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The Fair Credit Reporting Act (FCRA) 

The Fair Credit Reporting Act (FCRA) is a United States federal law (codified at 15 U.S.C. § 1681 et seq.) that regulates the collection, dissemination, and use of consumer information, including consumer credit information. (Full Statute PDF) Along with the Fair Debt Collection Practices Act (FDCPA), it forms the base of consumer credit rights in the United States. It was originally passed in 1970, and is enforced by the US Federal Trade Commission and private litigants. 

Consumer Reporting Agencies 

Consumer reporting agencies (CRAs) are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes, including employment. Credit bureaus, a type of consumer reporting agency, hold a consumer's credit report in their databases. CRAs have a number of responsibilities under FCRA, including the following: 

1. Provide a consumer with information about him or her in the agency's files and to take steps to verify the accuracy of information disputed by a consumer. Under the Fair and Accurate Credit Transactions Act (FACTA), an amendment to the FCRA passed in 2003, consumers are able to receive one free credit report a year. The free report can be requested by telephone, mail, or through the government-authorized website, annualcreditreport.com.  

2. If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within five days, in writing. 

3. CRAs may not retain negative information for an excessive period. The FCRA describes how long negative information, such as late payments, bankruptcies, tax liens or judgments may stay on a consumer's credit report — typically seven years from the date of the delinquency. The exceptions: bankruptcies (10 years) and tax liens (seven years from the time they are paid). 

The three big CRAs — Experian, TransUnion, and Equifax — do not interact with information furnishers directly as a result of consumer disputes. They use a system called E-Oscar. In some areas of the country, however, there are other credit bureaus. For example, in Texas, if a consumer tries to dispute information with Equifax directly, they must go through CSC Credit Services which is linked to the Equifax database. 

Nationwide Specialty Consumer Reporting Agencies 

In addition to the three big CRAs, the FCRA also classifies dozens of other information technology companies as "nationwide specialty consumer reporting agencies" that produce individual consumer reports used to make credit determinations. Under Section 603(w) of the Fair Credit Reporting Act, the term “nationwide specialty consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to, 

1. medical records or payments

2. residential or tenant history

3. check writing history

4. employment history

5. insurance claims 

Because these nationwide specialty consumer reporting agencies sell consumer credit report files, they are required to provide annual disclosures of their report files to any consumers who request disclosure. A partial list of companies classified as nationwide specialty consumer reporting agencies under FCRA includes: ChoicePoint, Acxiom, Innovis, the Insurance Services Office (ISO), Tenant Data Services, LexisNexis, Retail Equation, Central Credit, TeleTrack, the Medical Information Bureau (MIB aka, MIB Group, Inc.), UnitedHealth Group (Ingenix Division), and Milliman.

Although the major CRAs Experian, Equifax, and TransUnion are required by law to provide a central source website for consumers to request their reports, the nationwide specialty consumer reporting agencies are not required to provide a centralized online source for disclosure. The FCRA Section 612(c) merely requires nationwide specialty consumer reporting agencies to establish a streamlined process for consumers to request consumer reports, which shall include, at a minimum, the establishment by each such agency of a toll-free telephone number for such consumer disclosure requests.  

Information furnishers 

An information furnisher, as defined by the FCRA, is a company that provides information to consumer reporting agencies. Typically, these are creditors, with which a consumer has some sort of credit agreement (credit card companies, auto finance companies and mortgage banking institutions, to name a few). However, other examples of information furnishers are collection agencies (third-party collectors), state or municipal courts reporting a judgment of some kind, past and present employers and bonders. Under the FCRA, these information furnishers may only report to a consumer's credit report under the following guidelines: 

Lenders have an important role to play in ensuring credit reports are accurate:  

1. They must provide complete and accurate information to the credit reporting agencies. 

2. The duty to investigate disputed information from consumers falls on them, and they must correct an error, or explain why the credit report is correct within 30 days of receipt of notice of a dispute. 

3. They must inform consumers about negative information which has been or is about to be placed on a consumer's credit report within 30 days. 

(This notice doesn't have to be sent as a separate notice, but may be placed on a consumer's monthly statement. If sent as part as the monthly statement, it needs to be conspicuous, but need not be in bold type. Required wording (developed by the US Federal Treasury Department): 

Notice before negative information is reported: We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report. 

Notice after negative information is reported: We have told a credit bureau about a late payment, missed payment or other default on your account. This information may be reflected in your credit report.) 

Users of the information for credit, insurance, or employment purposes 

Users of the information for credit, insurance, or employment purposes (including background checks) have the following responsibilities under the FCRA: 

1. They must notify the consumer when an adverse action is taken on the basis of such reports. 

2.Users must identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer. 

Likelihood of errors on a credit report 

A large portion of consumer credit reports contain errors. A study released by the U.S. Public Interest Research Group in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. However, the General Accountability Office released a study disputing US PIRG numbers. The Federal Reserve Board issued a similar study noting that "the proportion of individuals affected by any single type of data problem appears to be small."  

In 2007, the Consumer Data Industry Association which represents the credit bureaus testified that less than two percent of 52 million credit reports had data deleted because it was in error. The accuracy of credit report data was also mentioned in written testimony by Allstate Insurance before the Michigan insurance department in 2002. By law, consumers can invoke their rights under the FCRA to review and correct their credit reports. 

The Fair and Accurate Credit Transactions Act ("FACTA") of 2003 has allowed easier access to consumers wishing to view their reports and dispute items. 

Civil liability for willful or negligent violations of the FCRA 

Under § 616 of the Act, (15 U.S.C. § 1681n), a consumer may recover either actual damages or a minimum of $100 and a maximum of $1000 plus punitive damages and reasonable attorney's fees and costs for willful noncompliance with the Act. Under § 617 of the Act, (15 U.S.C. § 1681o), recovery for a negligent violation is of actual damages, plus attorney's fees. Under § 618, a consumer may file suit in state or federal court to enforce the Act, and the statute of limitations is the earlier of 2 years from discovery and 5 years from the violation. (15 U.S.C. § 1681p.) 

Which companies are regulated by the FCRA? 

Transunion http://www.transunion.com
Equifax http://www.equifax.com
Experian http://www.experian.com 

While database companies like Lexis, Westlaw, ChoicePoint, and eFunds (owner of ChexSystems) do not create credit reports, they may gather the same types of information and as a result may subject some of their actions to FCRA. 

An excerpt of the 1999 FTC advisory opinion states: 

An entity that meets the definitional requirement for a "consumer reporting agency" (CRA) in Section 603(f) of the FCRA is covered by the law even if the only information it collects, maintains, and disseminates is obtained from "public record" sources. 

Section 603(f) defines a "consumer reporting agency" as any person "which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information ... for the purpose of furnishing consumer reports to third parties ...".  

In turn, Section 603(d) defines a "consumer report" as the communication of "any information" by a CRA that bears on a consumer's "credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" that is "used or expected to be used or collected in whole or in part" for the purpose of serving as a factor in establishing eligibility for credit or insurance to be used primarily for personal, family, or household purposes, employment purposes, or any other purpose authorized under Section 604. 

If the commercial service you describe regularly provides information for the purposes set forth in the definition of consumer report in Section 603(d), the agency is a consumer reporting agency and the information it collects from public record sources and maintains in its computerized files is subject to the FCRA.

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