The Fair Credit Reporting Act (FCRA) is a complex statute that has been significantly altered since 1970 by Congress and the courts. The Act’s primary protection requires that Credit Reporting Agencies (CRAs) follow “reasonable procedures” to protect the confidentiality, accuracy and relevance of credit information. Originally, the FCRA was passed to address a growing credit reporting industry in the United States that compiled consumer credit reports and investigative consumer reports on individuals. The FCRA was the first federal law to regulate the use of personal information by private businesses.
Comprehensive amendments to the FCRA were made in the Consumer Credit Reporting Reform Act of 1996 as well as the Fair and Accurate Credit Transactions Act of 2003.
Credit reports are subject to regulations that follow a framework of “fair information practices,” not only because they can include sensitive personal information, but because they are also used to evaluate the ability to participate in so many different activities in modern life. The FCRA establishes rights and responsibilities for consumers, furnishers and users of credit reports. Consumers are individuals. Furnishers are entities that send information to CRAs regarding creditworthiness in the normal course of business. Users of credit reports are entities that request a report to evaluate a consumer for some purpose.
Permissible Uses of the Credit Report
The FCRA limits the use of the credit report to certain purposes, which include the following:
- Applications for credit, insurance and rentals;
- Employment, which includes hiring, promotion, reassignment or retention. A CRA may not release a credit report for employment decisions without consent;
- Court orders, including grand jury subpoenas;
- Legitimate business needs in transactions initiated by the consumer;
- Account review. Periodically, companies review credit files to determine whether they wish to retain an individual as a customer;
- Professional licensing;
- Child support payment determinations, and
- Law enforcement access.
- Government agencies with authority to investigate terrorism and counterintelligence have secret access to credit reports.
- The USA PATRIOT Act of 2001 broadened law enforcement access to credit reports.
- This law allows any government agency that is authorized to conduct intelligence or counterintelligence investigations, or analysis of international terrorism to gain access to credit reports.