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 FCRA in Practice

Information about the personal details of individuals is always being collected by businesses for the purpose of making decisions about the nature of business relationships with prospective clients. I other words, businesses gather personal information about consumers and use it to decide the level of trustworthiness when engaging in a business relationship, such as being a debtor, a lease, a tenant, and any other relationship that involves deferred payments. However, personal information can also be misused by unscrupulous people in the credit agencies or have unauthorized access to such information for fraudulent purposes.  Consequently, the Fair Credit Reporting Act (FCRA) enacted in 1970 to protect consumers from any abuses associated with the personal credit-related information that is stored in consumer credit bureaus. This federal law promotes the confidentiality, fair use and sharing, and accuracy of the personal information collected from individuals and held in consumer credit bureaus [15 U.S. Code § 1681]. Practically any individual or organization engaged in consumer-facing activities is subject to the regulations under FCRA (American Bar Association para 1). Since its enactment, the Fair Credit Reporting Act has undergone improvements through other federal acts that have defined the mandates and improved the operations of the several bodies and agencies that play instrumental and significant within the credit reporting arena. These legislations include the Fair and Accurate Credit Transaction (FACT) act of 2003, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, popularly known as the Dodd-Frank Act, and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. Also, the Fair Credit Reporting Act is usually interpreted alongside the Equal Credit Opportunity Act (ECOA) of 1974 (Consumer Financial Protection Bureau 4). Notably, the Dodd-Frank Act established the Consumer Financial Protection Bureau (CFPB) and transferred the rule-making mandate to it from seven federal agencies that were previously authorized by the FCRA. Consequently, CFPB developed Regulation V, which governs the confidentiality, protection and accuracy of the consumer data contained in credit reports, alongside sharing the enforcement mandate of FCRA with the Federal Trade Comission (FTC) (Feder and Muttreja 50). Some of the groups of audiences that the law deals with include consumer reporting agencies, resellers and furnishers, each having its own unique set of requirements for conforming to this law and unique approaches of meeting these requirements. This analysis outlines the requirements demanded by FCRA on consumer reporting agencies, resellers, and furnishers, and what these need to do to ensure that they meet the set of requirements outlined.

1. Consumer Reporting Agency (CRA)

A consumer reporting agency is an organization that collects information related to the credit worthiness of an individual and disburses it to other entities that require it to make credit-relation decisions. Although there are numerous consumer credit reporting agencies in the United States, Equifax Information Services LLC, Experian Information Solutions, Inc., and TransUnion LLC are the three most prominent ones regarded as the national credit bureaus because of their nationwide coverage (Feder and Muttreja 50). These credit reporting agencies maintain a large repository of credit information of consumers in the country and beyond. The duties of the consumer reporting agencies are enumerated alongside the suggestions and examples of each duty being listed thereafter.

Duties

1. Collect, maintain and evaluates consumer credit information.  The credit reporting agencies are tasked with collecting information related to the financial transactions and experiences from employers, banking institutions, landlords, insurance companies, mortgage providers, retail stores, investment companies about individuals and organizations and compiling it into a consumer’s file [15 U.S. Code §1681p].
2. In addition to credit-related information, consumer reporting agencies can also collect information related to civil and criminal lawsuit and records, which can be used by employers, landlords and other entities when conducting a background check of an individual or organization.
3. This information is compiled into a consumer report and may be in several forms, including written, oral, electronic, and other communicable forms that can be transmitted between parties.
4. Disclose to consumers information contained in the credit report in their custody once a year without levying any charge [15 U.S. Code §1681c-1]. This report comprises the information in a consumer’s file spanning 12 months, including credit scores, risk scores and other predictors associated to the consumer (Federal Trade Commission 28). This information should be delivered to the consumer within 15 days after a request is placed.  
5. Examples of this provision include the right to place fraud alerts security freezes that inform credit report users of the consumer being a possible victim of identity theft (Federal Trade Commission 34). The alert can stay on the personal file for a period of one year minimum.
6. Generating credit scores that reflect the creditworthiness of an individual or entity. The credit reporting agencies screen credit information and reports gathered from the mentioned sources ensuring that such information is accurate. They then use this data to generate credit scores that are used by credit providers to make decisions regarding whether the individuals and organizations seeking credit services are creditworthy [15 U.S.C. §1681].
7. The consumer has the right of obtaining a free copy of the file from all the three national credit bureaus in the United States.
8. There are recommendations that medical debt not to be included in the calculation of credit scores because it is not incurred intentionally
9. Ensure that the data contained in the consumer credit database is accurate. In this regard, they evaluate the credit-related information of consumers to establish its accuracy and update it whenever they encounter inaccuracies that could influence the creditworthiness of the consumers [15 U.S. Code §1681i].
10. The credit-related information is evaluated to determine the credit standing and capacity, the personal characteristics and lifestyle, and general reputation of the consumer.
11. Secure consumer data from unauthorized access. The credit reporting agencies protect the consumer information of individuals and organizations from possible identity theft that could be used to access credit without the express authority of its owners.
12. A consumer can request for a security freeze, which prohibits the consumer reporting agency from disclosing a credit report without the direct authorization of the consumer.
13. Reinvestigate any claims of inaccurate consumer credit information by the owners [15 U.S. Code §1681i(a)(6)(B)]. In this regard, the credit reporting agencies investigate claims launched by consumers regarding false credit-related information aimed at defaming and invading the privacy of consumers, with malicious intent leading to loss of credit and other alleged harmful outcomes.
14. However, the consumer reporting agency should inform a consumer when a request for an investigative consumer report is made, by entities, like employers.
15. Notify requesters of consumer credit report of significant discrepancies and inaccuracies of consumer credit information [15 U.S.C. §1681e(d)]. The credit reporting agencies inform resellers and furnishers of credit information of any inconsistencies, inaccuracies, and discrepancies that may injure the consumer.
16. Notify furnishers and users of information in consumer reports of their responsibilities, as prescribed in the FCRA [15 U.S.C. §1681e(d)]. In this regard, the FCRA defines the regulatory role of the consumer reporting agency in guiding how furnishers and users of consumers’ credit information is used to make credit-relate decisions.
17. Make disclosures of information contained in credit reports to consumers [15 U.S. Code §1681g]. The credit reporting agencies is tasked with informing consumers with the contents of the credit report maintained in their repositories, particularly if that information contains any negative aspects that can adversely affect the consumers’ creditworthiness.  

Recommendations

• Consumer reporting agencies should scale up their public awareness initiatives because many people do not know their credit-related information rights.
• Consumer reporting agencies should training public educators to help implement the public awareness intervention.

2. Reseller

Resellers compile information collected from other consumer reporting agencies and furnish it to third parties without holding it in a database. In this regard, it acts as conduit between a consumer reporting agency and the end user of the credit-related information that deletes the information it has gathered and compiled after disbursing it to a third party. By serving as an intermediary, between the CRA and third party, a reseller avoids the complex and excessive compliance obligations and liability to consumer report inaccuracies often associated with consumer reporting agencies. The duties of the resellers and the particularly suggestions and examples associated with these operators under the FCRA are enumerated.

Duties

1. Place information requests to a consumer reporting agency. This means that the resellers of credit-related information held in consumer reporting agency repositories make requests on behalf of information end-users comprising bodies and organizations that advance credit to consumers.  
2. Passing over disputes related to credit reports to consumer reporting agencies from where the report originated. In this regard, when the reseller becomes aware of complaints raise by credit information owners (consumers) against the generators, holders, and users of such information, they bring those grievances to the attention of the consumer reporting agencies responsible for generating the credit files [15 U.S. Code §1681i].
3. Securing reasonable procedures for guaranteeing permissible purpose of credit information end users. In other words, the resellers of credit information are expected to formulate protocols for guiding the processes of determining and ensuring the identity and permissible purpose regarding the use of the credit information.

Recommendations

• A policy framework addressing resellers exclusively would the understanding of their duties and responsibilities better than is the current case where furnisher provisions are caveats among the statutes regulating consumer reporting agencies
• Resellers need further training in the current changes in FCRA to improve their handling of consumer files

3. Furnisher

Furnishers of credit information are entities that collect personal information related to individuals’ and organizations’ financial and credit activity. They capture personal information during a financial transaction and forward it to a credit reporting agency (Feder and Muttreja 50). The duties of the furnishers and the particularly suggestions and examples associated with these operators under the FCRA are enumerated.  

Duties

1. Furnish consumer reporting agencies with credit information of consumers. In this regard, the furnishers are prohibited from disbursing credit information to a credit reporting agency if there is reasonable belief that such information is inaccurate [15 U.S.C. §1681s–2(a)(1)]. Similarly, furnishers are prohibited from giving out consumer information to credit reporting agencies if the consumer informs them about any inaccuracies contained therein. Likewise, the furnishers may not disburse consumers’ information that has been obtained through identify fraud, unless the consumers confirm the correctness of such information. Therefore, furnishes are required to establish reasonable procedures preventing the refurnishing of consumer information obtained though identity theft, as determined by a credit reporting agencies though notifications.
2. If a direct dispute arises, the furnisher can initiate reasonable investigations to determine the liabilities related to the consumer’s credit account and any other debts to determine the consumer’s performance and financial conduct.
3. For instance, the investigations must be conducted and completed within 30 days upon the receipt of the consumer’s complaint and a consumer can only sue a furnisher after formally disputing the information contained in the personal file.
4. In another example, the furnisher should inform all consumer reporting agencies about the results of findings related to incomplete and inaccurate consumer information.
5. Notify consumers about adverse financial information in writing. The furnishers should communicate with the owners of credit information about any negative information contained in the credit files that may harm the creditworthiness of the consumer [15 U.S.C. §1681s–2(a)(7)].
6. Furnish creditors with consumers’ financial transaction information and credit history. In other words, the furnishers disclose information related to the past financial activities of the consumer, including any criminal records, information related to financial transactions, and behavior with finances borrowed from diverse financial institutions and service providers.
7. Such information may include that related to transitions with vehicle dealers, jewelry sellers, clothing retailers, hotels and restaurants, airlines and taxi companies, and any other entity engage in financial transactions with the consumer.
8. Furnish creditors and the criminal justice systems with consumers’ financially-related criminal record and history. In other words, furnishers are expected to disclose the financial records of consumers to users of such information and court proceedings when there is sufficient information suggesting that these records contain evidence of fraudulent financial activities.
9. This information is often the subject of litigations. Therefore, the furnisher must ensure that this information is accurate and complete to avoid being sued for malicious intent and reputation damage.
10. Develop and implement policies and procedures related to the accuracy and integrity of the consumer information forwarded to credit reporting agencies [15 U.S. Code §1681c(h)]. These policies and procedures should be sufficiently simple, of reasonable size and nature, and corresponding to the furnishers’ scope of activities. In addition, the furnishers should periodically review their policies and procedures and update them accordingly to ensure that they conform to the standard data reporting formats and procedures, reasonable data storage periods, and that staff is adequately trained to perform activities related with handling and furnishing consumer information to credit reporting agencies.

Recommendations

• A policy framework addressing furnishers exclusively would the understanding of their duties and responsibilities better than is the current case where furnisher provisions are caveats among the statutes regulating consumer reporting agencies
• Furnishers need further training in the current changes in FCRA to improve their handling of consumer files and disputes.

Conclusion

The Fair Credit Reporting Act (FCRA) is critical for securing the consumers’ rights regarding the information related to their credit, such as reports and scores. The legislation has been informed by the misuse that such information can be subjected by entities that to use consumers’ personal information for fraudulent activities while causing intentional harm to the information owners. Identity theft is a critical problem in the United States while creditworthiness is of great concern to Americans, who wish to manage their finances while enjoying their rights as consumers, considering that the American economy is largely driven by credit advanced to individuals and business organizations.  The three critical players regulated by this policy; consumer reporting agencies, resellers, and furnishers, have specific but sometimes overlapping duties and responsibilities, which are mainly related with securing the rights of consumers and ensuring that their credit information remains safe and is used appropriately. Nonetheless, consumers encounter several challenges emanating from their ignorance about this policy or its deficiencies and gaps, often leading to lengthy litigations. It is recommended that public awareness be enhanced and dispute resolutions be expedited to enable consumers to continue enjoying the credit they deserve alongside other credit-related services and benefits.

Works Cited

American Bar Association. “The Fair Credit Reporting Act: Not just about credit.” 20 June 2016. https://www.americanbar.org/groups/business_law/publications/blt/2016/06/13_anthony/

Consumer Financial Protection Bureau. CFPB supervision and examination manual. March 2022.

Feder, Meir and Rajeev Muttreja. “Understanding the Fair Credit Reporting Act.” Practical Law, April/May 2016, pp. 48-57.

Federal Trade Commission. Fair Credit Reporting Act: 15 U.S.C § 1681. Revised September 2018. 2018.