Durham & Associates, Inc.

THE FAIR CREDIT REPORTING ACT (FCRA)

 

GENERAL PROVISIONS

Passed by congress in 1971, the Fair Credit Reporting Act (FCRA) enacted the original federal initiative to protect individuals from unfair credit reporting activities by consumer reporting agencies referring to the need "to ensure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality and a respect for the consumer's right to privacy."

According to the FCRA, a "consumer report" is "a written, oral or other communication of information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living" used by the requestor to grant credit, offer employment or approve other benefits. When you to order a credit report, driving record, or criminal history from us, all these reports would be considered a consumer report and therefore subject to the regulations of the FCRA.

Also regulated by the FCRA is a similar but different report that it calls an "investigative consumer report." This report contains information pertaining to "the consumer's character, general reputation, personal characteristics or mode of living" that is gathered through personal interviews from employers, friends or other individual who know the consumer. Were you to order an employment verification, reference check, or other report derived from a personal interview, it would be classified by the FCRA as an investigative consumer report.

The FCRA provides that consumer reports and investigative consumer reports may not contain adverse information more than seven years old, except:

• Orders of relief (bankruptcies) may be reported for ten years

• Convictions may be reported without limitation except in the following states where state laws set the time limitation at seven years: CA, KS, MO, MA, MT, NV, NH, NM, & WA.

• There are no limitations on reporting adverse information when: a life insurance policy has a face amount of $150,000; a credit transaction amounts to at least $150,000; or a job pays at least $75,000 per year.

 

When you order consumer reports or investigative consumer reports for pre-employment screening purposes, you must certify to Durham & Associates the following:

• The purpose for requesting the report and information received will only be used for that purpose.

• You will comply with the disclosure requirements of the FCRA (including adverse action provisions).

• The information will not be used to violate any federal or state equal employment laws or regulations.

• Consumer reports and investigative consumer reports will not be ordered for employment purposes including retention and promotion without the consumer's authorization.

 

NOTIFICATION

If you order a consumer report or investigative consumer report for pre-employment screening purposes, the FCRA requires notification to the consumer.  That means anytime a consumer report is ordered for employment purposes, you must notify the consumer (potential employee) that such a report may be made and will include information as to the consumer's character, general reputation, personal characteristics and mode of living.

In addition, if you deny the consumer a benefit, employment or credit, either in part or whole, because of information contained in a consumer report or investigative consumer report received from a consumer reporting agency, you must notify the consumer of the adverse action.

1. Pre-Notification

A consumer report notice must:

• Be in writing, mailed or otherwise delivered to the consumer.  For employment purposes, the notice may not be a part of an application form.  The notice must be a stand alone document.

• Be issued before the request is submitted to the consumer reporting agency.

• Provide written authorization before the request is submitted to the consumer reporting agency.

An investigative consumer report must:

• Be in writing, mailed or otherwise delivered to the consumer. In this instance, the notice may be a part of the application form.

• Be issued no later than three days after the report was requested.

• Include a statement that, upon written request, additional disclosure will be made concerning the complete nature and scope of the investigation.  That information must be provided within five days of receiving such a request from the consumer.

• Provide a written summary of the consumer's rights as prescribed by the Federal Trade Commission

2. Post-Notification

An adverse action notice must include the following:

• A copy of the consumer report.

• Description in writing of the consumer's right to obtain a free report within 60 days to dispute any inaccuracies with the consumer reporting agency.

• Reporting agency's name, address and toll-free telephone number.

• A statement claiming that the consumer reporting agency did not make the adverse decision and can not provide the reason for the adverse action.

• Notification to the consumer of the adverse action which can be orally, in writing or electronically delivered.

 

CIVIL LIABILITY

Failure to comply with FCRA requirements imposes civil liability which includes:

• An individual who knowingly obtains a report without permissible purpose or under false pretenses is liable to the consumer for actual damages with a minimum penalty of $1,000.

• Any entity that willfully fails to comply with any provision of the FCRA is liable to the consumer for actual damages.  The penalty has a $100 minimum and a $1,000 maximum.

• Negligent noncompliance of FCRA requirements may result in liability to the consumer of actual damages, costs and attorney's fees.,

• Attorney's fees are available to the prevailing party in defending motions brought in bad faith or for harassment purposes.

 

All forms and releases needed for you to be in compliance with the FCRA as an entity or individual requesting consumer information are located on our Resources Page. Click here

 

 

THE FACT ACT

In 2003 congress enacted the Fair and Accurate Credit Transactions Act (FACT Act) that amends the FCRA of 1971, by improving the quality of credit information, and protecting consumers against identity theft.

Here are some of the major provisions:

• Gives every consumer the right to their credit report free of charge every year. Consumers will be able to review a free report every year for unauthorized activity, including activity that might be the result of identity theft.

• Helps prevent identity theft before it occurs by requiring merchants to leave all but the last five digits of a credit card number off store receipts. This law will make sure that slips of paper that most people throw away do not contain their credit card number, a key to their financial identities.

• Creates a national system of fraud detection to make identity thieves more likely to be caught. Previously, victims would have to make phone calls to all of their credit card companies and three major credit rating agencies to alert them to the crime. Now consumers will only need to make one call to receive advice, set off a nationwide fraud alert, and protect their credit standing.

• Establishes a nationwide system of fraud alerts for consumers to place on their credit files. Credit reporting agencies that receive such alerts from customers will now be obliged to follow procedures to ensure that any future requests are by the true consumer, not an identity thief posing as the consumer. The law also will enable active duty military personnel to place special alerts on their files when they are deployed overseas.,

• Requires regulators to devise a list of red flag indicators of identity theft, drawn from the patterns and practices of identity thieves. Regulators will be required to evaluate the use of these red flag indicators in their compliance examinations of financial institutions, and impose fines where disregard of red flags has resulted in losses to customers.

• Requires lenders and credit agencies to take action before a victim even knows a crime has occurred. With oversight by bank regulators, the credit agencies will draw up a set of guidelines to identify patterns common to identity theft, and develop methods to stop identity theft before it can cause major damage.