Know Your Rights When It Comes to Debt
Fair Credit Reporting Act became law on April
25, 1971 and was passed to grant privacy, protect consumers from
incorrect credit reporting to credit bureaus, and insure Consumer
Reporting Agencies adopt fair procedures for acquiring, maintaining,
and giving information about consumers.
The Fair Credit Reporting Act permits consumers
to write a limited explanation in their credit report and provides
for elimination of outdated information after 7 years. Certain types
of information may remain on credit reports longer-- for example
Chapter 7 bankruptcy and judgments.
Credit reporting agency subscribers, comprised
of banks and merchants, etc., may not access an individual's credit
record unless authorized. This authorization is standard procedure
when you sign credit and loan applications, life insurance applications,
employment applications, security clearance requests, etc. Read
the fine-print on the applications for more details.
On September 30, 1996, new changes in the Fair
Credit Reporting Act were made effective and the Congress made the
The banking system is dependent upon fair and
accurate credit reporting. Inaccurate credit reports directly impair
the efficiency of the banking system, and unfair credit reporting
methods undermine the public confidence which is essential to the
continued functioning of the banking system.
An elaborate mechanism has been developed for
investigating and evaluating the credit worthiness, credit standing,
credit capacity, character, and general reputation of consumers.
Consumer reporting agencies have assumed a vital role in assembling
and evaluating consumer credit and other information on consumers.
There is a need to insure that consumer reporting
agencies exercise their grave responsibilities with fairness, impartiality,
and a respect for the consumers right to privacy.
It is the purpose of this amendment to require
Consumer Reporting Agencies use of reasonable procedures for meeting
the needs of commerce for consumer credit, personnel, insurance,
and other information in a manner which is fair and equitable to
the consumer, with regard to the confidentiality, accuracy, relevancy,
and proper utilization of such information in accordance with the
requirements of this title.
The benefits of this new law are:
1. It is easier for individuals to find out
when and if their credit report has been used against them. It allows
consumers to more easily contest incorrect information on their
report, and enables them to stop their names from getting on credit
card companies marketing lists.
2. The amendment places new accountability on
credit bureaus, companies that use credit reports, and organizations
that provide the information that goes into the reports.
3. The law allows for new privacy defenses.
Unauthorized people will not be able to obtain credit reports and
the law places new restraints on "investigative consumer reports".
4. The new law also addresses issues concerning
the three groups who are most interested in credit reports: credit
bureaus, credit report users, and credit report information suppliers.
The following is an summary of the rights and obligations for each
They must establish a toll-free number enabling consumers to contact
them without charge. Currently most have toll-free numbers, but
the law stipulates that consumers must be able to reach a "live"
person rather than only automated responses.
Credit bureaus must investigate consumer complaints within 30 days
and notify the complainant of the results. The new law gives 30
days, not an unspecified amount of time as was the case, to verify
complaints or eliminate them from the report. In addition, the burden
of proof will be on the credit bureau instead of the consumer. Consumers
will no longer be in the position to prove that, for example, they
are not someone else whose file has been mixed up with theirs.
Credit bureaus must furnish a free copy of a consumer's credit report
if it has an adverse effect to the consumer. Consumers have this
right under the previous law only if they are turned down for credit.
The new law widens the meaning of an "adverse effect" to include
such things as employment, licenses, insurance, and housing. The
law requires that consumers be given all the information in their
file with the exception of credit scores or similar "predictors"
used by credit grantors to determine who to offer credit.
The report must also include a list of everyone who received a copy
of the consumer's report during the past year (two years, if employment
related). The report must show all inquiries received by the credit
bureau in the past year pertinent to credit or insurance that was
not initiated by the consumer.
Credit Report Users:
Credit report users such as banks, car dealers, employers, stores,
etc., must disclose consumers rights when an unfavorable action
has been taken against them. This includes advising consumers of
their right to get a free copy of the report and to contest any
information in it. If an employer or potential employer wants to
pull an individuals credit report they must get the person's permission.
Credit Report Information Suppliers:
Information providers are lenders, stores, and others who report
to credit bureaus. They must investigate disputed information within
the same 30-day limit as the credit bureaus and correct any errors.
They must also notify the credit bureau if a consumer disputes information
they are giving to the credit bureau.
Like credit bureaus, credit report information suppliers must take
steps to guarantee incorrect information does not reappear in a
consumer's files after it has been eliminated. The new law holds
firms who fail to correct mistakes liable for damages and liable
for punitive damages if the failure is found to be willful.
NOTE: The above changes in the Fair Credit Reporting Act, do not
take effect until September of 1997.
Fair Debt Collection Practices Act prohibits debt collection agencies
from abusive collection practices. The act allows consumers to dispute
a debt and to stop any unreasonable collection activities such as:
calling before 8 AM or after 9 PM, harassment, false statements,
threatening action that is not permissible, and other unfair practices.
Truth in Lending Act requires credit grantors to provide you with
the annual percentage rate (APR) of any loan prior to signing. The
APR reflects the true cost of the credit.
Equal Credit Opportunity Act prohibits discrimination against you
for the reasons of age, sex, marital status, race, color, religion,
national origin, or receipt of public assistance.
Fair Credit Billing Act allows for the prompt correction of errors
on a credit account and prevents damage to your credit record while
you are settling disputes.