Fair Credit Reporting Act

 Signed into law on December 4, 2003

The foundation of America's national consumer credit system is the Fair Credit Reporting Act (FCRA), enacted by Congress in 1970 to streamline credit reporting and provide consumers with protection from inaccurate and inappropriate disclosures of personal information by consumer reporting agencies. Consumer reporting agencies (CRAs) collect and compile information about consumers' creditworthiness from financial institutions, public records, and other sources.  Today, millions of small and large businesses rely on CRA information to provide services and products to consumers.  CRAs in this country currently maintain credit files on more than 180 million adults and track more than two billion transactions per month.

The FCRA requires reporting agencies to ensure that they disclose personal credit information only under limited circumstances and to follow reasonable procedures to assure maximum possible accuracy of the personal credit information they maintain.

The FCRA applies to the files maintained by CRAs.  Consumer credit reports generally include information about credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.  This information is gathered and sold to creditors, employers, landlords and other businesses.

The FCRA also outlines a consumer's right in relation to his or her credit report, as well as permissible uses for credit reports and disclosure requirements.  In addition, the FCRA requires CRAs to follow reasonable procedures to ensure maximum possible accuracy of the information concerning the individual about whom the report relates.

The FCRA was strengthened in 1996 in response to consumers' concerns that businesses that provide information to the CRAs were not being held accountable for their accuracy, and that CRAs were unresponsive to inquiries and disputes.  As a result of these concerns, amendments were added to the bill to establish strong national operating standards that preserve the efficiencies of the credit reporting process and ensure that its benefits extend to consumers across the country.

In 1996 the FCRA was amended and now contains six specific federal preemptions to ensure that a national consumer credit system remains viable and can continue to deliver affordable and accessible credit and financial services to consumers.  Federal consumer credit laws that apply nationally regulate the following areas and include provisions that preempt states from regulating or changing:

• the responsibilities of organizations and businesses that furnish information to consumer reporting agencies;
• the duties of organizations and businesses to notify consumers when they have been denied credit or employment based on information in their credit reports;
• procedures that a consumer reporting agency must use if a consumer disputes the accuracy of information;
• the information that may be included in consumer reports, including the time periods during which consumer reporting agencies are permitted to report adverse information;
• the form or content of the summary of rights that a consumer reporting agency is required to provide to a consumer along with information in the consumer's file; and
• the exchange of information among affiliated institutions, and prescreening activities to provide consumers with credit or other financial service or product offers.

On June 27th, 2003, Rep. Spencer Bachus (R-AL), the Chairman of the Financial Institutions Subcommittee, introduced H.R. 2622, the Fair and Accurate Credit Transactions Act (FACT) which would permanently reauthorize the preemptions in addition to taking new steps to combat identity theft. 
 
H.R. 2622 would grant consumers one free credit report each year, discourage the reintroduction of fraudulent information, direct regulators to determine how to increase the prompt investigation and correction of disputed information, require credit card companies to investigate when they receive a request for additional cards within thirty days of receiving a change of address form, mandate truncation of credit and debit card information, and streamline the process by which consumers can report that they are victims of identity theft. 

The bipartisan bill was approved by the House on September 10, 2003 by a 392-30 vote.

On September 23, 2003, the Senate Banking Committee marked-up the National Credit Reporting System Improvement Act, the companion bill to H.R. 2622.  In addition to permanently reauthorizing the FCRA, the Senate bill would:

• Make possession of a false identification a punishable offense and increase the maximum penalty for an identity theft offense from three to five years.
• Require the FTC, the Federal banking agencies and the NCUA to develop a model summary of the rights of consumers with respect to procedures for resolving the effects of identity theft.
• Require the credit bureaus to develop procedures for referring to each other any complaint they receive alleging identity theft.
• Extend the current statute of limitations for violations of the FCRA.  Currently, consumers must file suit within two years of the violation occurring.  The Senate bill would change the statute to two years from when the consumer discovered the violation, with the restriction that the complaint must still be filed within seven years of when the violation occurs.
• Require consumer reporting agencies to notify users of consumer reports when the consumer address contained in the report differs substantially from the address provided in the credit application.

The Senate bill also incorporates language very similar to S. 1470, sponsored by Sen. Paul Sarbanes, which would create the Financial Literacy and Education Commission, which will be headed by the Treasury and tasked with streamlining the myriad federal financial education programs.

Any person or business extending credit, which is secured by a dwelling, would be required to provide to the customer information obtained from any consumer reporting agency that was used to determine credit worthiness.

In addition, the legislation directs the FTC to promulgate new rules requiring that solicitations generated by the use of pre-screened lists must contain “clear and conspicuous” information on how to opt-out of such lists.  The section extends the effective period of a telephone opt-out from two to seven years and requires the FTC to actively publicize the availability of the “opt-out”.

On November 5, 2003 the Senate approved its FCRA reauthorization bill by a vote of 95-2.  Sens. Barbara Boxer (D-CA) and Dianne Feinstein (D-CA) who opposed the bill because it would pre-empt a stronger California privacy statute were the sole senators to vote against the bill.  House and Senate conferees met and quickly resolved the differences between the two different bills and the President signed the bill into law on December 4, 2003.