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Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA), Public Law No.
91-508, was enacted in 1970 to promote accuracy, fairness, and the privacy
of personal information assembled by Credit Reporting Agencies (CRAs).
CRAs assemble reports on individuals for businesses,
including credit card companies, banks, employers, landlords, and others.
The FCRA provides important protections for credit reports, consumer
investigatory reports, and employment background checks. The FCRA is a
complex statute that has been significantly altered since 1970 by Congress
and the courts. The Act's primary protection requires that CRAs follow
"reasonable procedures" to protect the confidentiality, accuracy, and
relevance of credit information. To do so, the FCRA establishes a framework
of Fair Information Practices for personal information that include rights
of data quality (right to access and correct), data security, use
limitations, requirements for data destruction, notice, user participation
(consent), and accountability.
The
Federal Trade
Commission (FTC) issues commentaries on the statute, but does not engage
in rulemaking for the FCRA.
CRAs may also be referred to as "credit bureaus" or
"consumer reporting agencies."
The FCRA was passed to address a growing credit
reporting industry in the United States that compiled "consumer credit
reports" and "investigative consumer reports" on individuals. The FCRA was
the first federal law to regulate the use of personal information by private
businesses.
The first major credit reporting agency, Retail
Credit Co, was started in 1899. Over the years, Retail Credit purchased
smaller CRAs and expanded its business into selling reports to insurers and
employers. By the 1960s, significant controversy surrounded the CRAs because
their reports were sometimes used to deny services and opportunities, and
individuals had no right to see what was in their file.
By the late 1960s, there was abuse in the industry,
including requirements that investigators fill quotas of negative
information on data subjects. To do this, some investigators fabricated
negative information, others included incomplete information. Additionally,
the investigators were collecting "lifestyle" information on data subjects,
including their sexual orientation, marital status, drinking habits, and
cleanliness. The CRAs were maintaining outdated information, and in some
cases, providing the file to law enforcement and to unauthorized persons.
Public exposure of the industry resulted in Congressional inquiry and
federal regulation of CRAs.
Years of legislative leadership by Representative
Leonor Sullivan and Senator William Proxmire resulted in the passage of the
FCRA in 1970. After its passage, Senator Proxmire attempted to broaden the
FCRA's protections over the next ten years. Shortly the FCRA took effect on
April 25, 1971, CRAs were pursued for violations of numerous provisions of
the Act. Most recently, in January 2000, the three CRAs paid $2.5 million in
a case settlement brought by the FTC.
Comprehensive amendments to the FCRA were made in
the Consumer Credit Reporting Reform Act of 1996 (P.L. 104-208). The
Amendments contained a number of improvements to the FCRA, but it also
included provisions that allow affiliate sharing of credit reports,
"prescreening" of credit reports (unsolicited offers of credit made to
certain consumers), and limited preemption of stronger state laws on credit.
The FCRA was re-visited by the 108th Congress in
2003, when the body enacted the "Fair
and Accurate Credit Transactions Act of 2003" (FACTA). The Act preempts
some state privacy protections, but includes a number of improvements to
credit reporting law, including free credit reports annually.
