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What Is the Fair Credit Reporting Act?

The Fair Credit Reporting Act (FCRA) is considered one of the first privacy statutes in the US. It is a federal statute that regulates the use of people’s sensitive personal information for matters like employment screening, credit underwriting, and insurance underwriting. The intent behind the FCRA is to not only ensure fair and accurate credit reporting but also to protect the privacy of personal information that can be found in credit reporting files.

Enforcing the FCRA

Individual consumers, the federal government, and state agencies are responsible for enforcing the provisions of the FCRA. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are two agencies that administer and enforce the FCRA.

The CFPB has the authority to bring enforcement actions against furnishers, users, and consumer reporting agencies (CRAs). The CFPB was also the first federal agency to have supervisory jurisdiction over CRAs, which means it can carry out routine examinations of companies that aren’t even suspected of FCRA violations.

Under the FCRA, state agencies can also investigate and enforce action for violations.

4 THINGS CONSUMERS SHOULD KNOW

#1: The Impact of COVID-19 on the Consumer Finance Industry & FCRA

The following dates and events that occurred during the COVID-19 pandemic impacted consumer’s FCRA rights:

  • March 27, 2020: The CARES Act is enacted, amending furnishers’ duties under the FCRA.
  • April 1, 2020: The CFBP releases a policy statement announcing its intent to relax specific oversight priorities during the pandemic.
  • April 30, 2020: The National Association of Consumer Advocates sends a letter to the CFPB citing the potential areas where consumer’s credit reports could be affected by Covid 19 -- this includes how consumer data is being reported and how credit disputes are being investigated.
  • May 5, 2020: The Federal Trade Commission sends a report to Congress explaining the agency’s efforts to inform consumers about their rights to dispute and correct errors found in consumer reports.

#2: Failure to Comply with Furnishers’ Investigation Duties

Furnishers -- which are typically creditors, mortgage companies, credit cards, car loans or debt collectors—became liable under the FCRA after Congress passed the Consumer Credit Reporting Reform Act of 1996. This amendment to the FCRA was excellent for consumers and allowed consumers to pursue furnishers of information to CRAs. While the FCRA does not define the term “furnisher,” the definition found in Regulation V of the FCRA, as well as on common usage, suggest it means any entity that furnishes information related to a consumer regarding the entity’s transactions or experiences with the consumer to one or more consumer reporting industries for inclusion in a consumer report. For most consumers, a furnisher is typically a creditor – but could also be a cell phone, an apartment, or even an employer.

When a furnisher receives notice of a dispute from a CRA, it is called an “indirect dispute.” After receiving an indirect dispute, the furnisher must complete an investigation and report back to the CRA that notified the furnisher of the dispute within 30 days of the date the CRA received the dispute from the consumer. In general, the quality of the furnisher’s investigation is the subject of litigation.

#3: Furnishing Consumer Reports Without a “Permissible Purpose”

Under the FCRA, consumer reports can only be furnished or used for a “permissible purpose.” Any CRA that furnishes a consumer report for any other purpose than those laid out in 15 U.S.C. § 1681b faces the risk of civil liability.

If the violation is negligent, the plaintiffs might be able to recover actual damages and attorneys’ fees. If the violation is deemed willful, then plaintiffs are entitled to seek statutory damages of between $100 and $1,000 per violation, as well as attorneys’ fees and punitive damages.

The CRA has a permissible purpose to furnish a report if it reasonably believes the person:

  • Intends to use the report “in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer.”
  • Intends to use the report for employment purposes.
  • Has a legitimate business need for the information in connection with a business transaction that is initiated by the consumer or to review an account to determine if the consumer continues to meet its terms.

A consumer’s written instructions or written consent can also authorize a CRA to furnish a report when circumstances are not otherwise permissible. Determining if a purpose was permissible is probably one of the most highly-litigated FCRA issues in the U.S.

#4: Employment FCRA Notice Disclosures

Employers can only obtain a consumer report for employment purposes under the following two conditions:

  • A clear and conspicuous disclosure must be made to the consumer in writing.
  • The consumer must authorize the user to obtain the report in writing.

Employers that fail to meet both of these conditions before obtaining a consumer report are in violation of the FCRA. These employers can be on the hook for statutory and punitive damages, attorney’s fees, and costs.

Talk to Our Florida Attorneys Today

If you have more questions regarding the Fair Credit Reporting Act, then please don't hesitate to get in touch with our experienced and knowledgeable legal professionals at Boss Law. Our legal team is here to devise strong legal strategies for our clients and to provide them with reliable legal guidance so they can confidently navigate their cases.

Call our law firm today at (727) 877-3188 to request your case consultation with an attorney at Boss Law.