To many, credit reporting bureaus seem to be monolithic entities, created only for the purpose of destroying the financial life of innocent citizens. They seem to be as bad as other large companies, only existing for the purpose of serving large banks and spying on everyone. However, nothing could be farther from the truth. In almost all transactions, US law protects the consumer over the reporting agency or bank.
The largest and most effective law in protecting the consumer in this context is the Fair Credit Reporting Act (FCRA) passed in 1970 and amended in 2003. The amendment is typically called the Fair and Accurate Credit Transactions Act (FACTA). Together, these two bills give the consumer a number of rights in terms of his or her credit, and protect from many possible abuses of the process.
Consumer Reporting Agencies
The first thing that the Fair Credit Reporting Act did was to establish a new branch of organization, called a consumer reporting agency. Businesses that fall under this umbrella have a number of responsibilities, as outlined later in this article, and have to make quarterly reports to the FTC to ensure that they are doing their duty.
Fraud / Identity Theft Alerts
FACTA was primarily concerned with establishing the rights of people who have been subjected to fraud concerning their credit or identity theft. To prevent this, the federal government set up the Annual Credit Report website, allowing all consumers to view their credit information for free once a year. Also, this view is not allowed to be used against the consumer on his or her report. Other regulations were put in place as to what a bureau must do if a consumer believes that a report contains an error, and allowing a consumer to place a fraud alert on his or her report, if he or she has been the subject of identity theft .
What the Information Can be Used For
The FCRA limits who is allowed to access the information contained in a credit history. Previously, anybody could purchase a report from one of the major bureaus, the the FCRA lays down limitations and only in those cases may a bureau sell a report. The protects the consumer against abuses by those selling housing, employers, and similar non-financial uses of one's history.
Limitations of Information
Finally, together the two laws set up limitations for what type of information may be bought and sold and when that information may be used. For example, the FCRA says that a bankruptcy may not be held against a consumer more than ten years after it was declared. Also, bureaus may not sell any information on transactions that were removed from one's credit because they were fraudulent or in error. This definitely helps protect the consumer in the long run, as eventually, no matter what happens, a negative mark in one's history will be removed.