9. What is the “Fair Credit Reporting Act”?
The Fair Credit Reporting Act protects consumers (not businesses) by regulating the accuracy, fairness, and privacy of consumer information reported to or held by consumer reporting agencies. It protects consumers from the negative consequences associated with inaccurate information in their personal credit reports. The FCRA regulates each stage of the credit reporting process, including collection of information, reporting of that information to credit agencies, dissemination of credit information, and use of a consumer’s credit information (such as in extending new credit). The Act applies to anyone who prepares or uses a credit report in connection with extending credit, selling insurance, or hiring or firing an employee.
• Note: The FCRA was amended in 2003 (by the Fair and Accurate Credit Transaction Act) to allow consumers to receive one copy of their credit reports each year from each credit reporting agency. It also established rules for credit reporting agencies and businesses to increase identity theft protections. These provisions include placing fraud alerts on credit reports, truncation of debit and credit card numbers, secure disposal of consumer information, etc.
• Example: You walk into my store and ask to finance the purchase of a large piece of machinery that I sell. I may request authorization to request your credit report. My request and use of this credit report in my decision of whether to extend you credit will be governed by the FCRA.