Fair Credit Reporting Act (FCRA): A Guide

Joey Ocampo, Senior Commercial Loan Specialist, First Republic Bank
July 14, 2022

  • The Fair Credit Reporting Act (FCRA) provides consumer protection and transparency for your credit information.
  • To correct credit reporting errors, it's generally best to contact the bureau with which the errors appear — and the Consumer Financial Protection Bureau (CFPB) if you believe a bureau has violated your rights.
  • In some situations, you may be entitled to compensation or punitive damages if a credit bureau reports incorrect or outdated information.

The Federal Fair Credit Reporting Act (FCRA) is a federal law designed to ensure that the information credit reporting agencies provide is fair, private and accurate. This law standardized credit reporting, thus bolstering data privacy and giving consumers the ability to catch and dispute credit reporting errors. 

The FCRA provides you with several rights and privileges for correcting your score, contesting erroneous or outdated information and repairing your credit. The act also includes penalties for misreporting, which can help you rectify problems if they arise.

What is the Fair Credit Reporting Act (FCRA)?

The FCRA, passed in 1970, outlines several policies related to the collection, dissemination and correction of credit-related information found on your credit report. The act was designed to create more accurate, fair and private information about a person’s credit history and credit score. The FCRA is therefore one of the first data privacy laws of the information era.

The FCRA covers significant ground with regard to personal privacy, but the act is primarily targeted at how the three major consumer reporting agencies (Experian, Equifax and TransUnion) collect and report information. The FCRA was originally administered and overseen by the Federal Trade Commission (FTC), but the Dodd-Frank Act of 2010 transferred much of these responsibilities to the Consumer Financial Protection Bureau (CFPB). 

The FCRA allows victims to file for financial and statutory damages — these can include attorney’s fees, court costs and punitive damages. Companies that do not comply with or violate the act can also be fined by the CFPB and the FTC, as they not only provide the guidelines for businesses and individuals but also oversee the act’s provisions.

What are your rights under the FCRA?

Consumers have several rights by way of the FCRA. These include:

  • The right to a free credit report: You are allowed one free credit report from the three major credit bureaus every 12 months. You can obtain these reports online or by calling (877) 322-8228. These are considered soft inquiries and will not damage your credit.
  • The right to dispute and correct inaccurate information: The FCRA legally permits you to dispute inaccurate information. You can call the agency reporting wrong or incomplete information directly.
  • The right to remove outdated information: Negative information — entries that harm your credit  — is supposed to be removed from your credit report seven and a half years after your first delinquent payment or seven years after you default. The FCRA allows you to petition reporting agencies to have these items removed if they remain on your report after this period.
  • The right to know when the reader’s file has been used against them: When working to gain credit, insurance or employment, you can request specific information on which area of your credit report led to that decision.
  • The right to freeze your credit: You are allowed to freeze your credit which bars companies from accessing your credit reports and extending credit in your name until you unfreeze it. This can help prevent you from becoming a victim of identity theft.
  • The right to obtain fraud alerts: You can have a fraud alert filed alongside your credit history, which can signal you when you’ve been subject to identity theft.

What are the Fair Credit Reporting Act violation penalties?

Credit reporting agencies are subject to a range of penalties for violating the FCRA. These penalties are designed to offset any damages you’ve suffered as a result of misreporting. 

You can file a complaint with the CFPB via their website or by calling (855) 411-2372. The CFPB offers individual-level assistance with complaints. Penalties for offenders are designed to offset damages to your credit score, and the severity of these penalties will vary depending on the nature of the damage (i.e., negligence vs. willful misconduct).

  • Willful FCRA violations: Legally speaking, a willful FCRA violation must have been committed knowingly and recklessly. Plaintiffs in these cases may receive actual or statutory damages ranging from $100 to $1,000 per violation, in addition to punitive damages determined by the courts.
  • Negligent FCRA violations: Negligent FCRA violations are done without intent but still run afoul of the law. Fines and restitution amounts are usually lower in these situations.

Related credit reporting legislation

The FCRA isn’t the only legislation designed to protect individuals from credit-related concerns. Several bills have been enacted since the FCRA was signed into law. Each of these other acts provides different protections for consumers that complement the terms of the FCRA. 

  • 2009 Credit CARD Act: Limits how much credit card companies can charge customers, regulates how long you have to pay your bill, prohibits retroactive rate increases and makes it easier to pay down your credit card debt
  • Dodd-Frank Wall Street Reform and Consumer Protection Act: A widespread act that established the CFPB in addition to other oversight committees within the financial services industry 
  • Fair and Accurate Credit Transactions Act: An amendment to the FCRA that allows consumers to obtain a free credit report from Equifax, Experian and TransUnion once every 12 months without penalty

Final thoughts

The FCRA is designed to protect you from inaccurate credit information that could negatively affect your future prospects, including loans, apartments or job opportunities. This and other related acts make it easier for you to monitor and protect your credit report from errors and fraud. In the event that a reporting agency makes a mistake on your report, you can also seek restitution to keep your report as accurate as possible.

If you want to take control of your credit history and information, be sure to use the tools these acts provide — your free annual credit report is a great first step. 

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