The FCRA or Fair Credit Reporting Act is a federal legislation that determines how consumer credit information can be obtained, shared or used. The FCRA gives consumers the right to access their credit reports and the information contained within it. If discrepancies are found, the consumer can raise a dispute and have the information corrected.

Scope of FCRA

The FCRA establishes guidelines for CRAs or Consumer Reporting Agencies. These are the very same agencies responsible for collecting and sharing credit information for the purpose of credit evaluation. Here are some of the guidelines established by the FCRA.

  • CSAs are required to provide one free credit report to consumers every year, which can be requested for by the consumer via mail or phone. Online requests can also be placed.
  • When discrepancies are found in the credit report, the consumer can raise a dispute and have it removed. However, if the dispute doesn’t hold up, the CRA cannot have the information reinserted without informing the consumer.
  • Negative information cannot be maintained in a consumer’s credit file for more than the established timeframe. The FCRA establishes that negative information such as tax liens or late payments can only be maintained by the concerned CRA for a maximum period of 7 years from the actual date they took place. However, bankruptcy records can be maintained for a period of 10 years.

Apart from the guidelines for CRAs, FCRA establishes guidelines for individual creditors and agencies too. This is applicable to scenarios where creditors have agreements with individual consumers. Here are some of the guidelines that third-party collection agencies and creditors have to follow.

  • The creditors and third-party collectors are required to provide accurate information about their consumers to the CRAs
  • It is the creditor’s job to investigate disputes raised by a consumer concerning negative information in his/her credit report. If the dispute is found to be valid, the creditor must correct it or prove that there is no validity to the dispute. This must be done within 30 days of the dispute being raised with the creditor.
  • Creditors have to inform their consumers of any negative information being published in their respective reports within a month of the information being entered.
  • FCRA also holds responsible those who use credit information for purposes of credit evaluation, insurance, and employment. These entities also have to follow certain guidelines.
  • They must inform the consumer if a negative action occurs due to the report.
  • They must reveal, to the consumer, the name of the company that provided them with the credit report. This is to help the consumer verify the accuracy of the report.

Punishment for violating FCRA

Consumers can recover up to $1000 from entities that violate the FCRA guidelines.