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The Fair Credit Reporting Act
Fair Credit Reporting Act (47 KB)
Credit scores: They re not just for credit decisions any more. It used to be that these scores were the province of mortgage lenders and credit card companies. Now, insurance companies, wireless-service providers, and even employers are using credit scores to decide on what rates to charge, with whom to deal, and even whom to hire. Some municipalities are even reporting overdue library books and parking violations to consumer reporting agencies. In short, credit scores are important, and they can change your financial life.
In response to the growing use and importance of credit scores, Congress passed the Fair Credit Reporting Act, and has strengthened the Act through a number of amendments over time. The Act focuses on consumer reporting agencies – the companies that collect consumer credit information and develop credit scores. The Act is intended to promote accuracy, fairness, and privacy of information used by consumer reporting agencies. The Act gives consumers a number of important rights to obtain information about and dispute inaccuracies in their credit files.
The Fair Credit Reporting Act is at 15 USC § 1681 et seq.
Important Rights Under the Act
Rights to information. The Act provides consumers with two important rights to information. First, the law provides that you have the right to know that a credit report was the basis for an adverse employment, credit, or insurance decision. The user of the credit information must also provide you with the name, address, and phone number of the agency that provided the information. See 15 USC § 1681m.
Second, the law provides that – even without any adverse action – you have a right to know the information about you contained in the files of a consumer reporting agency.
(1) You have the right to obtain a copy of that information. In fact, once a year, you may obtain the information for free from each of the three credit reporting agencies. See 15 USC 1681j.
To obtain a free copy of your credit information, you can (1) go to www.annualcreditreport.com; (2) call 1-877-322-8228; (3) fill out the form at www.ftc.gov/bcp/conline/include/requestformfinal.pdf and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281; or (4) go to http://www.lsnv.org/Free_Credit_Report_Index.pdf.
(2) Right to dispute inaccurate information. Not only does the Act provide you with the right to know the information in your credit file, it also gives you the right to dispute inaccuracies in that information. Suppose, for instance, that you paid off a loan but it still appears in the report. Perhaps there is a report by a credit card company that you failed to make timely payments, but your records show otherwise. You can dispute this type of information, and the Act sets forth a procedure for such disputes. See 15 USC § 1681i.
To initiate a dispute, write to the credit reporting agency. Your letter should:
identify the information that you believe is inaccurate;
state the facts and explain why you believe the information is inaccurate; provide copies (not originals) of documents (e.g. billing statements) that show the information to be inaccurate; and request that the agency remove the inaccurate information
You may include a copy of your credit report with the disputed items circled. Send your letter by certified mail.
(3) Whenever a consumer disputes the accuracy of any information in the consumer s file, the Act requires the credit reporting agency to conduct a reasonable reinvestigation to determine the accuracy of the information or delete the information within 30 days (45 days if you provide further information during the 30 day period). See 15 USC § 1681i(a)(1)(A). The agency must also, within 5 days, notify the provider of the disputed information (e.g. the credit card company that reported late payments). See 15 USC § 1681i(a)(2)(A).
If the agency, after reinvestigation, determines that the dispute is frivolous or irrelevant, the agency must notify you. This finding may, for instance, be caused by your failure to provide sufficient information for the agency to investigate the dispute. The notice must state (1) the reasons for the determination and (2) identify any information it needs to conduct the investigation. See 15 USC § 1681i(a)(3).
If, however, the agency finds that the disputed information is inaccurate or incomplete or cannot be verified, it must (1) delete or modify the information in your file and (2) notify the provider of the information (e.g. the credit card company). See 15 USC § 1681i(a)(5)(A). Such information cannot be reinserted unless the provider of the information certifies that it is complete and accurate. The agency must notify you of a reinsertion; notice must be in writing, sent within 5 days, and provide the name and address of the information provider. See 15 USC § 1681i(a)(5)(B).
Whatever the result of a reinvestigation, the agency must notify you of the outcome and provide: (1) a statement that the reinvestigation is complete and (2) a consumer report based on the revised information. See 15 USC § 1681i(a)(6)(B). If the disputed information was deleted from your file, you may request that the agency furnish notifications of the deletion to anyone you designate that has received your consumer report within the last six months (or two years if used for employment purposes). See 15 USC § 1681i(d).
If the resolution of your dispute is not satisfactory, you have several rights.
You have the right to request a description of the investigation. See 15 USC § 1681i(a)(7).
You have the right to add a statement to your file summarizing your dispute regarding the accuracy of the information. See 15 USC § 1681i(b).
The consumer reporting agency must include your statement in any subsequent report (unless there are reasonable grounds to believe that the dispute is frivolous or irrelevant). See 15 USC § 1681i(c)
In addition, you may also raise your dispute directly with the creditor that provided the information that you believe is inaccurate.
Rights to damages. The Act also provides that you have the right to obtain damages from anyone who fails to comply with the requirements of the Act. If the failure is willful, you may be entitled to actual damages caused by the failure (or statutory damages between $100 and $1000), punitive damages, costs of suit, and attorneys fees. See 15 USC § 1681n. If the failure is due to negligence, you may be entitled to actual damages caused by the failure, costs of suit, and attorneys fees. See 15 USC § 1681o.