What Protection does the Fair Credit Reporting Act Offer?
Although many consumers may feel burdened by the threat of negative credit file information, the Fair Credit Reporting Act offers extensive protection from abusive reporting practices. Under the Act, commonly known as the FCRA, consumers have guaranteed access to their own credit files, limits on who can view their files and overall accurate reporting.
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Proper Credit Reporting
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Proper, fair and accurate credit reporting serves as the primary purpose of the Fair Credit Reporting Act. According to the consumer-protecting website Privacy Guard, the FCRA requires that credit-reporting agencies delete or correct inaccurate information in a consumer's credit file. The act goes a step further, though, by requiring reporting agencies to remove unverifiable information. If a consumer disputes a credit file entry, and the agency cannot verify the report with a creditor, the agency must remove the entry. In addition, the act protects consumers from reports of very old credit issues. According to Privacy Guard, agencies must stop reporting negative items that are more than seven years old and bankruptcies more than 10 years old.
Attorney Compensation
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In some cases, credit-reporting agencies may fail to remove erroneous or unverifiable entries despite the FCRA requirements. In such cases, consumers have legal protection under the act and may choose to sue the credit-reporting agency or the creditor that submitted incorrect information. According to the consumer-protection website Give Me Back My Credit, consumers who successfully sue agencies responsible for erroneous reports may also force the agency to pay applicable attorney and legal fees.
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Privacy
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In a 1998 response to a legal question about the FCRA, the U.S. Federal Trade Commission underscored the importance of privacy in consumer credit reporting. According to the FTC, businesses need written permission before accessing a consumer's credit file. In addition, a business must have a valid need, such as verification of credit worthiness or identify verification, to access a consumer's file. Employers and prospective employers are not exempt from this requirement. Employees must give written permission for employers to access their credit files.
Disclosure
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The Fair Credit Reporting Act protects consumers from unknown negative credit items by guaranteeing access to review the file at any time. Under the act, consumers may receive one free credit report per year from each of the three major credit-reporting agencies. Consumers may also receive an additional free report in an array of situations that include denial of credit, suspected fraud and the receipt of public assistance. If a consumer does not meet any of the criteria for complimentary access to credit files, credit-reporting bureaus also offer paid access.
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