“FCRA” is a common buzzword among CRAs and HR departments.
However, the Fair Credit Reporting Act isn’t primarily aimed at protecting employers, credit bureaus, and employers. It’s aimed at protecting consumers.
Data Wasn’t Nearly As Useful 50+ Years Ago
Most of us have grown accustomed to a world where credit, criminal background, and personal identifier information are easily obtainable by outside parties.
But remember that this is due to a relatively new data retrieval and storage infrastructure.
An individual applying for a bank loan in the 40s or 50s was probably approved based on good faith alone. There was no reliable database of information highlighting the individual’s creditworthiness. Words like “credit report” or “credit score” didn’t have much relevance. It wasn’t until 1989 that our current credit scoring methods were introduced.
The same applies to criminal history and personal identifier information, such as one’s social security number. While this information could be retrieved, it wasn’t logged or shared electronically like it is today. It was much harder to access and verify.
The Need for Consumer Data Protection
As technology and processes improved nationwide, data gathering became more of a focus. Consumer reporting agencies found considerable leverage with the everyday individual’s private information.
At first, this data wasn’t regulated, and individuals had no right to action against false or misleading information. There was no way to challenge or dispute inaccuracies, which created tremendous risk for consumers.
If a credit bureau wanted to report a non-existent bankruptcy, they could. If a background screening company wished to report a number of inaccurate felonies to one’s employer, they could– and there was nothing the consumer could do, legally, to combat it.
For this reason, the Fair Credit Reporting Act was enacted in 1970 to promote the accuracy, fairness, and privacy of consumer information.
What Are the Rights of a Consumer Under the FCRA?
Consumer rights under the FCRA are fairly straightforward. Here are some of the basics:
1. An individual must be informed if negative information may be (or has been) used to make an adverse decision.
For example, if a credit application is denied due to information on a credit report or if an offer for employment is withdrawn due to information on a background check, the consumer must be informed and given the name, address, and phone number of the agency that provided the information.
2. An individual has the right to know what is being reported about them.
A consumer may request and obtain all the information that a CRA reports about them. In most cases, such information will be free, but sometimes a fee can be imposed.
3. An Individual has the right to ask for their credit score.
An individual’s credit score cannot be withheld from them. However, there will often be a fee incurred when accessing the information.
4. An Individual has the right to dispute inaccurate information.
If incomplete or inaccurate information is on file, a consumer has the right to initiate a formal dispute. The consumer reporting agency is legally required to respond unless the claim is deemed frivolous.
5. Consumer reporting agencies must correct inaccuracies.
When a dispute is initiated, the CRA must correct all inaccurate, incomplete, or unverifiable information (typically within 30 days). If the CRA verifies the accuracy of the information in dispute, it can continue to be reported.
6. Consumer reporting agencies may not report outdated negative information.
There are large amounts of information that cannot be reported past seven (7) years. This includes most negative credit items as well as non-conviction criminal records.
7. An individual must give consent for employers to access their information.
An employer must obtain the proper consent and authorization from a prospective hire before obtaining their information from a consumer reporting agency. In many cases, the CRA will have a process in place for this.
8. An individual has the right to seek damages.
For violations of the FCRA that are not properly addressed or resolved, consumers have the right to bring the matter to court.
Takeaways
The FCRA was enacted to protect consumers from the misuse of their personal information. In an age where consumer data carries substantial weight and is easily accessible, there must be checks and balances in place to ensure fairness and accuracy.
Proper observance of the FCRA is paramount for any consumer reporting agency or employer if they wish to remain within the bounds of the law and keep consumers safe.
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