The Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection, distribution, and use of consumer credit information. The FCRA defines the rights and obligations related to consumer reporting data, aiming to create a dependable and precise exchange of information that benefits lenders, landlords, and employers. It achieves this by setting up privacy and transparency standards for consumer credit information. Businesses that follow the FCRA are largely immune from privacy and defamation lawsuits. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) are responsible for enforcing the FCRA, among organizations, and non compliance can lead to legal consequences. 

In 1899, businessmen established the first major credit reporting agency (CRA), Retail Credit Co.. The bureau expanded and sold reports to insurers and employers, which created controversy when businesses denied services based on credit information. By the 1960s, credit agencies operated independently. There was significant corruption including incomplete and fabricated information on consumer credit reports to meet internal quota. The CRAs provided personal and inaccurate information to unauthorized entities. 

Passed in 1970, the FCRA was primarily designed to target three major CRAs: Experian, Equifax, and TransUnion. These agencies have data on more than 200 million Americans with a study finding that 40 million consumers had errors on their reports. Credit information is valuable and used extensively in credit card applications, loans, employment, child support, and government licenses. By protecting and accurately maintaining consumer credit information, consumers will not be wrongfully serviced.

The Pros of FCRA: Accessibility, Dispute Resolutions, and Usability Disclosures

The FCRA grants consumers numerous rights regarding their credit information with an emphasis on transparency and accuracy. The goal is to facilitate a reliable and functioning credit reporting system. The main elements of the legislation include:

1. Consumers have the right to access their credit report at any time and review it to verify its accuracy. With this accessibility, consumers can monitor their payments, detect fraudulent activity, and gain financial awareness. 
2. Consumers can to dispute and resolve inaccuracies. Responsible CRAs can request an investigation to resolve the issue. CRAs must delete or correct inaccurate, incomplete, or unverifiable information within 30 days. Consumers can initiate troubleshooting, which allows them to have more control over their information. Furthermore, the consumer may seek damages from violators. If a CRA, report user, or data provider breaches the FCRA, it could lead to a potential lawsuit in court.
3. Consumer credit information is private and protected. Sharing of credit reports is permissible under limited circumstances such as employment screening. Even then, written consent is mandatory to allow third-party viewership. Consumer notification and sign off limit fraudulent and suspicious activity.
4. Consumers are entitled to adverse action notifications. Entities must notify consumers when their credit reports influence negative decisions. For example, if a credit report causes an employment denial, consumers have the right to know the reasoning. This notification helps consumers to better understand the issue and take appropriate action to address it. This also ensures that companies do not discriminate and must provide a legitimate reason. 

The Cons of FCRA: Limited Accountability, Inadequate Customer Solutions, and Burdening Small Businesses 

Despite the benefits of the FCRA, concerns have been raised. First, data furnishers have limited accountability. CRAs are supervised, but furnishers have less government oversight. By regulating the furnishers, the root of the problem (data suppliers) can be addressed by ensuring accurate data was provided. 

Second, some believe the consumer solutions are inadequate. The process to correct inaccuracies can be time consuming and identifying mistakes can be difficult without sufficient knowledge and resources. Another concern is the lack of enforcement by the FTC. In the past 40 years, the FTC has taken 87 enforcement actions. For comparison, customers initiated 4,531 lawsuits in 2018. Because the primary target of the FCRA and the FTC are credit agencies, furnisher organizations are not well supervised. Therefore, there is a lack of action and consumer ability to achieve personal justice is limited.

A final concern of the FCRA is that it potentially burdens small businesses. Guidelines like adverse action notice or investigations can be time consuming and costly for small businesses. Additionally, because the FCRA is lengthy and extensive, small businesses could have unintentional violations and they don’t have the same resources to ensure compliance and work through claims as large corporations. 

The FCRA will continue to develop and reform proposals include:

• Easier processes for corrections and consumer appeals
• Reducing the amount of time adverse credit information can remain on the consumer credit report