Chapter IV. Fair Credit Reporting Act (FCRA)

• Jurisdiction: United States

IV. Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act, 15 U.S.C. § 1681 (FCRA) is a widely used statute governing the collection, maintenance and dissemination of consumer information. It is intended to protect consumers from the inclusion of inaccurate information in credit reports. Litigation, particularly class litigation, based on the FCRA is on the rise. This chapter provides an overview of the statute and litigation based on the statute.

A. Scope of Application

The FCRA applies to communication of information that fits the definition of "consumer reports" by consumer reporting agencies (CRAs). To be considered a consumer report, information must bear on a consumer's credit worthiness, standing or capacity, character, general reputation, personal characteristics or mode of living.³⁴ This information includes how often a consumer pays on time, how much credit the consumer has available, how much credit the consumer is using, and whether a debt or bill collector is collecting on money owed by the consumer. Additionally, to be considered a consumer report, the information must be used or expected to be used to establish the consumer's eligibility for credit or insurance for personal, family, household, employment or other purposes specifically identified in the FCRA.³⁵

Congress amended the FCRA with the passage of the Fair and Accurate Credit Transaction Act of 2003 (FACT Act). The FACT Act contained new consumer disclosure requirements as well as provisions to address identity theft. In addition, it provided consumers with the right to a free annual consumer report and improved access to consumer report information.

B. Regulated Entities

The FCRA applies to (1) furnishers who provide information about their experiences with consumers to CRAs, (2) CRAs that prepare consumer reports and maintain consumer information, and (3) parties who use consumer reports. A summary of the obligations of each under the FCRA is below.

1. Furnishers

Under the FCRA, creditors who furnish information about consumers to reporting agencies have a number of responsibilities. A "furnisher" is not defined under the statute, but furnishers generally include banks, credit card issuers, mortgage lenders, collection agencies and car finance lenders.

The requirements for furnishers generally involve ensuring the accuracy of the data provided to the consumer reporting system. In particular, they must provide complete and accurate information; investigate consumer disputes received from credit reporting agencies; correct, delete or verify information within 30 days of receipt of a dispute; and inform consumers about negative information that has already been placed on a consumer's credit report within one month.³⁶

2. CRAs

Consumer reporting agencies (CRAs) are entities that collect and provide information about consumers to be used for credit evaluation and certain other purposes, including decisions about employment. The three largest CRAs are Experian, TransUnion and Equifax. The definition of CRAs also includes many other companies that...