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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Reporting Act permits consumers to write a limited explanation in their credit report and provides for elimination of outdated information after 7 years.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 following findings:

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 group.

Credit Bureaus:

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.




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