Credit Reporting Rules for Creditors
In 1970 Congress passed the Fair Credit Reporting Act (FCRA), which contained many facets of law aimed at protecting the rights of consumers. Strict rules govern permitted purposes of credit reports, requirements for information in a credit report, disclosure of information and compliance procedures. Contained in 15 U.S. Code, Section 1681 s-2 and codified in Section 623 of the FCRA, many rules and regulations govern creditor input. Other sections of the FCRA and its amendments protect consumers with regard to cost-of-credit disclosures, the wage garnishment process, credit repair organizations, equal credit opportunity and reporting, and debt collection practices.
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Inaccurate Information
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According to Section 623(a)(1)(A) and Section 623 (a)(1)(C), creditors who report inaccurate information to a consumer-reporting agency are in violation of FCRA law. The statute prohibits a creditor from knowingly reporting erroneous information about an individual to a consumer reporting agency.
Correcting and Updating
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As explained in Section 623(a)(2), the creditor must report corrections and update information concerning a consumer's account as it becomes available. The law also directs the creditor to not furnish incorrect information to consumer reporting agencies in the future.
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Consumer Dispute Procedure
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The law, in Sections 623(a)(1)(B) and 623(a)(3), directs creditors to discontinue reporting of any information if the consumer has notified the creditor that he disputes an entry. If the creditor reveals the information to a consumer reporting agency after receiving a dispute claim from a consumer, the creditor must inform the consumer reporting agency that the information is in dispute.
CRA Notice
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If a consumer reporting agency notifies a creditor that an entry is in dispute, the creditor must investigate and report findings to the consumer reporting agency. If the creditor deems the information inaccurate or incomplete, he must provide corrected information to all national consumer reporting agencies that received the initial incorrect data. Section 623(b) imposes a 30-day time limit for investigation and resolution. Failure of the creditor to follow the time frame imposed by the law results in deletion of disputed information.
Closed Accounts
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FCRA's Section 623(a)(4) requires a creditor to notify all consumer reporting agencies of the voluntary closing of a consumer's credit account. By labeling the account as closed by the consumer, future creditors should not construe the closed account as an indication of bad credit.
Delinquency Reporting
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Because FCRA regulates the length of time a negative collection entry may appear on a consumer's credit report, Section 623(a)(5) qualifies the reporting procedure. Within 90 days after reporting collection action, the creditor must notify all consumer reporting agencies of the month and year the delinquency commenced. Providing this information ensures that consumer reporting agencies use the correct date when anticipating the removal of detrimental credit information.
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