The Fair Credit Reporting Act
According to the United States Congress, the success of the banking system depends upon fair and accurate credit reporting.
And since the economy depends upon the success of the banking system, it is not difficult to see the importance of The Fair Credit Reporting Act (FCRA).
This American law was set up originally in 1970, but was amended in 1996, 1997, 1998, 2001 and 2003 to include some very important reforms and additions.
One such addition was the inclusion of the US Patriot Act in 2001 to protect citizens from the attempts of terrorists to infiltrate the US banking system and thereby benefit from American commerce for the purpose of furthering their terrorist activities.
In addition, the Fair and Accurate Credit Transactions Act added in 2003 allows for persons to receive a free copy of their credit report each year.
This benefit makes it easier for consumers to keep their credit reports accurate.
Determining Credit Worthiness
The purpose of the FCRA is to regulate the collection of personal information about people with regard to determining their credit worthiness.
Without this law in affect, major aspects of a person’s quality of life would suffer.
For example, personal and private information like medical records, that have nothing to do with whether or not a person is a good prospect for receiving credit would be obtainable by virtually anyone.
This law is also in place to protect banks and other credit issuers from extending credit to individuals who practice fraud or identity theft.
When a person has been convicted of these felonies, their credit report or consumer report will reflect that fact with the terms “fraud alert” or identity theft”.
The FCRA also regulates information that is gathered by consumer reporting agencies. Before an offer of employment is given to an applicant, many companies will check with these consumer reporting agencies as to the background and general character or reputation of the applicant before hiring them.
Insurance companies usually will consult with a consumer reporting agency before issuing an insurance policy to a prospective applicant. Most insurance companies will not issue a policy to a person who is on active military duty and their consumer report would reflect the terms “active military alert” thereby protecting the insurance company from unnecessary risk.
The FCRA regulates the type of information that can be collected, the purpose for collecting it and who can collect it. It also requires that a person be notified in writing when information is being gathered and for what purpose.
In addition, the FCRA requires by law that a person must be notified in writing when an adverse decision is made based on certain information in a person’s credit report and what agency supplied this information.
When a person is late on payments that they are making towards credit they have already received, the FCRA states that they must be notified in writing when that information will be sent to a credit reporting agency.