Fair Credit Reporting Act (FCRA): Common Violations and Your Rights

The financial future of a consumer will rise and fall based on his credit report, so everyone must keep a close eye on the contents.

Credit reports are used to determine who gets a job, a credit card, a loan, or even a rental apartment, so few things are more important than getting an error-free credit report.

Even then, mistakes are made in credit reporting, and the consequences can be disastrous.

The Fair Credit Reporting Act of 1970

Recognizing credit information’s life-changing power, Congress enacted the 1970 Fair Credit Reporting Act (FCRA) to protect consumers and control how credit information is used and distributed. The law gives the consumers the right to be informed of what is in their credit file and access to the scores assigned to them by rating agencies. It also requires anyone who denies credit, insurance, or a job because of credit report information to tell you where they got the information, and how to contact the issuer.

The Federal Trade Commission is responsible for implementing the FCRA. The Dodd-Frank Act shifted much of the responsibility for rulemaking to the Consumer Financial Protection Bureau, but the FTC still maintains the authority for enforcement.

The country’s three largest credit reporting agencies – Equifax, Experian, and TransUnion – are required by law to do all they can to collect and report consumer information accurately. They keep files on over 200 million Americans collectively and issue more than 3 billion reports a year.

Given the sheer volume of data, errors are unavoidable. The FCRA provides customers with the ability to file complaints if they find inaccuracies in their reports. It also mandates reporting agencies to investigate and correct false information.

Errors are often clerical, but sometimes they are the consequence of old information reported as current. The New York Times reported in 2014 about the troubles of a Mississippi woman whose $40,000 second-mortgage debt was discharged via a 2007 bankruptcy filing. But four years later, the debt appeared as unpaid on her report, although she had repeatedly attempted to get the error removed. It took action by the attorney general of Mississippi to get her report rectified.

Cases such as these are typical. State attorneys investigate FCRA related complaints. Many have consumer information on their websites to let people know about their rights and what steps they should take if they discover misinformation.

Common violations of the FCRA include:

1. Outdated information supplied as new information. Failure to update documentation after the bankruptcy is over is just one example. Agencies could also report old debts as new, and a financial account can be reported as active when the consumer had closed it.

2. Creditors provide inaccurate financial information regarding you to reporting agencies.

3. Reporting agencies combine or mix details from one person with that of another because of a similar (or identical) last name or social security number.

4. The inability of the agencies to follow dispute management guidelines.

5. Pull your report for an unlawful or unjustifiable reason. For example, viewing a credit file to determine whether you have any assets before filing certain types of lawsuits.

6. Failure to send notifications concerning your credit score or report, in violation of the FCRA.

7. Reporting agencies which provide information to unauthorized individuals or companies.

All FCRA actions are not the result of errors or documents which are improperly handled. For instance, the Los Angeles Times reported in 2012 about a data broker who, in a settlement with the Federal Trade Commission, agreed to pay $800,000 for accusations that he illegally sold personal information to human resources, recruiting firms, and background screening.

Rights Under the Fair Credit Reporting Act

If you are rejected for credit or have any other reason to believe you might have been unfairly harmed by a credit report, get the name of the national credit agency which issued the statement. A property owner who turned you down for poor credit or a bank that refused you a credit card would tell you which entity released the report.

Then, contact the concerned agency and ask for a copy of the report. Bear in mind that if the report contains inaccurate information, other agencies might be using the same information in their reports. Within 30 days of rejection, the organization supplying the data will provide you with the report free of charge. Otherwise, a report may be acquired at a fee.

If you notice incorrect or obsolete information, notify the credit reporting agency in writing, describe the error and request that it be corrected immediately. If the agency investigates and takes no action, and if you are still confident that the report includes errors, approach the Federal Trade Commission or the nearest office of the State Attorney General.

It’s essential to know your rights under the Fair Credit Reporting Act:

1. You are entitled to know what is on your file. Contact the credit rating agency that published a report used to refuse you credit, accommodation, or employment. For all of these reasons and purposes, you are entitled to a free report: information has been used against you; you are a victim of identity theft and put a fraud alert in your records; your file includes false information resulting from fraud; you are on social aid, or you have been unemployed but intend to apply for work within 60 days.

2. In case you have become the victim of identity theft, you are entitled to obtain a copy of transaction documents relating to your identity theft from businesses—loan applications or credit card applications, for example. You may also be authorizing law enforcement agencies to request the details. Businesses have to provide this within 30 days of obtaining the request. Some firms are reluctant to release this information, claiming that it is proprietary or protects consumers. However, the FCRA notes that businesses are expected to provide records of applications and business transactions to assist victims in reporting fraudulent charges. The FTC defines company obligations.

3. All customers are entitled, from each national credit bureau to one free annual credit report.

4. You have the right to request your credit score. Credit reporting agencies issue these. In some instances, when you apply for a loan, mortgage lenders will tell you your score. Additionally, some issuers of credit cards now include revised ratings in their monthly statements.

5. You have the right to challenge information that is missing or incorrect in your report.

6. Credit reporting agencies are required to correct or remove information that is inaccurate, incomplete, or unverifiable.

7. Reporting agencies are not mandated to disseminate outdated negative data.

8. Information contained in your file is restricted to those with a legitimate need.

9. You have to give the credit agencies written permission to send your credit report to employers.

If your rights under the FCRA have been breached, you are entitled to receive actual or statutory damages, recover fees for lawyers and court expenses, and claim punitive damages.

Violations of fair credit reporting act

There are several common breaches of the Fair Credit Reporting Act, involving the thousands of information reporting companies and the three significant offices taking the information and assigning it to your credit report.

Several of the common violations include:

Furnishing and reporting of past information

If your credit conditions change, your credit report has to be updated. If it is not updated, then that is a violation. How can violations occur?

1. Recording a debt after it was settled or paid off as charged-off.
2. Reporting late payments while payments were made in due time.
3. Old debts are listed as new ones.
4. Reporting that an account was active after a customer voluntarily closed it.
5. Failure to report bankruptcy discharging of debt.
6. Reporting information that is over seven years old (when notices of bankruptcy are about to lapse) or ten years old (civil judgments).
7. Inaccurate information on the balance due.
8. Failure to provide a reasonable procedure for reporting identity theft (or providing credit details on an account where identity theft has been reported before).

Mixing of files

Mixing files with another person with similar background details (sometimes as careless as not identifying the Jr. and Sr. in related surnames).

Credit bureaus’ debt dispute procedures

When presenting a formal complaint about the credit report’s accuracy, the credit bureaus must follow appropriate protocols, such as performing an audit, fixing inaccuracies, or removing a debt in dispute. Agencies sometimes fall short in these areas.     

Debt dispute Creditor violations

Creditors are required to note each disputed debt and send corrected information, avoid submitting incorrect information when reported, perform an internal dispute investigation within 30 days, and have a fair process for filing a written dispute or identity theft report.

Privacy Violations

Your credit report should be reported only to individuals with a “valid need,” such as creditors, insurance providers, landlords, utility companies, and employers (with your consent). It is also an infringement to draw a credit report for an impermissible reason, such as deciding whether you are collectible in a dispute, an employer pulling the report without authorization, or a creditor on a debt discharged using the report to verify your current financial operation.

With-holding Notices

You must be given notice of your credit details being registered, managed, and used. Violations may include:

1. A creditor who fails to notify you when they provide negative credit information.
2. A ‘credit information user’ (prospective employer or lender) who does not notify you of an unfavorable decision based on your credit report. Or that credit information user who refuses to identify the source of credit information that he obtains about you.
3. A creditor who has failed to provide you the credit score when used as part of any lending decision.
4. A creditor who refuses to inform you of your right to a free credit report.

It’s essential to be educated and know your Fair Credit Reporting Act rights.

Damage recovery for FCRA violations

The information protected by the Fair Credit Reporting Act is crucial to an individual’s financial well-being that the claimant will file suit and sue for damages when the FCRA violations occur.

To what extent a victim can be compensated depends to a large extent on whether the violation was willful or negligent. The parties liable for potential breaches include credit reporting agencies, companies supplying the credit agency with information, or those using credit report information to make a job or housing decision.

Willful breach of FCRA

These are the most severe – and more highly compensated – violations because it indicates that the agency, company, or person was aware that their actions would impact you. Still, they went ahead and did them anyway.

The categories of damages to be paid for here include:

1. Actual damages. These are damages that can be proved by the harm caused by an action or failure to act by the business, agency, or individual. There’s no limit on how big a reward could be.

2. Statutory damages. These are damages that don’t need proof, but the reimbursement is limited to between $100 and $1,000.

3. Punitive damage. These are awarded to punish and prevent an agency, company, or person from violating the FCRA again.  There is no upper cap on the amount that can be granted.  

4. Attorney fees and legal expenses. If you win your case, you can get the costs of litigating the matter covered.

Negligent violations of FCRA

If an entity, company, or individual fails to exercise due care or takes action that a reasonable person would not practice concerning your credit records, this may result in “negligent” actions and money damages.

The forms of damages available are the same as for willful violations, including actual damages (no limit), statutory damages (usually between $100 and $1,000); punitive damages (no limit); lawyer fees, and legal expenses.

Frivolous lawsuit penalties  

Credit reporting agencies have the power to terminate violation investigations if the agency considers the consumer’s allegation to be unfounded or insignificant.

This usually occurs when the user does not provide enough details to examine the information in question.

They can also lose a case in court if they filed a lawsuit in bad faith or threaten an organization, company, or person. If this occurs, it will compel the consumer to pay the attorney’s fees for filing bad faith documents.

Deadlines

While dealing with the Fair Credit Reporting Act, here are four critical deadlines to remember.

• Incorrect information must be rectified or deleted within 30 days of your dispute (or 45 days if, after submitting your written dispute, you provide further details).
• Businesses or other information providers will inform you, within 30 days, of any negative information reported to the credit bureaus.
• The statute of limitations for filing a lawsuit is two years after the date a breach was found.
• Or within five years from the date of the violation.

Annual Report

If you request it, the three major credit bureaus will be required to provide you with one free copy of your credit report per year. Of course, you have to identify yourself appropriately. The AnnualCreditReport.com website is a perfect place to get your annual credit report for free. For certain instances, a free copy of your credit report must also be given by the credit bureaus:

• If a corporation has rejected your application or charged a higher rate of interest due to details on your credit report.
• When you ‘re unemployed and plan to look for work within the next 60 days.
• If you ‘re on public assistance.
• If you have been a victim of identity theft (or if your credit report, due to identity theft, contains inaccurate information)

Additional credit reporting services

There’s a lot of emphasis on the three nationwide consumer reporting firms — Equifax, Experian, and TransUnion — but recognizing that there are other providers of consumer reporting information is beneficial.

The Consumer Financial Protection Bureau has published a list of other firms that classify themselves as consumer reporting agencies. These firms collect information and report about you to other firms in credit, insurance, employment, residential rental housing, and different decision-making situations. Determining which of the companies might be relevant to you is worth considering.

This list has been independently verified by the CFPB, even though it is not all-inclusive.

In the meantime, here are the latest contact numbers for the three major customer reporting firms:

Equifax: 525-6285 (800)

Experian: (888) 397-3742

TransUnion: 680-7289 (800)

Credit reporting agency issues aren’t uncommon. It can be difficult to get prompt corrections to your credit report’s mistakes, but it is worth trying.

If you have concerns about credit reporting agencies and how information is obtained, you can contact a non-profit credit advisory organization and speak to a professional counselor about the subject.

If your credit report isn’t rectified or the error turns out to be accurate and is harming your credit score and credit obtaining abilities, consult a credit repair agent or a credit repair specialist to determine the future course of action. Looking for credit repair services California will be a great idea when searching for local or regional services.