The FCRA or Fair Credit Reporting Act is an important piece of legislation that guarantees American consumers certain rights related to their credit scores and reports. Both the credit bureaus/credit reporting agencies, including Experian, Equifax, and TransUnion, as well as credit furnishers, like businesses and utility companies, must abide by the FCRA and its provisions at all times.
But mistakes can and do happen, and some businesses may even intentionally try to avoid following the FCRA’s rules. Consumers need to know the most common violations of the FCRA so they can spot inaccuracies or errors on their credit reports and keep their credit scores healthy through regular checks and occasional disputes.
Failure to Update Consumer Credit Information
All creditors and credit reporting agencies (CRAs) are required to keep consumer credit information accurate and up-to-date. For example, if a consumer closes their account with a utility company, that utility company is obligated by the law to update that information and mark the account as closed when they furnish the credit agencies with more information.
If a company or creditor doesn’t update consumer credit information, they are in violation of the FCRA by default. Consumers who notice out-of-date information on their credit reports have the right to dispute that information and get it corrected at the earliest opportunity. Other examples of out-of-date consumer information include:
- Old bankruptcy information that should have disappeared (after the relevant seven or ten year deadline
- Re-reporting old debts as new or still relevant
- Reporting a currently in active debt account as active after it has been closed by the consumer
Reporting Inaccurate Information
Similarly, organizations that report inaccurate debt information are in violation of the FCRA.
Inaccurate information includes any credit information that contains wrong or erroneous data. This can include:
- Debt accounts or information with inaccurate balances or inaccurate statuses (e.g., debt marked as open when it is closed)
- Debt accounts filed incorrectly by type, such as reporting a debt as “charged-off” when a consumer actually paid in full
- Reporting late payments when a consumer paid their bills on time and in-full
- Reporting information that has been misattributed to a consumer due to an identity mistake (see more below)
Mixing Files (Mistaking Identities)
As touched on above, creditors and credit reporting agencies may occasionally make a mistake by mixing up consumer files. For instance, a credit bureau might receive information about several open debts for John Edward Smith. However, the credit bureau accidentally lists those debts and the credit report of John Edgar Smith instead due to both individuals' similar names and initials.
When John Edgar Smith checks his credit report, he sees incorrect debt information that he should not have. He has the right to inform the credit bureau of this mistake and get it corrected immediately.
Whenever a creditor or credit bureau makes a mistake in identity, they violate the FCRA. However, they are only legally in trouble if they refuse to correct the information after being made aware of it. These types of errors are more likely to be experienced by individuals who have very common names.
Not Following Debt Dispute Rules
Consumers have certain rights under the FCRA, including the right to file a dispute regarding any debt or credit information. Credit bureaus and credit furnishers have to follow debt dispute rules, such as:
- Investigating a debt dispute within 30 days of being notified of it
- Responding to consumers promptly (usually within five days) after investigating a debt dispute
- Credit reporting agencies must notify creditors that they are disputing a debt that they reported and vice versa
- Creditors must inform credit reporting agencies if they made a mistake so a consumer’s records may be accurately updated
- Both credit bureaus and creditors must update inaccurate, unverifiable, or incomplete information at the earliest opportunity if they are aware of it
Failing to abide by any of these rules could result in legal actions being taken against the violating party. Say that you file a dispute with a creditor about inaccurate information. If the creditor doesn’t correct the information quickly, you could have grounds for a legal response, up to and including a lawsuit.
Privacy Violations
In addition to the above violations, CRAs are not legally allowed to release your credit report or any credit information to just anybody. In fact, credit bureaus can only release credit information to authorized persons or organizations who have "permissible purposes."
In short, credit bureaus can only disclose your credit report to entities that have a valid or legitimate need. This can include landlords, creditors/lenders, utility companies, insurance providers, and employers (but only if the employee explicitly consents to it).
If a credit reporting agency releases your credit information without cause, they’re in violation of the FCRA and you may have grounds for a lawsuit. For instance, a credit bureau can’t give your credit information to a landlord, “just because,” or for frivolous reasons like curiosity.
Requestioning Credit Reports for Illegal Reasons
By the same token, creditors can’t request credit reports for illegal or impermissible reasons. If a person applies for a mortgage, a mortgage company can request their credit report to determine if they are trustworthy enough to hand out a loan.
However, a mortgage loan officer cannot request a person’s credit report for other reasons, such as:
- Determining whether a family member has high enough credit for one of their loans
- Discriminatory purposes, like looking for bad credit information as an excuse to deny someone a loan
- Plain curiosity or for other unnecessary purposes
Again, if a creditor is caught requesting credit information for no good reason, they could get into major legal trouble. In addition, employers are not legally allowed to request credit information about their employees unless employees agree to it beforehand. This is true even if employers use credit information to make hiring decisions; employees have to sign an agreement form to release their credit information legally.
Withholding Required Credit Notices
Lastly, creditors and credit bureaus may perform FCRA notice violations if they withhold vital credit-related notices and information from consumers.
For example, if a creditor doesn’t notify a consumer when it gives negative credit information to a credit bureau, they’re in violation of the FCRA. Similarly, each creditor must supply applicants for loans, lines of credit, etc. with adverse action letters explaining why they were denied for their request. The adverse action letter should explain the problem with credit that led to the denial.
Other withholding notice violations include:
- Creditors not providing applicants with credit scores if those credit scores were used for credit decisions
- Creditors not notifying consumers of their right to dispute any inaccurate or incomplete credit information
- Creditors not notifying consumers of their right to get a free credit report from the relevant credit bureaus
- Creditors refusing to identify credit information sources, such as identifying the exact credit bureau utilized
Any violation of these rights, no matter how small, could open up a credit furnisher to a serious lawsuit. If you receive an adverse action letter, be sure to check it carefully to make sure you have all the information you are entitled to.
Conclusion
The most common violations of the FCRA include failing to update credit reporting agencies with accurate consumer credit information, reporting inaccurate information, mixing up files, not following proper debt dispute rules, causing privacy violations, requesting credit reports for improper or impermissible reasons, and withholding required credit notices. If you believe your credit score has been affected by any of these violations, file a dispute letter or contact legal representatives for more options.
