New Credit Reporting Law (FACT)

On December 4th, President Bush signed into law the Fair and Accurate Credit Transactions Act of 2003 (FACT), a law that updates the Fair Credit Reporting Act. While parts of the law are great for consumers, others aren't. Different parts will go into effect from March 2004 through December 2004.

Here are the main provisions:

Free Annual Credit Reports

Finally, consumers will be able to request one free copy of their credit report from each of the three major credit reporting agencies (CRAs). This probably won't go into effect until near the end of the year.

In addition to the Big Three, you'll also be able to request a free copy of your report from bureaus that compile and develop reports on:

(1) medical records or payments;

(2) residential or tenant history;

(3) check writing history (such as Chexsystems or Telecheck);

(4) employment history; or

(5) insurance claims (such as CLUE)

And while you can request your credit score, there will be an as yet undetermined fee for it. If you apply for a mortgage, though, the lender will have to provide you with your credit score and the key factors influencing your score.

Identity Theft Prevention

One of the main thrusts of this law is trying to help identity theft victims. In addition to charging the regulators with developing guidelines to help prevent the misuse of consumer credit information, there are several provisions in the new law designed to help foil ID theft:

Members of the military on active duty may request an alert placed on their file indicating they are on active duty.

You'll be able to ask the CRAs in the near future not to disclose the first five digits of your social security number when they supply your credit report to another company.

And if a card issuer receives a receives a request for a new or replacement card from a consumer less than 30 days after receiving a change of address, the issuer will have to take additional steps to verify that the request is valid.

Credit and debit card receipts in the future will only list the last five digits of the card.

Finally, if the address given by someone ordering a credit report is significantly different than that on file with the CRA, the CRA must notify the user of the discrepancy. The regulatory agencies will develop guidelines for dealing with these situations.

If Your Identity Has Been Stolen

Was your wallet or purse stolen? Got a call from a collection agency you never heard of?

If you think you may have been, or are about to be, a victim of identity theft, with one phone call you'll be able to get a fraud alert placed on your credit file. (You will have to fill out a fraud affidavit and provide proof of your identity.) Users of credit reports will then have to take steps to verify the identity of anyone applying for credit using your information.

ID theft victims will also get two free credit reports in the year from each major reporting agency, plus they'll be able to block their credit file from prescreened credit offers.

Also under FACT, if you're a victim of ID theft, you'll be able to request a copy of any application and transaction records related to any business transaction that was made by the thief.

Within four business days of notifying a CRA of identity theft, the CRA must block the information that you report is fraudulent and notify the lender reporting the information that you believe it's fraudulent. (By the way, there are safeguards built in the law so that you can't use this provision to fraudulently boost your credit.)

Creditors will also be required to follow certain procedures to make sure that information that has been blocked or removed doesn't get reported again to the CRAs. The goal is to keep information legitimately related to identity theft off the consumer's report. Creditors also generally can't sell or transfer accounts that consumers claim are due to identity theft most notably to collection agencies.

Debt collectors who are notified that a debt may be related to identity theft must notify the creditor from whom they received the debt that it may be fraudulent and provide information required by law.

You'll have up to two years after you discover that you've been a victim of identity theft, but no longer than five years from when it occurred, to bring a lawsuit.

Negative Information

Lenders will have to notify you once before they report negative information to a credit bureau about your account. If you continue to fall behind, this notice won't be required again.

Risk Based Pricing

It's a common practice these days for lenders to advertise one low rate but then charge a higher rate after looking at your credit report.' Now they will be required to notify you if you didn't qualify for their generally available best pricing based on information on your credit report. This won't be required if you got the rate and terms you applied for (before a credit report was obtained). If you are entitled to this notice, though, you'll also be able to order a free copy of your credit report from the reporting agency the lender used.

Accuracy Issues

For the first time, consumers are specifically be given the right to dispute mistakes directly with the companies that furnish information to the credit bureaus. The FTC, and banking regulators will be establishing guidelines for this process, but generally:

Consumers can dispute the accuracy of information directly with furnisher at address specified by furnisher.

  • Furnishers must complete investigation within 30 days, and if information was inaccurate, notify CRA.
  • Disputes initiated with the help of credit repair organizations are specifically excluded.

Affiliate Sharing

Companies sometimes share customer information that could be classified as credit report information with their affiliated companies. You'll be given the opportunity to opt out of this sharing of information.

Pre-emption of state laws

The bad news in all of this? Consumer groups have opposed the pre-emption of stronger state laws that the bill includes. That means states won't be free to make tougher laws to protect consumers against identity theft and other credit report problems.

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