About FACT Act

If your company handles credit reports during the course of its day-to-day business, you need to know the answer to this question: What is the FACT Act?

WHAT IS THE FACT ACT?
The FACT Act, sometimes called FACTA, stands for the Fair and Accurate Credit Transactions Act. Passed on January 1, 2004, the FACT Act made some important changes to the Fair Credit Reporting Act (FCRA).The amendments were designed to make improvements in three major areas:

• Access. The laws under the FACT Act are designed to help consumers get easier access to their credit files with the national credit bureaus.
• Protection. Many of the new provisions are geared toward providing more comprehensive protection against identity theft and fraud.
• Accuracy. Because the quality of a consumer’s credit can largely affect their ability to purchase a home or car, or to get other types of financing, the Act also aims at improving the accuracy of credit report information.

The FCRA states that consumers have the right to know the contents of their credit files and can challenge the accuracy of information contained therein. The statute also limits the time derogatory information can remain in a consumer’s credit file and who can access a consumer's credit information.

The FCRA protects consumers by requiring consumer reporting agencies to follow certain procedures regarding privacy and accuracy in the dissemination of consumer credit information. Under the FCRA, consumer reporting agencies can provide reports to businesses that have a “permissible purpose” for accessing a consumer's credit information. A "permissible purpose" means that a business must demonstrate an acceptable reason for ordering a consumer report and must use the report only for that reason. In all cases, the contents of a consumers report must be kept in strict confidence. Such businesses include banks, mortgage and consumer finance companies, insurance companies, automotive, boat, and RV dealers, and equipment leasing companies. Landlords and employers who are screening potential renters or job candidates may also access consumer reports.

IMPLICATIONS
Certainly, the most talked-about element of the FACT Act is that it entitles every consumer to one free credit report per year — more than one if he or she has been a victim of fraud. Keep in mind that the free-report rule won’t fully kick in until after 2004.

Mortgage lenders are also now required to furnish a statement to home loan applicants disclosing their credit score, as well as:

• Key factors adversely affecting the score
• The score range
• The date on which the score was created
• The name of the entity that developed the score

Once all the changes under the FACT Act are in place, you may begin to notice special alerts on credit reports. Consumers will be allowed to place these alerts on their files to help prevent ID thieves from opening new accounts using their identity. For example, military personnel can request an alert on their credit files to prevent fraudsters from using their identity if they are called away for active duty. In their absence, if anyone tries to obtain credit in their name, a special message will appear on the credit report, alerting the report reviewer to the suspicious activity.

Consumers will also have to be notified if the number of credit inquiries on their file negatively affected their credit score. Many credit reports contain a summary key in the bureau score section where you can quickly see which factors impacted the consumer’s score.

Additionally, to help prevent identity theft before it occurs, businesses may no longer print more than the last five digits of an account number on a credit card receipt. That way, if a bad guy happens to get his hands on the receipt, he won’t have a complete number at his disposal. Those who do fall victim to identity theft will be able to block from their files any derogatory information that resulted directly from the crime.

Learn how First American CREDCO can help you comply