

(iv) an active duty fraud alert, provided that such websites cannot be the only mechanism by which a consumer may request a security freeze.

Section 301 of the Public Law extends to 1 year (from the current requirement of 90 days) the period of time that a consumer reporting agency is obligated to include a fraud alert in the file of a consumer in response to a request from (or on behalf of) the consumer where there is a good faith belief that the consumer has been or is about to become the victim of fraud or a related crime (such as identity theft).

Finally, Section 301 of the Public Law includes standard language for certain notifications to consumers which must be provided any time a consumer is required to receive a summary of rights under FCRA. The standard language provides a government-endorsed template that may also be used by businesses other than consumer reporting agencies in communications with consumers, such as in response to a data breach or similar event. Section 301 also implements legislative protections under FCRA for “protected consumers” (consumers under the age of 16 at the time a request for a security freeze is made, or who are incapacitated or under protection of a guardian or conservator) that are consistent with those described above for consumers.

Confirmation and additional information.

Not later than 5 business days after placing a security freeze, a consumer reporting agency shall;-

  1. Send confirmation of the placement to the consumer; and
  2. Inform the consumer of –
  3. The process by which the consumer may remove the security freeze, including a mechanism to authenticate the consumer; and
  4.  The consumer’s right

A consumer reporting agency may give a notice to third parties that a security freeze has been placed with respect to a consumer.

 Removal of security freeze.

A consumer reporting agency should only remove a security freeze placed on the consumer report of a consumer only in the following cases;-

  1. Upon the direct request of the consumer.
    1. The security freeze was placed due to a material misrepresentation of fact by the consumer.

 (B) Notice if removal not by request.

 If a consumer reporting agency removes a security freeze, the CRA shall notify the consumer in writing prior to removing the security freeze.

Removal of security freeze by consumer request.

A security freeze shall remain in place until the consumer directly requests that the security freeze be removed. Upon receiving a direct request from a consumer that a consumer reporting agency remove a security freeze, and upon receiving proper identification from the consumer, the CRA shall, free of charge, remove the security freeze not later than;-

  • In the case of a request that is by toll-free telephone or secure electronic means, 1 hour after receiving the request for removal; or
  •  In the case of a request that is by mail, 3 business days after receiving the request for removal.

Temporary removal of security freeze.

 A security freeze can be removed temporarily but it should be upon the receipt of  a direct request from a consumer, if the consumer requests for a temporary removal of a security freeze, the consumer reporting agency  removes the security freeze for the period of time specified by the consumer.

Exceptions.

A security freeze shall not apply to the making of a consumer report for use of the following;-

  1. A person or entity, or a subsidiary, affiliate, or agent of that person or entity, or an assignee of a financial obligation owed by the consumer to that person or entity, or a prospective assignee of a financial obligation owed by the consumer
    1. Any Federal, State, or local agency, law enforcement agency, trial court, or private collection agency that has been mandated by a court order, warrant, or subpoena.
    1. A child support agency
    1. Any person or entity administering a credit file monitoring subscription or similar service to which the consumer has subscribed.
    1. Any person or entity that has the responsibility of providing a consumer with a copy of the consumer’s consumer report or credit score, upon the request of the consumer.
    1. Any person using the information in connection with the underwriting of insurance.
    1. Any person using the information for employment, tenant, or background screening purposes.
    1. Any person using the information for assessing, verifying, or authenticating a consumer’s identity for purposes other than the granting of credit, or for investigating or preventing actual or potential fraud.

BLOCK OF INFORMATION RESULTING FROM IDENTITY THEFT

  • Block.

A consumer reporting agency shall block the reporting of any information in the file of a consumer that the consumer identifies as information that ensued from an alleged identity theft, not later than 4 business days after the date of receipt by such agency of

  1. appropriate proof of the identity of the consumer;
    1. a copy of an identity theft report;
    1. the identification of such information by the consumer; and
    1. a statement by the consumer that the information is not information relating to any transaction by the consumer.

 Notification.

A consumer reporting agency shall promptly notify the furnisher of information identified by the consumer;–

  1. that the information may be as a result of identity theft;
    1. that an identity theft report has been filed;
    1. that a block has been requested under this section; and
    1. of the effective dates of the block.

 Authority to Decline or Rescind

A consumer reporting agency may decline/ or rescind to block any information relating to a consumer if the consumer reporting agency reasonably determines that; –

  • the information was blocked in error or a block was requested by the consumer in error;
    • the information was blocked, or a block was requested by the consumer, on the basis of a material misrepresentation of fact by the consumer relevant to the request to block; or
    • the consumer obtained possession of goods, services, or money as a result of the blocked transaction or transactions.

 Notification to consumer.

 If a block of information is declined or rescinded, the affected consumer shall be notified promptly by the Consumer Reporting Agency.

DISCLOSURE OF INVESTIGATIVE CONSUMER REPORTS

Consumers have the right to make a request to see what is in their file. A file contains all information maintained by the consumer reporting agency on the consumer. CRAs are required to provide consumers with all information in the file, identify the sources of information, identify each person who has obtained a copy of the report and provide a summary of rights under the FCRA.

Disclosure of fact of preparation.

 A person may not obtain an investigative consumer report on any consumer unless it is clearly and accurately disclosed to the consumer.

The  investigative consumer report shall contain information regarding his character, general reputation, personal characteristics and mode of living. The disclosure should ;-

  1. be made in a writing and will be  mailed, or delivered to the consumer, not later than three days after the date on which the report was first requested,
  1. include a statement informing the consumer of his right to request for the additional disclosures and a written summary of the rights of the consumer.

 Disclosure on request of nature and scope of investigation.

 Any person who obtains or desires an investigative consumer report to be prepared shall, upon written request made by the consumer within a reasonable period of time after the receipt by him of the disclosure;-

  • make a complete and accurate disclosure of the nature and scope of the investigation requested.

The disclosure should be made in a writing and be mailed or delivered, to the consumer not later than five days after the date on which the request for the disclosure was received from the consumer or such report was first requested.

 Limitation on liability upon showing of reasonable procedures for compliance with provisions.

 No person may be held liable for any violation of  the FCRA if he shows by a majority of the evidence that at the time of the violation he maintained reasonable procedures to assure compliance with the Act.

 Prohibitions

 (1) Certification.

A consumer reporting agency should not prepare or furnish investigative consumer reports unless the agency has received a certification from the person who requested the report.

 (2) Inquiries.

 A consumer reporting agency should not make an inquiry for the purpose of preparing an investigative consumer report on a consumer for employment purposes if the making of the inquiry by an employer or prospective employer of the consumer would violate any applicable Federal or State equal employment opportunity law or regulation.

  • Certain public record information.

A consumer reporting agency should not provide an investigative consumer report that includes information that is a matter of public record and relates to;-

  1. an arrest,
  2. indictment,
  3. conviction, civil judicial action,
  4. tax lien, or
  5. outstanding judgment,

Unless the agency has verified the accuracy of the information during the 30-day period ending on the date on which the report is furnished.

  • Certain adverse information.

When preparing or providing an investigative consumer report by a consumer reporting agency, the CRA should not prepare or provide a report that contains information that may be adverse to the interest of the consumer.

 The information should not be obtained through a personal interview with a neighbor, friend, or associate of the consumer or with another person with whom the consumer is acquainted or who has knowledge of such item of information unless-

(A) the CRA has followed reasonable procedures to obtain confirmation of the information, from an additional source that has independent and direct knowledge of the information; or

 (B) the person interviewed is the best possible source of the information.

COMPLIANCE PROCEDURES

The Act requires that consumer reporting agencies should adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and any other information in a way which is fair and equitable to the consumer, with respect to the confidentiality, accuracy, relevancy, and proper utilization of such information.

The CRA has the full mandate of preparing a Consumer Report. When  a CRA prepares a consumer report, it must follow “reasonable procedures” to assure “maximum possible accuracy” of the information concerning the individual. Reasonable procedures do not require 100% accuracy because:

  • If an inaccurate item has appeared on a consumer report, that alone is insufficient for an FCRA violation.
  • According to the “strict liability statute”, an inaccuracy alone is not enough for an FCRA violation.
  • There is a “threshold requirement” for a claim which must prove: inaccuracy, failure to follow reasonable procedures, an injury, and that the injury was caused by the inaccuracy.

To claim inaccuracy, there are several conditions:-

  • Misleading or incomplete –Technical accuracy alone does not eliminate liability. CRAs are liable for reporting technically accurate information even if it is nevertheless “misleading” or “incomplete”. If report offenses are reported twice, though technically accurate, they make criminal records seem longer and are therefore misleading.
  • Duplicate reporting – Technical accuracy is not a defense if the information is incomplete or misleading. The same information showing up multiple times is misleading by making a public record history appear lengthier than it is. Duplicate reporting does not meet the “maximum possible accuracy” standard and places an applicant in an adverse light.
  • Litigation Pending – Includes reporting account as “litigation pending” without indicating that the consumer had initiated the lawsuit.
  • Reporting of duplicates – Includes reporting of “duplicate” convictions or a criminal charge that lacks the disposition.
  • Incomplete – Later on has an offense expunged, deferred disposition and charge is reduced from a felony to a misdemeanor or felony expunged. True just not complete.

 Identity and purposes of credit users.

Every consumer reporting agency has a duty to maintain reasonable procedures which have been designed to avoid violations of the Act and to limit the furnishing of consumer reports for only the purposes stipulated  under the Act.

Prospective users of the information should identify themselves and certify the purpose of the information sought and give assurance that the information will be used for no other purpose, as this is a requirement of the reasonable procedures.

CRAs should  make a reasonable effort to verify the identity of a new prospective user and the uses certified by such prospective user before to providing such user a consumer report.

No consumer reporting agency should provide a consumer report to any person if it has reasonable grounds that the consumer report will not be used for a purposes listed in FCRA.

Accuracy of report.

Whenever a consumer reporting agency prepares a consumer report it should follow the  reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.

Disclosure of consumer reports by users allowed.

A consumer reporting agency may not prohibit a user of a consumer report furnished by the agency on a consumer from disclosing the contents of the report to the consumer, if adverse action against the consumer has been taken by the user based in whole or in part on the report.

Procurement of Consumer Report for Resale

Disclosure.

 A person may not procure a consumer report for purposes of reselling the report (or any information in the report) unless the person discloses to the consumer reporting agency that originally furnishes the report.

Responsibilities of procurers for resale.

A person who procures a consumer report for purposes of reselling the report (or any information in the report) shall (A) establish and comply with reasonable procedures designed to ensure that the report (or information) is resold by the person only for a purpose for which the report may be furnished, including by requiring that each person to which the report is resold and that resells or provides the report to any other person ;-

  1. Identifies each end user of the resold report (or information);
  2. Certifies each purpose for which the report (or information) will be used; and
  3. Certifies that the report (or information) will be used for no other purpose; and

(3) Resale of consumer report to a federal agency or department, a person who procures a consumer report for purposes of reselling the report (or any information in the report) shall not disclose the identity of the end-user of the report.

CONDITIONS AND FORM OF DISCLOSURE TO CONSUMERS

Proper identification.

A consumer reporting agency shall require, as a condition of making the disclosures required under the       Act, that the consumer furnish proper identification.

Disclosure in writing.

As stipulated by the Act, the disclosures are  required to be in writing.

Other Forms of Disclosure

Upon the authorization of the consumer, a consumer reporting agency must make the disclosures required in writing and in such form as may be specified by the consumer and available from the agency.

Form.

 A consumer may specify that disclosures shall be made;-

  1. In person, upon the appearance of the consumer at the place of business of the consumer reporting agency where disclosures are regularly provided, during normal business hours, and on reasonable notice;
    1. By telephone, if the consumer has made a written request for disclosure by telephone;
    1. By electronic means, if available from the agency; or
    1. By any other reasonable means that is available from the agency.

 Trained personnel.

 Any consumer reporting agency shall provide trained personnel to explain to the consumer any information provided to him.

Persons accompanying consumer.

The consumer shall be permitted to be accompanied by one other person of his choosing, who shall deliver reasonable identification. A consumer reporting agency may require the consumer to furnish a written statement granting permission to the consumer reporting agency to discuss the consumer’s file in such person’s presence.

Limitation of liability.

No consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 609, 610, or 615 of this title or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report, except as to false information furnished with malice or willful intent to injure such consumer.

PROCEDURE IN CASE OF DISPUTED ACCURACY

Reinvestigations of Disputed Information

 Reinvestigation Required

If the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file in accordance with FCRA, before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.

Extension of period to reinvestigate.

If the consumer reporting agency receives information from the consumer during the 30-day period that is necessary for the reinvestigation, then the 30-day period may be extended for not more than 15 additional days.

Limitations on extension of period to reinvestigate

There shall be a limit to the extension of time to conduct reinvestigation in the event, the information that is the subject of the reinvestigation is found to be inaccurate or incomplete or the consumer reporting agency determines that the information cannot be verified.

(2) Prompt Notice of Dispute to Furnisher of Information

Whenever a CRA receives notice of a dispute from any consumer or a reseller;-

(1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer or reseller.

(B) The consumer reporting agency shall promptly provide to the person who provided the information in dispute all relevant information regarding the dispute that is received by the agency from the consumer or the reseller after the period and before the end of the period.

(3) Determination That Dispute Is Frivolous or Irrelevant

 A  consumer reporting agency may terminate a reinvestigation of information disputed by a consumer if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant, or if the consumer fails to provide sufficient information to investigate the disputed information.

(B) Notice of determination.

 Upon making any determination that a dispute is frivolous or irrelevant, a consumer reporting agency shall notify the consumer of such determination not later than 5 business days after making such determination, by mail or by any other means available to the agency.

 (C) Contents of notice. A notice shall include;-

  • the reasons for the determination

 (ii)identification of any information required to investigate the disputed information, which may consist of a standardized form describing the general nature of such information.

  • Consideration of consumer information.

In conducting any reinvestigation with respect to disputed information in the file of any consumer, the consumer reporting agency shall review and consider all relevant information submitted by the consumer with respect to such disputed information.

 (6) Treatment of Inaccurate or Unverifiable Information

If, after any reinvestigation of any information disputed by a consumer, an item of the information is found to be inaccurate or incomplete or cannot be verified, the consumer reporting agency shall –

  1. promptly delete that item of information from the file of the consumer, or modify that item of information, as appropriate, based on the results of the reinvestigation; and
  2. promptly notify the furnisher of that information that the information has been modified or deleted from the file of the consumer.

(B) Requirements Relating to Reinsertion of Previously Deleted Material

 (i)        Certification of accuracy of information.

If any information is deleted from a consumer’s file the information may not be reinserted in the file by the consumer reporting agency unless the person who provided the information certifies that the information is complete and accurate.

  • Notice to consumer.

 If any information that has been deleted from a consumer’s file is reinserted in the file, the consumer reporting agency shall notify the consumer of the reinsertion in writing not later than 5 business days after the reinsertion or, if authorized by the consumer for that purpose, by any other means available to the agency.

  • Additional information.

A consumer reporting agency shall provide to a consumer in writing not later than 5 business days after the date of the reinsertion

  1. A statement that the disputed information has been reinserted;
  2. The business name and address of any furnisher of information contacted and the telephone number of such furnisher, if reasonably available, or of any furnisher of information that contacted the consumer reporting agency, in connection with the reinsertion of such information; and
  3. A notice that the consumer has the right to add a statement to the consumer’s file disputing the accuracy or completeness of the disputed information.

(C) Procedures to prevent reappearance.

 A consumer reporting agency shall maintain reasonable procedures designed to prevent the reappearance in a consumer’s file, and in consumer reports on the consumer, of information that is deleted.

(D) Automated reinvestigation system.

Any consumer reporting agency that compiles and maintains files on consumers on a nationwide basis shall implement an automated system through which furnishers of information to that consumer reporting agency may report the results of a reinvestigation that finds incomplete or inaccurate information in a consumer’s file to other such consumer reporting agencies.

 (6) Notice of Results of Reinvestigation

A consumer reporting agency shall provide written notice to a consumer of the results of a reinvestigation under this subsection not later than 5 business days after the completion of the reinvestigation, by mail or, if authorized by the consumer for that purpose, by other means available to the agency.

 (B) Contents.

As part of, or in addition to, the notice a consumer reporting agency shall provide to a consumer in writing before the expiration of the 5-day period;-

  • A statement that the reinvestigation is completed;
    • A consumer report that is based upon the consumer’s file as that file is revised as a result of the reinvestigation;
    • A notice that, if requested by the consumer, a description of the procedure used to determine the accuracy and completeness of the information shall be provided to the consumer by the agency,
    • The business name and address of any furnisher of information contacted in connection with such information and the telephone number of such furnisher, if available;
    • A notice that the consumer has the right to add a statement to the consumer’s file disputing the accuracy or completeness of the information;

Treatment of Complaints and Report to Congress

 The Bureau shall;-

(A) compile all complaints that it receives on a file of a consumer that is maintained by a CRA described to contain incomplete or inaccurate information, with respect to which, the consumer appears to have disputed the completeness or accuracy with the consumer reporting agency or otherwise utilized the procedures provided and

 (B) transmit each such complaint to each consumer reporting agency involved.

 (2) Exclusion.

Complaints received or obtained by the Bureau pursuant to its investigative authority under the Consumer Financial Protection Act of 2010 shall not be subject to the provisions of the FCRA.

(3) Agency responsibilities.

Each consumer reporting agency that receives a complaint transmitted by the Bureau shall;-

  1. review each complaint and determine whether all legal obligations imposed on the consumer reporting agency have been met with reverence to the subject matter of the complaint;
    1. provide reports on a regular basis to the Bureau regarding the determinations of and actions taken by the consumer reporting agency, if any, in connection with its review of such complaints; and
    1. maintain, for a reasonable time period, records regarding the disposition of each such complaint that is sufficient to demonstrate compliance with the Act.

Annual report.

The Bureau shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives an annual report regarding information gathered by the Bureau.

CHARGES FOR CERTAIN DISCLOSURES

  • Nationwide Consumer Reporting Agencies

Centralized source

Nationwide Specialty Consumer Reporting Agency

  • Free disclosure after adverse notice to consumer
  • Free disclosure under certain other circumstances.
  • Free disclosures in connection with fraud alerts.
  • Reasonable Charges Allowed for Certain Disclosures
  • Prevention of Deceptive Marketing of Credit Reports

To conclude below are  a summary of your major rights under the FCRA:

  1. You must be told if information in your file has been used against you. Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment – or to take another adverse action against you must tell you, and must give you the name, address, and phone number of the agency that provided the information.
  2.  You have the right to know what is in your file. You may request and obtain all the information about you in the files of a consumer reporting agency (your “file disclosure”). You will be required to provide proper identification, which may include your Social Security number. In many cases, the disclosure will be free. You are entitled to a free file disclosure if:-
  3. A person has taken adverse action against you because of information in your credit report;
  4. You are the victim of identity theft and place a fraud alert in your file;
  5. Your file contains inaccurate information as a result of fraud; o you are on public assistance;
  6. You are unemployed but expect to apply for employment within 60 days.
  • You have the right to ask for a credit score. Credit scores are numerical summaries of your credit-worthiness based on information from credit bureaus. You may request a credit score from consumer reporting agencies that create scores or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender.
  • You have the right to dispute incomplete or inaccurate information. If you identify information in your file that is incomplete or inaccurate, and report it to the consumer 2 reporting agency, the agency must investigate unless your dispute is frivolous.
  •  Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. Inaccurate, incomplete, or unverifiable information must be removed or corrected, usually within 30 days. However, a consumer reporting agency may continue to report information it has verified as accurate.
  • Consumer reporting agencies may not report outdated negative information. In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.
  • Access to your file is limited. A consumer reporting agency may provide information about you only to people with a valid need – usually to consider an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for access.
  • You must give your consent for reports to be provided to employers. A consumer reporting agency may not give out information about you to your employer, or a potential employer, without your written consent given to the employer.
  1. You may limit “prescreened” offers of credit and insurance you get based on information in your credit report. Unsolicited “prescreened” offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address form the lists these offers are based on.

Who can bring an action under FCRA?

Two potential sets of plaintiffs can bring lawsuits under the FCRA including the Federal Trade Commission (FTC)/Consumer Financial Protection Bureau (CFPB) and individual consumers. The Federal Trade Commission has a big stick but uses it very infrequently. Individual plaintiffs pose a significant threat because they have competent, aggressive counsel that is profit and fee driven. In conjunction, consumers file thousands of FCRA lawsuits every year with many of them being proposed as class action lawsuits. FCRA lawsuits can be filed in both federal court and state courts.

Dispute claims are asserted when a consumer disputes the accuracy of a consumer report and the CRA fails to properly reinvestigate or fails to correct inaccurate reporting. Common FCRA claims against CRAs include individual claims where a CRA has provided an end-user with a consumer report that is “inaccurate.” In this case, the plaintiff has the burden of proof and must satisfy four legs of proof including the inaccuracy, the CRAs failure to follow reasonable procedures or failure to correct the inaccuracy, an actual injury, and evidence that the inaccuracy caused the injury.

and landlords. Furnishers have two obligations including the obligation to transmit accurate information to CRAs and to conduct disputes upon being notified of a dispute from a CRA. Furnishers can be sued civilly for failing to conduct a proper or timely reinvestigation and for failing to correct inaccurate information. Furnishers cannot be sued for violations because they are not CRAs, nor may they be sued for furnishing inaccurate information about a consumer to a CRA.

Resellers can be sued for inaccurate reporting and are a CRA for the purpose of a claim. Thus, resellers can be sued for inaccurate reporting even though they are not the entity that assembled or evaluated the information, but just passed the information along as they received it from the originating CRA. Certain courts have held that resellers cannot be liable for the transmission of inaccurate information when the inaccuracy is not “patently” obvious with respect to the data received from the originating CRA.

Most courts will allow plaintiffs to pursue claims when the reporting is “technically accurate”, but “misleading.” However, the plaintiff must prove more than just inaccuracy. The plaintiff must show that the procedures used which resulted in the inaccuracy were “unreasonable.”

Claims have statutes of limitations and must be brought earlier of two years after the consumer learns of the violation or five years after the violation occurs, with no exception. The statute of limitations begins when the consumer becomes aware of the facts that give rise to the violation, independent of whether the consumer is familiar with FCRA and knows that it is a potential legal violation. When the facts are made aware, that is the point in time when the two-year statute of limitation starts to run.

When a CRA has been found to be in violation of the law, the damages recoverable depends on the type of violation proven. Negligent violations will recover actual damages including credit-related damages, out-of-pocket cost, and emotional distress. Willful violations include both knowing, intentional violations and actions in “reckless disregard of a requirement” of the FCRA. Damages for willful violations may include actual damages and statutory damages from $100-$1,000 per violation plus punitive damages.

The FCRA is a “free shifting” statute and plaintiffs can recover their reasonable attorneys’ fees. Plaintiffs have a right to a jury trial with the amount of damages determined by the jury. Plaintiffs must demand a jury trial and must invoke their jury trial rights. Under the FCRA, trials are not automatic.

When one or more plaintiffs bring a lawsuit on behalf of a group or “class” of people it is considered a class-action lawsuit. All cases start off as an individual case even if proposed as a class action suit. All people in the class must have the same or similar claims. Class actions are allowed in federal and state courts and classes are frequently pled on a nationwide basis, regardless of the forum. Statutory damages available range from $100-$1,000 per violation plus punitive damages and “reasonable” attorney’s fees. There is no cap, however, on damage awards.

STATE VERSIONS OF FCRA

At least 22 states have their own versions of the FCRA. Some states limit the time a conviction can be reported to seven years, despite the lack of any such limit under the FCRA. The seven-year states include California, Kansas, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New Mexico, New York, and Washington.

STATE LAW DISCLOSURES

 If you reside in, or are seeking work in any of the following states, please review these additional notices:

California: This is the Summary of Your Rights under California Civil Code 1786.22. You have the right to view your file that an Investigative Consumer Reporting Agency holds. By providing proper identification and duplication cost, you may obtain a copy of this information in person at the Consumer Reporting Agency’s regular business hours and after providing reasonable notice for your request. Additionally, you can make the same request via mail or over request a summary of the file over the phone. The Consumer Reporting Agency can assist you in understanding your file, including coded information. You are allowed to have one additional person accompany you so long as they provide proper identification. “Proper Identification” includes documents such as a valid driver’s license, social security account number, military identification card, and credit cards. If an ICRA is unable to reasonably identify you on the basis of these documents, they may require additional information concerning your employment and personal or family history in order to verify your identity.

Maine: You have the right to ask and know whether a company ordered a background check on you. You can request the name, address, and telephone number of the nearest Consumer Reporting Agency office. Your request will be processed and sent to you within 5 business days.

Minnesota: You have the right in most circumstances to submit a written request to the consumer reporting agency for a complete and accurate disclosure of the nature and scope of any consumer report the Company ordered about you. The consumer reporting agency must provide you with this disclosure within 5 days after (i) its receipt of your request or (ii) the date the report was requested by the Company, whichever date is later.

Massachusetts: You have the right to obtain a copy of any of your consumer reports that your company has ordered on you by contacting the Consumer Reporting Agency for a free copy.

New Jersey: You have the right to submit a request to the consumer reporting agency for a copy of any investigative consumer report the Company requested about you.

New York: By submitting a written request, you can learn whether a company has run a background check on you. You are allowed to inspect and order a copy of the report by directly contacting the Consumer Reporting Agency. If you have been convicted of one or more criminal offenses, you can request the company to provide a written statement declaring the reasons for the refusal of hire. This statement must be provided to you within 30 days of your request.

Washington State: After submitting a written request and waiting a reasonable amount of time after receiving the disclosure, you have the right to receive a complete and accurate disclosure of the nature and scope of any “investigative” consumer reports requested by an agency. The Washington Fair Credit Reporting Act requires Consumer Reporting Agencies to provide you a summary of your rights and remedies upon request. Any information requested by a company that deals with credit worthiness, credit standing or capacity is justified in order for employers to evaluate whether you present a risk for theft or dishonest behavior for the job you are being considered for.

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