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InfoSight Highlight: Fair Credit Reporting Act—A Summary
Friday, February 10, 2017 6:40 AM

The purpose of the Fair Credit Reporting Act ("FCRA" or "Act") is to ensure fair and accurate reporting of consumer credit information. It regulates "consumer reporting agencies," including credit bureaus; restricts the use of consumer reports to their legitimate purposes; prohibits the dissemination of outdated credit information; and requires disclosure to consumers and employees when adverse action is taken as the result of credit reports or other consumer information.

The FCRA applies any time a credit report is used as a factor in establishing a member's eligibility for or in making changes to the member's consumer credit, share or deposit accounts, and other services. It also applies when credit reports are used in hiring or other employment decisions.

The FCRA does not apply to reports about business, commercial or professional entities, reports about a credit union's own experiences with a consumer, or reports by anyone based solely on their own experience with a consumer.

The Federal Trade Commission enforces compliance with the FCRA by consumer reporting agencies and state-chartered credit unions. The Consumer Financial Protection Bureau is charged with enforcing the provisions of the Act (12 CFR 1022).

In 2003, the Fair and Accurate Credit Transactions Act (FACT Act) was signed into law. This Act amended the Fair Credit Reporting Act in several important ways. It permanently reauthorized seven existing preemption provisions and extended preemption to certain areas related to identity theft prevention and mitigation.

How does the FCRA affect credit unions?
Requirements of FCRA are applicable to credit unions that are:

  • "Consumer reporting agencies" by providing credit information (other than their own experience with a member) to third parties (other than affiliates);
  • Users of consumer reports from consumer reporting agencies; and
  • Furnishers of information to consumer reporting agencies.

Credit unions are likely to be subject to FCRA as credit grantors, purchasers of dealer paper, issuers of credit cards, and as employers. When credit unions use consumer report information, the provisions of the FCRA that apply relate to transactions where an "adverse action" is taken partially or wholly on the basis of the information from a "consumer report."

Additionally, a number of credit unions and other employers use credit reports to evaluate employees for advancement and applicants for employment. The FCRA mandates particular procedures which must be followed in order to use credit reports for employment purposes.

Compliance with the FCRA is important because the FCRA contains penalties for violations. In a civil action, any consumer-reporting agency or user of information who willfully fails to comply with an FCRA requirement with respect to a consumer is liable to that consumer for any actual damages, any punitive damages that the court allows, and costs and reasonable attorneys' fees. Any consumer-reporting agency or user of information who fails to comply with an FCRA requirement due to negligence is liable to the consumer for any actual damages, plus costs and reasonable attorneys' fees.

Any person found liable for obtaining a consumer report under false pretenses or knowingly without a permissible purpose may be liable for actual damages or $1,000, whichever is greater.

Criminal penalties can be imposed for certain willful acts. For credit unions using consumer reports, any person who willfully obtains information on a member from a consumer-reporting agency under false pretenses may be fined up to $5,000, imprisoned for up to one year, or both.

Source:  InfoSight Compliance.

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