The recently enacted Fair and Accurate Credit Transactions Act improves access to credit files by empowering consumers to obtain a free report annually from each of the traditional nationwide reporting agencies. A centralized service will be established where a single request can generate a report from each agency.
Consumers can also obtain a free report annually from nationwide "specialty" reporting agencies, like medical information bureaus, check-writing databases, and employment history agencies. The expanded access was viewed by Congress as an important step in educating the public about the existence and contents of such reports and enabling consumers to verify the accuracy of the information.
The FACT Act enhances consumers' ability to obtain their credit scores and understand how they are used to make credit eligibility decisions. Scores must be made available by the reporting agencies that generate them and the residential mortgage lenders that use them. To achieve greater consumer access to scores and reports, the Federal Trade Commission is directed to prepare a summary of consumers' rights for obtaining the information, and how to do so. The FTC is required to "actively publicize" the availability of this summary, including posting it on the commission's Web site.
The statute includes new responsibilities for banks and other companies that furnish information to consumer reporting agencies. For example, if a lender reports negative information on borrowers, such as late payments, it must notify them in advance or at the time the information is reported; repeated notices are not required.
In addition, federal agencies are directed to establish guidelines to ensure the accuracy and integrity of the information supplied to consumer reporting agencies. Earlier versions of the statute focused on the completeness of information.
Since 1996 the Fair Credit Reporting Act has prohibited furnishing information to reporting agencies with the knowledge that it is not accurate. The FACT Act clarifies this standard to mean that furnishers cannot report information that they know or have reasonable cause to believe is inaccurate. This standard is defined in the statute itself as specific knowledge that would cause a reasonable person to have substantial doubt about the accuracy of the information, beyond mere allegations by the consumer.
Under the revised FCRA, consumers have expanded ability to dispute the accuracy of information in their credit files, and furnishers likely will play a bigger role in responding to disputes. In particular, consumers can submit a dispute to a furnisher directly, rather than through a reporting agency.
Instead of establishing a universal right to submit disputes directly to furnishers, however, the act directs federal agencies to identify under what circumstances a furnisher is required to accept consumer disputes. A furnisher that has received a dispute and found inaccurate or unverifiable information must tell the reporting agencies it previously provided with that data. It must also modify or delete the information from its own files, or at least prevent it from being incorrectly reported in the future.
Furnishers must also establish reasonable procedures to respond to notifications from consumer reporting agencies that information they have provided has been blocked because it results from identity theft. When a consumer provides an agency with a police report and identifies the fraudulent data, the agency must block the reporting of that data and must notify the furnisher, who must then modify its records accordingly.
This is an example of the "one call" or "one contact" approach intended by Congress to assist consumers in mitigating the effects of identity theft: One contact by a consumer to a reporting agency results in corrected records at both that agency and the furnisher of the data.
Mindful that companies furnish data to consumer reporting agencies voluntarily and that the continued flow of such information is essential to our national credit system, Congress limited the liability and enforcement mechanics for the furnisher requirements. Specifically, because the civil liability provisions of the FCRA do not apply to any violation of those requirements, private civil actions may not be brought against furnishers. Instead, the furnisher requirements are subject only to administrative enforcement by the appropriate federal agencies.
The FACT Act includes several other measures designed to improve the accuracy of consumer reports. For example, if there is a discrepancy between a consumer's address in a bank's request and the address in the credit file, the reporting agency must inform the bank so that it can verify that its request does not involve identity theft. Federal agencies are also authorized to regulate reasonable policies and procedures for banks to confirm the consumer's identity and to provide a corrected address.
Because the statute leaves many compliance details to federal agencies, there will be multiple, extensive rule-writing efforts in the next year to implement the new requirements for consumer reporting agencies, the furnishers of information, and the users of consumer reports.
