Legal Definitions - FCRA

FCRA stands for the Fair Credit Reporting Act.

The Fair Credit Reporting Act (FCRA) is a United States federal law designed to protect the privacy and accuracy of information held by consumer reporting agencies, such as credit bureaus. This law dictates how these agencies collect, use, and share an individual's financial and personal data, which is often compiled into reports used for decisions about credit, insurance, employment, housing, and other important matters. The FCRA grants individuals specific rights, including the ability to access their own reports, dispute inaccurate information, and limits who can obtain and use their personal data.

• Example 1: Correcting an Error on a Credit Report

  Imagine Sarah applies for a car loan but is denied because her credit report shows a late payment on a credit card from two years ago. Sarah knows she paid that bill on time. Under the FCRA, Sarah has the right to obtain a free copy of her credit report and formally dispute the inaccurate late payment entry with the credit bureau. The credit bureau is then legally obligated to investigate her claim, verify the information with the original creditor, and correct the error if it is found to be inaccurate. This demonstrates the FCRA's provision for individuals to ensure the accuracy of their financial data.

• Example 2: Employment Background Checks

  When David applies for a new job, the prospective employer informs him that they intend to run a background check as part of the hiring process. The employer provides David with a disclosure form and asks for his written consent before proceeding. This scenario illustrates the FCRA's requirement that employers must notify job applicants and obtain their permission before requesting a consumer report (which includes many types of background checks) for employment purposes. The FCRA also outlines what information can be included in such reports and how it can be used.

• Example 3: Protecting Against Identity Theft

  Suppose Maria receives a notification from her bank about a new credit card application made in her name, which she did not authorize. Fearing identity theft, Maria contacts one of the major credit bureaus and requests a security freeze on her credit report. The FCRA provides individuals with the right to place a security freeze on their credit files, which restricts access to their credit report and makes it much harder for identity thieves to open new accounts in their name. This showcases the FCRA's role in empowering consumers to protect their personal information from fraudulent use.