Fair Credit Reporting Act Violations: Know Your Rights

Good credit plays an essential role in your financial life. It is necessary to qualify for a loan or get a credit card and for things like getting cellular telephone service, renting a car, and perhaps even getting a job. Your credit history and credit scores are your purchasing power.

It’s not possible to stress the importance of this enough. This is why you need to know your rights and what you can do to prevent yourself from falling victim to credit reporting violations. If you do end up a victim, there are resources at your disposal that can help you.

What is the Fair Credit Reporting Act (FCRA)?

This act was established by the Federal Trade Commission to protect fairness, accuracy, and consumer privacy from abuse by consumer reporting agencies such as the credit bureaus, medical companies, and tenant screening services.

The FCRA provides guidelines for the following groups:

• Credit-reporting agencies are sometimes called consumer reporting agencies or CRAs. Credit reporting agencies are any company that collects and stores credit information. It includes the three major credit bureaus (Experian, Equifax and TransUnion) and any specialty consumer-reporting agencies dealing with tenant screening. The Act requires consumer reporting agencies to adopt reasonable procedures for gathering, maintaining, and distributing information.
• Information furnishers: Anyone who provides information to the credit reporting agencies. Credit card companies, mortgage lenders, auto lenders, etc. The furnishers have to have reasonable policies and procedures for ensuring the accuracy and integrity of the information they report.
• Information users are businesses that access your credit file, including anything from credit card companies to employers considering making you an offer. 

What Are Your Rights Under the Fair Credit Reporting Act?

You have to be informed if any information in your file has been used against you. For instance, if you are denied credit, etc.

Real-world example:  Mary applies for a new credit card and is denied based on previous late payments reported by TransUnion on her credit report. Along with stating the decision not to approve her application, the credit card company that denied Mary’s application must tell her that they used TransUnion information to arrive at their decision, then provide her with an address and phone number so she can obtain the information that was used.

You have the right to know the contents of your credit file and get your score. You can get free credit reports through annualcreditreport.com or the nationwide credit bureaus and specialty consumer-reporting agencies by contacting them directly.

Real-world example: Jane is applying for a mortgage and wants to see her chances of getting approved. She contacts Experian to learn her credit score and determine which factors may work for and against her while her application is evaluated.

You have the right to dispute information that’s incomplete or inaccurate. The consumer-reporting agency is required to investigate your dispute unless it is frivolous. You will not be successful if you fight accurate negative information on your credit reports, such as late payments, defaults, or bankruptcy. You’ll have to wait for most of those to fall off your credit report. That takes about seven years.

Inaccurate, incomplete, or unverifiable information on your credit reports must be corrected or deleted. If the credit bureau verifies that it is accurate, it will remain on your credit report. The agency usually has 30 days to remove or correct the information.

Credit bureaus cannot report outdated negative information. Credit bureaus can only report negative information for seven years or ten years if you’ve filed a Chapter 7 bankruptcy.

Access to your credit report is limited. The information can only be provided to someone with a valid need to consider an application, including a creditor, insurer, employer, landlord, or other business.

For reports to be provided to employers, you must give consent. You must provide written permission for a current or prospective employer to access information, although there are specific exceptions, such as working in the trucking industry.

You can limit prescreened credit, and insurance offers. Creditors and insurance companies must provide a toll-free number to opt out of unsolicited credit and insurance offers. One call should update all three credit bureaus. You can also opt-out by calling 888-5-OPTOUT (888-567-8688).

Real-world example: Brian has gotten several “prescreened” offers for credit cards since his credit score increased, and he didn’t sign up for or consent to them. He doesn’t want to receive these offers, so he finds the opt-out number to remove his name and address from their mailing list.

You can freeze your credit for free. Freezing your credit could delay any applications for new credit unless you unfreeze the account first. Freezing your credit will require a credit bureau to obtain your authorization before releasing the information in your credit report.

You’re entitled to seek damages from violators. Suppose a credit bureau or another company — or anyone who furnishes your information to the reporting agencies commits violations of the FCRA. In that case, you might have legal grounds to sue them in a state or federal court.

Real-world example: Scarlett finds that Experian didn’t correct an error she reported to them within 30 days and was denied a loan application. She’s able to sue them for damages in court.

Identity theft victims can ask the business for a copy of the credit application related to the theft. 

Active military can place an alert on their credit reports and remains in place for 12 months. 

For a brief overview of the Fair Credit Reporting Act, check out this video:

Free Credit Reports

Aside from being entitled to a free credit report every 12 months at annualcreditreport.com, you can get a free copy of your credit report under the following circumstances:

• Someone took adverse action against you due to information in your credit report
• You are a victim of identity theft
• Your file contains inaccurate information due to fraud 
• You’re on public welfare assistance
• You’re unemployed but seeking employment
• Your state law allows you to access your credit reports more frequently

Borrowers can request credit reports outside of these circumstances. You cannot be charged more than $12.50 per report if you’ve already exhausted your complimentary access.

You’re entitled to your credit score. Sometimes there’s a cost associated with obtaining your credit score, but you can often access it for free when you sign up for an account with the credit-reporting agency.

Your bank, credit union, or credit card issuer may also offer a free credit score tool.

Pay regular attention to your credit score. If it drops suddenly and you don’t know why, it could be a clue that someone has stolen your identity or violated your rights.

Steps to Protect Yourself – and Your Credit Score

• Be Careful with Your Personal Data: Please do not reveal your Social Security number, birth date, or mother’s maiden name to others and monitor it for unauthorized purchases. Setting up a multifactor authentication can reinforce your security.
• Request that the credit bureaus withhold the last five digits when of your Social Security number when supplying credit reports (Section 605 of the Fair and Accurate Credit Transactions Act of 2003.)
• If you’ve been a victim of identity theft, set up a fraud alert immediately. (You should only need to do this once. The credit bureau you choose will notify the other major credit bureaus on your behalf.)
• Request your credit report annually and inspect it for errors
• Look for any accounts that creditors may have opened without your consent. 

Opting Out of “Prescreening” 

Prescreening is usually done to send you unsolicited offers of credit. These credit offers can be intercepted and used to open accounts in others’ names.

Call 1-888-5OPTOUT. Be sure to indicate that you wish to opt-out permanently. Otherwise, the order will expire in five years. You’ll have to complete a form.

You can also opt-out by sending a letter to all three credit bureaus. The FTC provides a sample opt-out letter you can use.

If you suspect that your credit report was misused or that other violations of the FCRA have occurred, contact an attorney specializing in consumer law.

FCRA Provisions

Because credit reports contain sensitive personal information, they are subject to FCRA regulations.

The FCRA establishes the following rights and responsibilities for credit report consumers, furnishers, and users:

• Consumers are individuals.
• Furnishers are entities that send information to credit bureaus regarding creditworthiness.
• Users of credit reports need to evaluate a consumer for a specific purpose.

What’s in Your Credit Report?

A consumer credit report contains primary personal data (name, address, previous address, Social Security number, marital status, employment information, number of children) plus:

• Financial information: Here, you will have estimated annual income, employment history, bank accounts, and the loan value of your car and home. 
• Public records information: This includes arrests, bankruptcies, and tax liens.
• Credit accounts: This includes the current account balances and payment status. Closed accounts will also remain on your report; average account ages, length of credit history, negative information, revolving credit lines, and available credit limits.
• Collections notifications: Whether you have unpaid or disputed bills or charge-offs
• Current employment and employment history will also be listed.
• Requests for credit report inquiries: The number of requests for your report, plus the identity of the requestors.
• Dispute records: Information regarding any disputed items on the credit report.

8 Common Violations of the Fair Credit Reporting Act

Here are some of the more common violations of the FCRA:

1. Furnishing and Reporting Old Information

Credit bureaus and the creditors who supply the information must keep your credit information current. If your credit circumstances change, the credit reporting agency must update the information in your credit report to reflect these changes. If this doesn’t happen on time, it is likely a violation of the FCRA. 

Examples include: 

• Neglecting to report that debts were discharged in bankruptcy
• Reporting old debts as new 
• Registering that an account that has been voluntarily closed by a consumer as active 
• It continued reporting any negative information for longer than seven years, unless it’s one of the specific items that remain on your report for ten years, like bankruptcies and civil judgments

2. Furnishing or Reporting Inaccurate Information

Your creditor must not supply information that it knows (or should know) is inaccurate. 

That includes:

• Reporting debts as charged-off when the debt was settled or paid in full
• Inaccurately stating balances due
• Reporting on-time payments as late payments 
• Supplying credit information on an account where identity theft has been reported

3. Mixed Files

A credit bureau can mix your file with someone else with a similar name or background information in many instances.

• Duplicating negative credit information with someone whose Social Security number is similar
• Not distinguishing a Jr. or Sr. in similar surnames
• Mixing data of persons with the same last name
• Mixing up people with similar names who live in the same city

4. Failing to Follow Debt Dispute Procedures

Credit bureaus and your creditors must take action if you submit a written dispute challenging the accuracy of any item on your report. 

They must:

• Conduct an investigation
• Correct any errors or inaccuracies from your credit report within 30 to 45 days after receiving notice
• Remove the disputed debt if they can’t validate it.

Key takeaway: Credit reporting agencies need to respond to filed disputes in specific ways, and not following those procedures could violate the FCRA.

5. Debt Dispute Violations by Creditors or Other Information Suppliers

Common violations by a creditor or other information furnisher include:

• Failing to notify each credit bureau that you’ve disputed the debt
• Neglecting to submit corrected information to the credit bureau following the investigation
• Refraining from knowingly submitting incorrect information 
• Failing to conduct an internal investigation of your dispute on time
• Failing to provide you with a reasonable procedure to report identity theft or raise a dispute

6. Requesting a Credit Report for an “Impermissible Purpose”

Even though your employer, creditor, or landlord can pull your credit report, they must still have a permissible purpose. Pulling your credit report for an impermissible purpose could be an FCRA violation.

Examples of impermissible purposes:

• Pulling your credit report to determine if you’re collectible before taking legal action against you
• An employer pulls your credit report without your authorization for a background check
• Creditors on any debts discharged in bankruptcy, pull your credit report to monitor your current financial activities

Key takeaway: Those who ask for your credit information need a valid reason, and credit reporting agencies that don’t ensure their reasoning is valid violate the FCRA.

7. Withholding Notices

You’re entitled to notices concerning the reporting, handling, and use of your credit information. The bureau may be withholding notice if you’re not informed about how they are using your data. Notice violations under the FCRA might occur when:

• A creditor doesn’t alert you when it provides negative credit information to a credit bureau
• A user of credit information (such as a prospective employer or lender) fails to notify you of an unfavorable decision due to the contents of your credit report
• A creditor doesn’t provide your credit score, and your credit report was used in a credit decision
• A creditor neglects to inform you of your right to any dispute inaccurate credit information
• A creditor fails to inform you of your right to a free credit report
• A creditor won’t identify the source of information obtained about you.

Key takeaway: Credit bureaus not letting you know how your credit information is being used violates the Fair Credit Reporting Act.

8. Privacy Violations

A credit bureau cannot hand over your credit information to anyone who requests it. Credit reporting agencies should only share your data with authorized people or entities to validate your credit information. People who don’t need your credit information include:

• A university you applied to
• The manager of a job you applied for
• A client you’ve entered into a business relationship with

If a credit bureau has shared your information with an unauthorized person or party, they violated your protected privacy under the FCRA, and you would be entitled to damages.

Key takeaway: Only certain parties are entitled to your credit information, and credit reporting agencies that provide your information to unauthorized parties violate your right to privacy under the FCRA.

Recovering Damages for FCRA Violations

When violations of the FCRA occur, the victim can file a lawsuit seeking damages.

The extent to which you might be compensated will depend on whether a violation was willful or negligent. 

Willful or Negligent FCRA Violations

Willful means an agency, company, or individual knew the actions would be harmful. It’s considered negligent when a business, credit bureau, or individual makes an unreasonable effort with your credit information. These are the more serious violations – and more highly compensated.

The types of damages involved here include:

• Actual damages can be proven that harm was caused by a specific action or deliberate failure to act. There is no cap on the amount of money that can be awarded
• Statutory damages: These don’t require proof, but the compensation will range between $100 and $1,000
• Punitive damages: These punish the agency, business, or individual for deterring future FCRA violations. There is no cap
• Attorney fees and court costs: You will recover your court costs if you win

Before you call your lawyer, be aware that there is a penalty for an unnecessary or “frivolous” FCRA lawsuit that comes with a hefty fine. You would need to pay the other party’s attorney fees if you filed your suit in bad faith or for purposes of harassment.

Deadlines to Report an FCRA Violation

Here are some critical deadlines to remember when dealing with the Fair Credit Reporting Act.

• Inaccurate information must be updated or deleted within 30 days of your dispute
• It would be best to alert any negative information reported to the credit bureaus within 30 days
• The statute of limitations for filing a lawsuit is two years after discovering a Fair Credit Reporting Act violation or within five years of the date of the violation

How Do I Report an FCRA Violation?

File online at www.consumerfinance.gov/Complaint. Call the toll-free phone number at 1-855-411-CFPB (2372). Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244.

The Bottom Line

Credit reports allow you to make a wide range of life choices, from where people live and work to how much they pay for insurance and utilities. 

Lenders look at the credit history of potential customers when deciding whether to offer a new line of credit or help determine the terms of the loan. Employers and landlords use the credit history to assess job candidates and potential tenants. Credit history records your ability to repay debt and how responsible you are. It’s imperative to protect it.

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