Fair Credit Reporting Act of 2004

The Fair Credit Reporting Act sets forth protections for consumers from malicious, negligent or unethical credit reporting. The act was passed into law in 1970 and has been amended over the years in reaction to developing consumer issues; as of February 2011, the Fair Credit Reporting Act was last updated in 2004. Credit card companies and other lenders make regular reports on their customers' accounts to credit rating agencies. Creditors use the information aggregated by credit reporting agencies to determine credit limits, interest rates and whether or not to extend credit to individual consumers. The Fair Credit Reporting Act helps to ensure that consumers' credit reports accurately reflect their borrowing history and financial responsibility.

Identity Protection

Identity theft has become a growing concern as the world relies more on electronic communications networks for vital and sensitive functions than ever before. The Fair Credit Reporting Act covers the issue of protection from identity theft early in its text.

The act directs creditors to follow strict procedures when notified of a potential identity-theft issue. When a borrower notifies a creditor of a potential issue, the creditor must place an identity theft flag on the borrower's account, which must be taken into consideration before the creditor takes any action on the account for at least 90 days. The creditor must also include the note on any reports made to credit reporting agencies. Consumer reporting agencies are required to furnish free reports to anyone with an identity theft flag on their credit report as well.

Purposes

The act sets forth specific circumstances in which a credit report can be obtained. Credit reports can be obtained in connection with a new credit application, for preemployment screening or insurance underwriting purposes, and to determine whether to issue someone a license from a government agency.

Other "legitimate business needs" of credit information include reviewing the information in connection with a business transaction initiated by a consumer or to determine whether a consumer meets specific, ongoing requirements to hold a certain type of account.

Disclosure Rules

The Fair Credit Reporting Act contains strict provisions for reporting credit information to individuals, reporting agencies and government authorities. The act deals quickly with government agencies, simply specifying that reporting agencies must furnish information on any consumer to any government authority. The act specifies exactly which information must be furnished upfront for personal or employment-related credit checks, and for reporting agencies furnishing reports to lenders who have received credit applications.

Liability

The act provides civil penalties for accessing someone else's credit information without his consent. The act requires reimbursement for personal damages, up to $1,000, for obtaining a report without permission, in addition to punitive damages left up to individual courts. The act extends these provisions to liability for negligence, in addition to willful noncompliance with the act's regulations.