The Fair Credit Reporting Act (or “FCRA” for short) is one of the handful of statutes that I deal with regularly in my capacity as a consumer defense attorney.
The FCRA is a federal law that regulates how consumer credit information is collected, maintained, and used. The FCRA was drafted to ensure that Credit Reporting Agencies, (or “CRAs”) reflect accurate data about consumer credit, and provide adequate notice and information to consumers whose credit is affected by the information they collect and disseminate.
Especially today, when credit is essential to staying adrift in this struggling economy, Americans should be fully aware of their rights under the FCRA As the name suggests, the FCRA is all about credit. Credit is incredibly important – your credit score affects countless aspects of your life, from whether a bank will approve you for a loan, to whether a prospective employer will offer you a job. Consumers with a history of paying their debts in full and on time with little or no problems will typically have a good credit score and are thus likely to be approved for more credit.
Conversely, consumers who make late payments on debt, miss payments entirely, allow their loans to go into default, or fail to fulfill other obligations under a financial agreement will have a poor credit score and will find it difficult, if not downright impossible, to be approved for further credit until the issues dragging their score down are resolved. Even then, entries of bad credit can remain on one’s credit report for many years, as CRAs generally keep bad credit information for seven years.
Given the incontestable significance of credit scores to one’s financial well-being, it stands to reason that information affecting credit scores should be reported accurately. Sadly, this wasn’t always the case. Retail Credit Co., one of the very first credit reporting agencies, was founded in the late 19th century before the FCRA was even a glimmer in a congressman’s eye. Retail Credit snatched up several of its competitor CRAs in the early 1900s, eventually making it a giant in the credit reporting industry. As it grew, the self-regulation of their reporting practices diminished. Retail Credit and its fellow CRAs came under fire for a number of abusive practices. By the 1960s, complaints were rampant. CRAs were requiring its employees to fill quotas for negative information on consumers, resulting in false information being reported. Agencies were failing to update important consumer information, thus reporting false data that negatively impacted consumers’ credit scores.
Some agencies were even keeping track of superfluous information related to consumers’ personal lives that had nothing to do with credit. In some cases, the information contained in one’s credit report was being freely shared with parties that had no business reviewing such data. As you can imagine, this abuse in the credit reporting industry caused all sorts of commotion. However, Credit Reporting Agencies were not the only responsible (or irresponsible) parties when it comes to the FCRA. The market failure of 1970 was another key factor that brought about the passage of the Act. That failure was largely the result of juggernaut financial companies putting the interests of corporate investor clients over those of everyday Americans.
Sound familiar? It should – the market failure of 1970 is similar to the housing crisis of 2006 that sent the U.S. economy into a tailspin from which it has yet to recover. Nevertheless, the current incarnation of the FCRA imposes important duties upon Credit Reporting Agencies that every consumer should be aware of. Under the FCRA, a Credit Reporting Agency must provide consumers with the information contained in their individual file, and take action to verify any information disputed by the consumer. Information that negatively impacts a consumer’s credit cannot be maintained for an “excessive period,” such period being defined by the FCRA depending on the character of the negative information. In the event that negative information is disputed and subsequently removed from the consumer’s credit report, a CRA must inform the consumer in writing within five days before returning the negative information to the report.
Furthermore, an amendment to the FCRA allows consumers to get one free credit report per year from www.annualcreditreport.com in order to ensure the information being reported is accurate and to allow consumers the opportunity to dispute any erroneous data. The FCRA allows consumers to file suit for willful or negligent violations of its provisions. Under 15 U.S.C. Section 1681n, a consumer can recover the greater of actual damages or statutory damages up to $1,000, and possibly even punitive damages, for willful violations. Under 15 U.S.C. Section 1681o, a consumer can recover actual damages for negligent violations. Both sections allow a consumer to recover reasonable attorney’s fees and costs of filing suit.
Be mindful, however, that the relevant statute of limitations is either two years from the time you discover the violation, or five years from the date of the actual violation, whichever comes first. So if you’ve discovered an error on your credit report, don’t sit on it – go see an experienced consumer defense attorney as soon as possible!