What Is The Fair Credit Reporting Act?

Credit reporting agencies (CRA) collect, process, and archive credit information for 200 million people in the United States. Equifax, Experian, and Transunion, the three primary consumer credit reporting companies, sell this information mainly to facilitate the decisions of businesses that extend credit.

However, many consumer rights advocates have doubts about the accuracy of the information collected by credit reporting agencies. It is believed that 20-80% of credit reports contain errors, thus affecting an individual’s ability to obtain new credit and possibly retain employment. This is exacerbated by the fact that many consumer advocates also believe that consumers’ ability to dispute this information and have it expeditiously removed from their credit report is often ineffective.

How are credit reporting agencies regulated by federal and state governments? At the federal level, the Fair Credit Reporting Act (FCRA), enacted in 1970, regulates the collection, dissemination, and use of consumer credit information. Any information collected and distributed by a consumer credit agency must fairly and accurately summarize a consumer’s credit history pursuant to FCRA requirements.

The FCRA provides specific guidelines regarding the methods credit reporting agencies use to collect and verify information while providing the situations when a consumer’s personal information may be released to creditors. Basically, it protects consumers from the use of incorrect information when denied credit.

The FCRA also applies to banks, credit unions and agencies that sell medical records and check writing or rental history records, as well as any business that uses information on credit reports for hiring purposes.

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