Bank data & compliance
Fair Credit Reporting Act: Definition & Example
Also called: FCRA
What Is the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) is a federal law that regulates how consumer reporting agencies collect and share consumer information and how others use consumer reports.
What does Fair Credit Reporting Act mean?
Enacted in 1970, the FCRA promotes the accuracy, fairness, and privacy of information in consumer reports. The FTC and CFPB share enforcement, and consumers can sue for violations.
The law gives consumers the right to see their file, to dispute inaccurate information, and to be told when a report was used against them. It limits who can get a report to those with a permissible purpose, and it generally bars reporting most negative information older than seven years (ten for bankruptcies).
Users of consumer reports, such as landlords, lenders, and employers, also have obligations, including giving adverse action notices and, for employment, getting written authorization before ordering a report.
Fair Credit Reporting Act example
A landlord denies an application because of a collection account on the applicant’s credit report. Under the FCRA, the landlord sends an adverse action notice naming the credit bureau. The applicant requests her free report, finds the collection belongs to someone else, and disputes it with the bureau.
Related terms
- Consumer Reporting AgencyA consumer reporting agency (CRA) is a company that regularly assembles or evaluates information about consumers and furnishes consumer reports to third parties for decisions about credit, insurance, employment, or housing.
- Permissible PurposePermissible purpose is a legally valid reason under the Fair Credit Reporting Act for obtaining someone’s consumer report, such as evaluating their application for credit, insurance, employment, or housing.
- Adverse Action NoticeAn adverse action notice is a disclosure required by the Fair Credit Reporting Act when a landlord, lender, or employer takes a negative action based in whole or in part on a consumer report.
- Tenant Screening ReportA tenant screening report is a consumer report a landlord orders from a screening company, usually combining credit, eviction, and criminal record information about a rental applicant.
- Gramm-Leach-Bliley ActThe Gramm-Leach-Bliley Act (GLBA) is a 1999 federal law that requires financial institutions to explain how they share customers’ nonpublic personal information and to safeguard that information.
Fair Credit Reporting Act FAQ
- What does the FCRA protect?
- It protects the accuracy and privacy of consumer report information and gives consumers rights to access their file, dispute errors, and receive notice when a report is used against them.
- Does the FCRA apply to landlords?
- Yes, when landlords use consumer reports, such as credit or tenant screening reports. They need a permissible purpose and must give adverse action notices when required.
