Fair and Accurate Credit Transactions (FACTA) Act – Explained

Cite this article as:"Fair and Accurate Credit Transactions (FACTA) Act – Explained," in The Business Professor, updated November 27, 2018, last accessed October 27, 2020, https://thebusinessprofessor.com/lesson/fair-and-accurate-credit-transactions-facta-act/.


Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA) Definition

The Fair and Accurate Credit Transaction Act (FACTA) was a US law passed in 2003 that aims to escalate the protective measures against identity theft by introducing industry standards for managing personal credit information. Notably, the FACTA gives users free access to their credit reports. It has been the impetus for developing alert mechanisms.

A Little More on What is the Fair & Accurate Credit Transaction Act

FACTA allows people to have their credit reports free of cost, once in a year. They can request their credit reports from Equifax, TransUnion and Experian. Also, it requires mortgage lenders to disclose the consumer credit score information used when determining mortgage loan prices or denials.

Both lenders and regulators must alert consumers of identity theft, unusual purchasing patterns, an any related information to be place din the consumer credit files, as per the standards imposed.

FACTA empowers enforcement agencies to enforce Red Flag Rules. These rules make anti-identity theft provisions mandatory for banks and credit unions, especially at the time of opening of new accounts or accessing their existing accounts. For instance, credit and debit cards issuer must validate customer address changes. The red flags might include requesting personally identifying info while using accounts, opening doubtful accounts related to covered accounts.

The policies launched later under the Dodd-Frank Act, shifted various rulemaking responsibilities to the Federal Trade Commission and the Consumer Financial Protection Bureau. The Federal Trade Commission has the authority to evaluate credit reports’ accuracy, issues for Fair Credit Reporting Act, oversees data security red flag rules and disposals.

References for Fair and Accurate Credit Transaction Act

Academic Research on Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA)

The Fair and Accurate Credit Transactions Act of 2003: Will Preemption of State Credit Reporting Laws Harm Consumers, Epshteyn, M. (2004). Geo. LJ, 93, 1143.

Identity theft legislation: the¬†fair¬†and¬†accurate credit transactions act¬†of¬†2003¬†and the road not taken, Linnhoff, S., & Langenderfer, J. (2004). Journal of Consumer Affairs,¬†38(2), 204-216. This article provides a review of the Fair and Accurate Credit Transactions Act of 2003 (FACTA) as it relates to the growing problem of identity theft. The article also examines other identity theft‚Äźrelated proposed legislation from the 108th Congress and analyzes the effectiveness of the proposed measures. The authors conclude that FACTA represents an important step toward reducing the incidence of identity theft as well as ameliorating the damage that it causes.

What’s So¬†Fair¬†About the¬†Fair¬†and¬†Accurate Credit Transactions Act, Chaplin, M. E. (2008). Marq. L. Rev.,¬†92, 307.

The fair and accurate credit transactions act: New tool to fight identity theft, Holt, T. J. (2004). Business Horizons, 47(5), 3-6.

Fair credit reporting act developments, McEneney, M. F., & Kaufmann, K. F. (2003). Bus. Law., 59, 1215.

How the¬†fair credit¬†reporting¬†act¬†regulates big data, Hoofnagle, C. (2013). How the fair credit reporting act regulates big data. This paper is a documentation of observations about big data prepared for the Future of Privacy Forum’s Big Data and Privacy.

Credit report accuracy and access to credit, Avery, R. B., Calem, P. S., & Canner, G. B. (2004). Fed. Res. Bull., 90, 297.

Credit scoring and its effects on the availability and affordability of credit, Avery, R. B., Brevoort, K. P., & Canner, G. B. (2009). Journal of Consumer Affairs, 43(3), 516-537. The Fair and Accurate Credit Transaction Act of 2003 (the FACT Act) directed several federal agencies to conduct studies related to the credit reporting industry. In this article, Federal Reserve System Board economists report on a study in which they examined various issues related to credit scoring, including how credit scoring has affected the availability and affordability of credit.

After the FACTA: state power to prevent identity theft, Hillebrand, G. (2004). Loy. Consumer L. Rev., 17, 53.

The¬†Fair¬†and¬†Accurate Credit Transactions Act¬†of¬†2003, Ornstein, S. F., Yoon, M. S., & Tallman, D. A. (2005).¬†The Journal of Structured Finance,¬†11(1), 27-39. This paper discusses the amendment made to the Fair Credit Reporting Act of 1996 by the Fair and Accurate Credit Transactions Act of 2003 (the ‚ÄúFACT Act‚ÄĚ), and examines how it affects credits imposed and available to consumers.

The FACT Act: The Latest Attempt at Overhauling the Fair Credit Reporting Act and the Fairness and Accuracy of Consumer Reports, Taft, J., & Poulon, C. (2004). Banking LJ, 121, 194.

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