What are the FCRA Requirements? A Comprehensive Guide

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how credit reporting agencies collect, maintain, use, and share information about consumers. Enacted in 1970, it aims to promote accuracy, fairness, and privacy of consumer information contained in credit reports. Understanding the FCRA requirements is important for consumers to protect their rights and for businesses dealing with credit reports to avoid violations.

An Overview of the FCRA

The FCRA applies to credit reporting agencies (CRAs) like Equifax, Experian, and TransUnion that compile credit reports on individual consumers. It mandates how CRAs can obtain, retain, and share credit history information. The law also outlines obligations for businesses using credit reports, like lenders, insurers, employers, landlords etc. Key provisions include:

• Limiting CRA data collection to bill payment history, loans debts, bankruptcies court judgments etc. Medical records can’t be included without consent.

• Restricting credit report access to those with permissible purpose like credit applications, employment background checks etc.

• Obligating CRAs to ensure maximum possible accuracy of collected information

• Giving consumers the right to review their credit reports annually for free.

• Allowing consumers to dispute and correct incomplete or inaccurate information in credit reports.

The FCRA is enforced by the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB). Violations can lead to state or federal lawsuits.

Key FCRA Requirements for Credit Reporting Agencies

CRAs have the most extensive FCRA compliance obligations including

1. Collecting Only Relevant Data

CRAs can gather specific credit-related data like bill payment history, loans, debts, bankruptcies, and court judgments. Other details like race, religion, medical records, personal lifestyle information can’t be included.

2. Ensuring Maximum Accuracy

CRAs must maintain reasonable procedures to ensure “maximum possible accuracy” of credit reports per the FCRA. This includes promptly updating public record information.

3. Investigating Consumer Disputes

When a consumer disputes information in their credit report, CRAs must conduct reasonable investigations within 30 days, review relevant data provided and correct any errors.

4. Restricting Access

CRAs can share credit reports only with those having an authorized “permissible purpose” like credit checks, employment screening etc. Medical information needs explicit consent.

5. Providing Access to Consumers

Consumers can obtain free annual credit reports on request. They must also be informed when data from their credit report is used against them, like denial of credit.

6. Following Disposal Rules

CRAs must properly dispose of credit reports to avoid unauthorized access. This includes shredding physical records and deleting electronic files.

Key FCRA Duties for Businesses Using Credit Reports

Any business using consumer credit reports for decisions like loan approval, insurance eligibility etc. must comply with FCRA:

• They must specify the purpose for obtaining an individual’s credit report.

• Consumers must explicitly permit credit checks for employment purposes.

• Adverse action based on credit data, like denial of insurance, must be communicated to the consumer.

• Credit reports must be securely stored and disposed of after use.

• Medical information from credit reports can’t be used without written consent.

• Financial services companies must provide risk-based pricing notices when providing credit at less-than-best terms based on credit scores.

Important FCRA Rights for Consumers

The FCRA grants consumers several rights to participate in the credit reporting process and fix errors:

• Consumers can obtain free annual credit reports from each CRA via AnnualCreditReport.com

• They can dispute incomplete, inaccurate or unverifiable data in credit reports and have it deleted or corrected.

• Outdated negative information must be removed after 7-10 years depending on type of record.

• Credit report access for employment purposes requires their explicit consent.

• Consumers can opt-out of prescreened credit or insurance offers based on credit data.

• Identity theft victims can place extended fraud alerts on their credit files.

• Active military personnel have additional rights like free credit monitoring services.

• Adverse action based on credit data must be disclosed to consumers.

Understanding the various FCRA requirements for credit bureaus, businesses and consumers is key to ensuring compliance, avoiding violations and protecting consumer rights. Consumers should periodically review credit reports and fix errors to maintain accuracy.