Understanding the FCRA - Credit Reporting Law
Update: Credit Industry Reform
An update on the National Consumer Assistance Plan
On March 8, 2015, Equifax, Experian and TransUnion (CRAs) entered into a settlement agreement with the NY Attorney General along with 31 additional AGs from other states. Upon entering the agreement, the CRAs announced that they would address a number of credit reporting industry problems, including their dispute process and how they handle unpaid medical debt. This agreement is referred to as the National Consumer Assistance Plan.
The credit reporting industry overhaul is taking place nationally over the course of three plus years with 2018 as the deadline to have all changes made. The overhaul will be implemented in three phases (detailed below) to allow the CRAs to update their IT systems and procedures with data furnishers.
To date, changes to websites and other technical tasks have been acomplished. A change to be implemented this September will address the dispute process. The CRAs will be using trained and empowered employees to review the documentation accompanying disputes. And, if a furnisher says its information is correct, the credit reporting agencies must still look into it and resolve the dispute.
In addition, the credit reporting overhaul will require CRAs to wait 180 days before adding any medical debt
What to do if Your Credit Dispute is Denied
Your legal rights under the Fair Credit Reporting Act
According to the FCRA, the credit reporting agencies, Equifax, Experian & Trans Union (also referred to as CRAs) must investigate your dispute. Upon receipt of your dispute, the CRAs have 30 days to complete their investigation and provide you with their findings. The law requires their findings to be accompanied by a free credit report. If their investigation led to the denial of your credit dispute, now is the time to seek legal counsel to enforce your legal rights.
Prior to obtaining legal representation, ensure you have followed the dispute process accordingly. (See step-by-step instructions on Disupting Credit Report Errors here).
Who is allowed to pull your credit report?
Not just anyone can pull your credit report. The Fair Credit Reporting Act, the federal law which governs credit reporting, allows credit reporting agencies to generate your credit report under the following circumstance and no other:
- by written request from you or a guardian
- by court order
- by request from a state or local child support enforcement agency
- by request of others who intend to use your credit report:
- to extend credit (including landlords and utilities)
- to collect debt (debt collectors)
- for employment purposes
- for insurance underwriting purposes
- to determine eligibility for a license or government benefits
- to determine if you meet the terms of an account
- for business transactions
Credit Reporting Reform Underway
2015 is a big year for the credit reporting industry. Major changes are underway. Earlier this year, Equifax, Experian, and Trans Union announced that they would change the way they handle credit disputes and unpaid medical bills. Credit experts say the announcement marks the biggest reform for the credit reporting industry in more than a decade. Most importantly, these changes will help millions qualify for better interest rates on student, home, and auto loans.
Stop Errors in Credit Use and Reporting (SECURE) Act Introduced by Sherrod Brown
Senator Sherrod Brown of Ohio, has introduced the Stop Errors in Credit Use and Reporting (SECURE) Act to ensure that all have accurate information on their credit report to ensure they are being treated fairly.
According to the article published by Senator Brown, "[t]he SECURE Act would require credit reporting agencies to improve their processes for collecting
Background Checks | Employment Screening
Background Checks and the Federal Law
Employers obtain background checks (or consumer reports, commonly known as credit reports) to aid decision making when it comes to evaluating a consumer for employment, promotion, reassignment, or retention as an employee. Intelli Corp, HireSafe, HireRIght, Clarifacts, EmployeeScreenIQ, and Proforma are just a few of the many background check/employee screening companies that offer employers their services. When an employer conducts a background check, they may be provided with any of the following information about you:
- Credit reports;
- Criminal and civil records;
- Social security number (trace and validation);
- Employment verification;
- Education verification;
- Professional license verification;
- Motor vehicle and driving records;
- Military record verification; and
- Workers’ compensation history.
Credit Reports and Employment Background Screening
One of the Federal Trade Commission’s (“FTC”) roles is to protect job applicants and employees against inaccurate information being reported to employers; because employers can access your credit report to make decisions regarding hiring, firing, promotion, reassignment, or retention. In addition to financial history, the consumer reports provided to employers consist of arrests, convictions, judgments, and bankruptcies. Recently, settlements have been reached in legal actions that have been brought against companies like Spoekeo, Inc. and HireRight Solutions, Inc. for failure to take reasonable measures to ensure the accuracy of consumer reports. Such failures resulted in inaccurate criminal history, belonging to someone other than the actual consumer being reported as if it was relating to the individual the report was requested for. Other failures included noncompliance with the FCRA rules and not ensuring the reports were used for only purposes provided by the law.
CRA Reinvestigation Obligations Under the FCRA
When a consumer disputes the completeness or accuracy of any information contained in his/her credit report, the consumer reporting agency (CRA) must conduct a "reinvestigation." The term "reinvestigation" is a statutory term under the Fair Credit Reporting Act (FCRA). If the reinvestigation reveals that the information is inaccurate or cannot be verified, the CRA must promptly delete the information. 15 U.S.C. § 1681i(a). Failure to conduct a reasonable reinvestigation violates the FCRA. Cushman v. Trans Union Corp., 115 F.3d 220, 223–24 (3d Cir.1997). The burden to conduct the reinvestigation is on the credit reporting agency. It cannot be shifted back to the consumer.
A credit reporting agency's reinvestigation obligation is to verify the accuracy of its original source of information. This duty may include going beyond the original source. Whether the credit reporting agency must go beyond the original source depends on a number of factors, including: (1) whether the consumer has alerted the CRA that the original source may be unreliable; (2) whether the CRA itself knows or should know that the original source is unreliable; and (3) the comparative costs of verifying the accuracy of the original sources versus the potential harm the inaccurate information may cause the consumer. Dixon-Rollins v. Experian Information Solutions, Inc., 753 F.Supp.2d 452 (2010).
Findings & Purpose of the Fair Credit Reporting Act
The Fair Credit Reporting Act (commonly known as the “FCRA”) is codified at 15 U.S.C 1861, et seq. In enacting this legislation, the United States Congress made several findings: (A) The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.
Know Your Credit History | Protect Your Rights
Credit Report
Consumer reporting agencies, also known as “credit reporting agencies” or “credit bureaus,” serve a critical role in a consumer’s financial life. After collecting financial and personal data on individuals; the credit reporting agencies are able to generate the aggregated results into a consumer report, commonly known as a “credit report.” In most lending, credit reports, and the credit scores which are derived from them, form the basis of lending decisions. Many employers also use credit reports and other investigative reports to make hiring decisions. From the ability to pay back a loan to establishing one’s worthiness for a job, the information contained in a credit report can cause substantial injury to a consumer when that information turns out to be inaccurate.
Federal laws, like the Fair Credit Reporting Act, were passed by Congress to require credit reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information” contained in credit reports, and to protect consumers when inaccuracies cause such injury. However, the burden is still heavily on the consumer when resolving such issues because those federal laws require consumers to know what is on their credit reports and to take action when inaccuracies are discovered. For this reason, it is critical that consumers take advantage of the federal law which requires the agencies, which are Equifax (including credit files owned by CSC Credit Services), Experian, and Trans Union, to provide them with one free credit report each year. To obtain your free annual report go to the only official site: www.AnnualCreditReport.com.
Credit Scores - FICO and VantageScore
FICO Score
According to court filings by Fair Isaac, the creator of the FICO score (the dominant and most well-known consumer credit score in the United States), a “Credit Score” is a representation of an individual consumer’s financial creditworthiness that quantifies the risk that a consumer will fail to repay a loan or other credit obligation. “Credit Scoring” is the process by which an algorithm, or set of algorithms is applied to Aggregated Credit Data to generate a Credit Score.
“Aggregated Credit Data” is the historical records of an individual consumer’s borrowing and repayment as reported to credit reporting agencies by multiple lenders and servicers of loans. “Aggregated Credit Data” is separately compiled, reported, and sold by Equifax, Experian, and Trans Union (collectively, the "Consumer Reporting Agencies"), with such activity representing the core of their respective businesses. Credit reporting in the United States is entirely voluntary and, therefore, the Consumer Reporting Agencies depend on major financial institutions, other lenders, and merchants to provide data.
How Long Will a Withdrawn or Dismissed Bankruptcy Stay on Your Credit Report?
A bankruptcy can end in a number of ways prior to discharge; for example, a bankruptcy can be subsequently withdrawn at the request of the debtor or dismissed by the court for a variety of reasons. There are several reasons a debtor may file bankruptcy just as there are several reasons why a debtor may decide to seek withdrawal of that bankruptcy. Because bankruptcy filings are public record those filings will eventually be picked up by the third party public information vendors which consumer reporting agencies use to collect public record information or directly by the consumer reporting agencies through the electronic PACER court reporting service.
Federal law requires that consumer reporting agencies that choose to report a bankruptcy must also report the type of bankruptcy filed (e.g. Chapter 7, Chapter 13, etc.) and, in the case of a withdrawn bankruptcy, that the bankruptcy has been withdrawn. The current practice of the consumer reporting agencies is to report a bankruptcy, including a withdrawn or dismissed bankruptcy, on a debtor’s credit report for up to 10 years.
How Can You Obtain Your Credit Report?
You can obtain your credit report directly from each of the consumer reporting agencies -Trans Union, Equifax, Experian or CSC Credit Services. The FCRA guarantees you access to your credit report for free from each of the three nationwide credit reporting companies —Trans Union, Equifax and Experian — every 12 months. Note that for all Indiana residents your Equifax credit report is created from credit files which, though housed on Equifax’s database, are actually owned by CSC Credit Services. To obtain your free annual credit report you should visit AnnualCreditReport.com - the ONLY authorized source for the free annual credit report that's yours by law.
What is Credit History?
Credit history is a record of your past borrowing and repaying, including information about late payments and bankruptcy. In other words, your credit history is your reputation about how much debt you have and how you repay that debt. Your credit history is created by the consumer reporting agencies through credit information they receive and compile from furnishers of credit information such as your mortgage lenders, credit card companies, automobile loan lenders and others. These furnishers report personal information about you such as your name, address and social security number along with information about your debt, such as the amount of your debt, your payment history, etc.