Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is legislation embodied in title VI of the CONSUMER CREDIT PROTECTION ACT (15 U.S.C.A. § 1681 et seq. [1968]), which was enacted by Congress in 1970 to ensure that reporting activities relating to various consumer transactions are conducted in a manner that is fair to the affected individual, and to protect the consumer's right to privacy against the informational demands of a credit reporting company.

FCRA represents the first federal regulation of the consumer reporting industry, covering all credit bureaus, investigative reporting companies, detective and collection agencies, lenders' exchanges, and computerized information reporting companies.

The consumer is guaranteed several rights under the FCRA, including the right to a notice of reporting activities, the right of access to information contained in consumer reports, and the right to the correction of erroneous information that may have been the basis for a denial of credit, insurance, or employment. When a consumer is denied an extension of credit, insurance, or employment owing to information contained in a credit report, the consumer must be given the name and address of the credit bureau that furnished the credit report. Consumers are also entitled to see any report that led to a denial, but agencies are not required to disclose risk scores to them. Risk scores (or other numerical evaluation, however named) are assigned by consumer reporting agencies to help clients interpret the agency's report. Credit agencies may not report adverse information older than seven years or bankruptcies older than ten years.

The provisions of the FCRA apply to any report by an agency relating to a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. The FCRA covers information that is used or expected to be used in whole or part as a factor in establishing the consumer's eligibility for one of four purposes:(1) employment; (2) credit or insurance for personal, family, or household use; (3) government benefits and licenses to operate particular businesses or practice a profession; and (4) other legitimate business needs. Under the FCRA, an agency may also furnish a report in response to a court order or a federal GRAND JURY subpoena, to a written authorization from the consumer, or to a summons from the INTERNAL REVENUE SERVICE.

The FCRA creates civil liability for consumer reporting agencies and users of consumer reports that fail to comply with its requirements. For example, the Joneses, owners and operators of a real estate appraisal business, sued a consumer reporting agency under the FCRA. The Joneses claimed that the agency incorrectly reported a judgment against their business. The Supreme Court of Appeals upheld a jury's award, which included compensatory and PUNITIVE DAMAGES (Jones v. Credit Bureau of Huntington, Inc., 184 W.Va. 112, 399 S.E.2d 694[1990]). A consumer reporting agency includes any person or corporation that, for monetary fees, dues, or on a cooperative nonprofit basis, regularly assembles or evaluates credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. A retail department store or another comparable business that furnishes information to consumer reporting agencies based on its experience with consumers is not considered a consumer reporting agency under the FCRA (DiGianni v. Stern's, 26 F.3d 346 [2d Cir. 1994], cert. denied, 513 U.S. 897, 115 S. Ct. 252, 130 L. Ed. 2d 173).

Since its enactment, the FCRA has not undergone major reform. However, legislation has been proposed to address the issues that have arisen from a technological explosion created by a large increase in consumer debt and the information that it generates. In addition, states have enacted comparable statutes covering consumer's rights.