The Fair Credit Reporting Act (FCRA) is a broad law that’s meant to help consumers. It has a lot of implications in everyday life. For example, if you’re applying for a job and the employer wants to do a background check, there are certain things they have to adhere to under the FCRA.
The following are key facts to know about your rights and how the FCRA can protect you as a consumer.
1. The Basics
The FCRA is a federal law that’s meant to help make sure information that’s in consumer credit bureau files is accurate, fair, and private. Broadly, the law regulates how credit reporting agencies are able to go about collecting, accessing, sharing, and using data that are collected in consumer reports.
The FCRA passed in 1970.
Information is being collected about consumers all the time, and in addition to the three major credit bureaus, there are many other organizations that can potentially be collecting and using your information.
When you apply for any type of credit, such as a mortgage or credit card, the company you’re applying with will check your credit history. The terms that the institution offers you are based on your credit score and information that’s found in your credit report.
Landlords can also check your credit report, and employers can, too, for hiring purposes.
In some states, even insurers can check your credit before offering you coverage.
2. How the FCRA Helps You As a Consumer
There are certain things that are especially pertinent as far as consumer protections in the FCRA. These include:
- Consumers have a right to be informed if there’s something in their credit file that’s being used against them to deny employment, credit, or insurance.
- You have the right to file disclosure, meaning you can request and access the information a consumer reporting agency has about you.
- You get a free file disclosure every 12 months from each of the three major national credit bureaus.
- Other people’s access to your credit report is limited. People who are viewed as having a permissible purpose for accessing it include creditors, insurance companies, and landlords.
- If an employer is going to check your credit report, you have to provide them with your written consent, and employers have to meet certain other requirements. Not every state will let a prospective employer pull your credit report as part of your background check.
- You have the right to dispute information that’s inaccurate or not complete on your report.
- Under the FCRA, you can opt out of pre-screened credit offers.
- You have the right under the stipulations of the FCRA to put a freeze on your credit report. This means lenders can’t check your credit report unless you lift the freeze or give a lender a one-time PIN that would allow them to access it.
- The FCRA requires agencies to remove negative credit information once it’s been seven years. Bankruptcies have to be removed after 7-10 years, depending on the type. The goal is to make sure that consumers aren’t having things held against them for their entire lives.
3. Employer Responsibilities Under the FCRA
Employers have to remember the following:
- Employers have to tell the applicant or the employee that they might use information from their consumer report to make employment-related decisions. The notice has to be in writing. The notice can’t be part of the employment application—it has to be provided on its own.
- You must get written permission. You can get this as part of the notification document you’re providing to the employee or applicant.
- When using a third party to get access to consumer credit information, make sure that the company is following all regulations and laws. You’re also going to have to certify you notified the employee or applicant, got their permission, and followed all requirements of the FCRA. The third-party company will also ask you to certify you won’t use the information to discriminate against an employee or applicant or misuse the information in any way under federal and state laws and regulations.
- Before you take any adverse action, like terminating an employee or denying a promotion if it’s based on something from the consumer report, you have to let the applicant or employee have notice that includes a copy of the report you used to make a decision. You also have to provide a copy of what’s called “A Summary of Your Rights Under the Fair Credit Reporting Act.”
Finally, when you’re finished with a consumer report, you have to securely dispose of it and any information you got from it.