Fair Credit Reporting Act: Common Violations and Your Rights
People’s futures can rise and fall on what’s in their credit report so keeping a close eye on the contents should be important to all consumers.
Credit reports are used to decide who gets a loan, a credit card, a job, or even an apartment to rent, so few things are more crucial than having a credit report free of errors. Yet sometimes credit report errors are made, and the consequences can be devastating.
The Fair Credit Reporting Act of 1970
Recognizing the life-altering power of credit information, Congress adopted the Fair Credit Reporting Act in 1970 to protect consumers and regulate how credit information is used and disseminated. The law gives consumers the right to know what’s in their credit reports and free access to the scores that credit rating agencies assign them. It also requires that anyone who denies credit, insurance or employment because of what is on your credit report, tell you where they got the information and how to contact the issuer.
The nation three largest credit reporting agencies – Equifax, Experian and TransUnion – are required by law to do everything in their power to accurately gather and report consumer information. Together, they keep files on more than 200 million Americans and issue more than 3 billion reports a year.
Given the volume of information, it’s inevitable that errors occur. The FCRA gives consumers the means to detect inaccuracies in their reports and file complaints. It also requires reporting agencies to investigate and correct bogus information.
Mistakes are often clerical, but sometimes they’re the result of old information reported as current. In 2014, The New York Times reported the troubles of a Mississippi woman whose $40,000 second-mortgage debt was discharged through a bankruptcy filing in 2007. But four years later, the debt appeared on her report as unpaid, even though she had repeatedly tried to get the error removed. It took intervention from Mississippi’s attorney general to have her report corrected.
Cases like that are common. State attorneys investigate FCRA complaints and many have consumer information on their web pages to let people know what their rights are and the steps to take if they uncover erroneous information.
Common violations of the FCRA include:
- Old information furnished as new information. Failure to update reports after completion of bankruptcy is just one example. Agencies might also report old debts as new and report a financial account as active when it was closed by the consumer.
- Creditors give reporting agencies inaccurate financial information about you.
- Reporting agencies mixing up one person’s information with another’s because of similar (or same) last name or social security number.
- Agencies fail to follow guidelines for handling disputes.
- Pulling your report for an impermissible purpose. For instance, viewing a credit report to determine if you have assets before filing certain kinds of lawsuits.
- Failing to send you notifications about your credit report or score in violation of the FCRA.
- Reporting agencies providing information to unauthorized persons or businesses.
Not all FCRA actions are the result of errors or poorly maintained files. For example, in 2012 the Los Angeles Times reported about a data broker that agreed to pay $800,000 in a settlement with the Federal Trade Commission for allegations he illegally sold personal information to human resources, background and recruiting companies.
Your Rights Under The Fair Credit Reporting Act
If you’re turned down for credit or have some other reason to suspect that a credit report might have erroneously damaged you, get the name of the national credit agency that provided the report. A landlord who turned you down for bad credit or a bank that denied you a credit card will tell you which agency issued the report.
Next, contact the agency and request a copy of the report. Keep in mind that if the report contains incorrect information, other agencies could be using the same information in their reports. The agency that provided the information must supply you with its report within 30 days of the denial for free. Otherwise, it can charge a fee to see a report.
If you find inaccurate or outdated information, notify the credit reporting agency in writing, explaining the error and demanding that it be immediately corrected. If the agency investigates and does nothing, and if you are still sure the report contains errors, contact the Federal Trade Commission or your state attorney general’s office nearest you.
It’s important to know your rights under the Fair Credit Reporting Act:
- You have a right to know what’s in your file. Contact the credit-rating agency that issued a report that was used to deny you credit, housing or employment. You’re entitled to a free report for any of these reasons: Information was used against you; you are a victim of identity theft and place a fraud alert on your file; your file contains inaccurate information that resulted from fraud; you’re on public assistance or you have been unemployed but expect to apply for work within 60 days.
- All consumers are entitled to one free annual credit report from each of the national credit bureaus.
- You have a right to ask for your credit score. Credit reporting agencies provide these. In some instances, mortgage lenders will tell you your score when you apply for a loan. Also, some credit card issuers now include up-to-date scores in their monthly statements.
- You have a right to dispute incomplete or inaccurate information in your report.
- Credit reporting agencies are obliged to correct or delete inaccurate, incomplete or unverifiable information.
- Reporting agencies mustn’t disseminate outdated negative information.
- Information in your file is limited to those with a valid need for it.
- You must give written consent for credit agencies to send your credit report to employers.
If your rights have been violated under the FCRA, you are entitled to seek actual or statutory damages, recover attorneys’ fees and court costs and request punitive damages.
Creditor Response Issues
There are several common violations of the Fair Credit Reporting Act, involving both the thousands of companies reporting information and the three major bureaus taking the information and assigning it to your credit report.
Some of the common violations include:
Furnishing and Reporting Old Information — When your credit circumstances change, your credit report must be updated. If it’s not, that’s a violation. How could some violations occur?
- Failure to report that a debt was discharged in bankruptcy.
- Reporting a debt as charged off when it was settled or paid off.
- Reporting late payments when your payments were timely.
- Reporting old debts as new ones.
- Reporting that an account was active after it was voluntarily closed by a consumer.
- Reporting information that is more than seven years old (when bankruptcy notices should lapse) or 10 years old (civil judgments).
- Inaccurate statement of balance due.
- Failing to have a reasonable procedure for you to report identity theft (or supplying credit information on an account where identity theft was previously reported).
Mixing Files — Mixing files with someone else who has similar background information (sometimes as careless as failing to distinguish the Jr. and Sr. in similar surnames).
Debt Dispute Procedures for Credit Bureaus — When submitting a written dispute about the accuracy of your credit report, the credit bureaus must follow proper procedures, such as conducting an investigation, correcting inaccuracies or removing a disputed debt. Sometimes, agencies fall short in these areas.
Debt Dispute Violations for Creditors — Creditors are obligated to note every disputed debt and submit corrected information, stop submitting incorrect information when it has been reported, conduct an internal investigation of disputes within 30 days and provide a reasonable procedure to submit a written dispute or report of identity theft.
Privacy Violations — Your credit report can be disclosed only to entities with a “valid need,’’ such as creditors, landlords, insurance providers, utility companies and employers (with your consent). It’s also a violation to pull a credit report for an impermissible purpose, such as determining if you are collectible in a lawsuit, an employer pulling the report without permission or a creditor on a discharged debt in bankruptcy using the report to check on your current financial activity.
Withholding Notices — You must be given notice on the reporting, handling and use of your credit information. Violations could include:
- A creditor failing to notify you when it supplies negative credit information.
- A “user of credit information’’ (prospective employer or lender) failing to notify you of a negative decision based upon your credit report. Or that user of credit information refusing to identify the source of credit information it obtained about you.
- A creditor failing to provide your credit score if it was used as part of any credit decision.
- A creditor failing to notify you of your right to obtain a free credit report.
It’s important to be educated and know your Fair Credit Reporting Act rights.
Here are two key deadlines to remember when dealing with the Fair Credit Reporting Act.
- Inaccurate information must be corrected or deleted within 30 days of your dispute (or up to 45 days if you provide additional information after submitting your written dispute).
- Businesses or other information furnishers must tell you about any negative information reported to the credit bureaus within 30 days.
Annual Credit Report
The three major credit bureaus are required to provide you with one free copy of your credit file every year, if you request it. You must properly identify yourself, of course. The Web site AnnualCreditReport.com is a prime place to obtain your free annual credit report. In some cases, the credit bureaus also must provide you with a free copy of your credit report:
If a business has denied your application or charged a higher interest rate because of information in your credit report.
If you’re unemployed and planning to look for a job within the next 60 days.
If you’re on welfare.
If you’ve been a victim of identity theft (or if your credit report contains inaccurate information because of identity theft).
Other Credit Reporting Agencies
There is much emphasis on the three nationwide consumer reporting companies — Equifax, Experian and TransUnion — but it’s useful to know there are other sources of consumer reporting information.
The Consumer Financial Protection Bureau has published a list of other companies that self-identify as consumer reporting agencies. These companies collection information and provide reports to other companies about you in the areas of credit, employment, residential rental housing, insurance and other decision-making situations. It’s worth a look to determine which of the companies could be important to you.
This list, while not all-inclusive, has been independently verified by the CFPB.
Meanwhile, here are the best contact numbers for the three nationwide consumer reporting companies:
- Equifax: (800) 525-6285.
- Experian: (888) 397-3742.
- TransUnion (800) 680-7289.
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NA, (2018), Consumer Financial Protection Bureau: List Of Consumer Reporting Companies. Retrieved from: http://files.consumerfinance.gov/f/201604_cfpb_list-of-consumer-reporting-companies.pdf
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