Get the Facts Straight: Your Rights Under the Fair and Accurate Credit Transactions Act

by Michelle M. Haas-Dosher

The Fair and Accurate Credit Transactions Act (FACT Act) of 2003 addresses consumers' rights to understand and protect the information in their credit reports and to get help when their financial information has been stolen. Financial institutions, including your credit union, have new responsibilities under the FACT Act, which President Bush signed into law in December 2003. Most of the FACT Act changes are effective by the end of 2004.

The FACT Act accomplishes key government priorities to help all Americans by ensuring that lenders make loan decisions based on fair and accurate credit reports. In 1996, uniform national standards--known as the Fair Credit Reporting Act, first enacted in 1970--were established to set clear rules on what credit agencies were entitled to include in individual credit reports. The FACT Act makes those national standards permanent.

The FACT Act establishes the Financial Literacy and Education Commission and calls for a national financial literacy campaign.

The Act restricts the use of medical information in determining a consumer's eligibility for credit, and also limits the sharing of medical information with affiliated companies under certain circumstances.

Understanding your credit report

• Consumers must have greater access to their credit reports and credit scores; the Act increases consumers' ability to correct inaccuracies in their credit reports.

• Consumers must receive better information about the ability to opt out of prescreened credit offers and to opt out of information sharing between affiliated companies for marketing purposes.

• Financial institutions that provide information to credit bureaus must ensure the accuracy and integrity of the information provided to credit bureaus.

• Credit bureaus must each provide a free report annually, phased in by region, to consumers who request a copy. Consumers also must be able to get credit score information from credit bureaus for "a reasonable fee" as set by the Federal Trade Commission (FTC).
  The FACT Act accomplishes key government priorities to help all Americans by ensuring that lenders make loan decisions based on fair and accurate credit reports.

• Financial institutions must notify members before or within 30 days after the fact that they're reporting negative information about them to credit bureaus regarding an account, extension of credit, or transaction.

• Mortgage lenders that use credit scores must provide applicants with the credit score information.

Fighting ID theft

The FACT Act also provides consumers with new national identity theft protections, some of which impose new rules on creditors:

• The FTC will develop model forms to standardize how consumers can report identity theft to creditors and consumer reporting agencies. In the interim, the FTC's "ID Theft Affidavit" simplifies the process.

• The Act requires setup of a nationwide fraud alert system. Credit reporting agencies receiving such alerts from customers now are obliged to follow procedures ensuring that any future requests are by the true consumer, not an identity thief posing as the consumer. The law also enables active duty military personnel to place special alerts on their files when they are deployed overseas.
  The FACT Act also provides consumers with new national identity theft protections, some of which impose new rules on creditors:

• The FACT Act helps prevent identity theft before it occurs by requiring merchants to leave all but the last five digits of a credit card number off store receipts. This way, slips of paper that most people throw away do not contain their full credit card number--a key to financial identity.

• Before, identity theft victims had to call all of their credit card issuers and the three major credit bureaus to alert them to crime. Under the FACT Act, credit bureaus share identity theft complaints, and consumers need only make one call to receive advice, set off a nationwide fraud alert, and protect their credit standing.

• If a financial institution receives a request for an additional credit card shortly after an address change, it must contact the consumer at the former address to make sure there isn't fraudulent activity.

• Consumers can directly ask credit unions and others who provide information to credit bureaus to investigate problems.

Published November 30, 2004

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