Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act is the federal statute that regulates the collection, use and correction of information about consumers held by consumer reporting agencies. It is title VI of the Consumer Credit Protection Act, Public Law 90-321, as added by Public Law 91-508, title VI, section 601, on October 26, 1970, 84 Stat. 1128, and it is codified at 15 USC 1681 through 1681x. Like the Fair Debt Collection Practices Act, it is not a freestanding law but a title bolted onto the 1968 credit statute, and its short title is recorded in a note under 15 USC 1601.

What distinguishes it from the pages on this site about credit reports, bureaus, disputes and freezes is that the Act is not really about the file. It is about who owes a duty to whom, and it regulates three different kinds of business in three different ways: the agency that compiles and sells the report, the furnisher that supplies the data, and the user that buys and acts on it. The last of those is where most of a consumer's day-to-day encounters with the Act actually happen, and it is the least described.

The architecture, stated once. Sections 1681b through 1681j regulate consumer reporting agencies: who may receive a report, what must be disclosed to you, how long items may stay, how disputes are reinvestigated, and what must be given free. Section 1681s-2 regulates furnishers, meaning the creditors and collectors that report data in. Section 1681m regulates users. That three-way split is why the answer to "who broke the law here" depends on whether the problem is the data, the reporting of it, or the decision taken on it, and the answers point at different defendants with different obligations.

Section 1681m is the users' section, and its adverse-action notice has four required elements. Where a person takes adverse action against a consumer based in whole or in part on information in a consumer report, 1681m(a) requires that person to: (1) give notice of the adverse action, which may be oral, written or electronic; (2) disclose in writing or electronically the numerical credit score it used and the accompanying information from 1681g(f)(1)(B) through (E); (3) give the name, address and telephone number of the agency that furnished the report, along with a statement that the agency did not make the decision and cannot say why it was made; and (4) give notice of the right to a free copy of the report from that agency, with the notice including "an indication of the 60-day period" for obtaining it, and of the right to dispute the accuracy or completeness of the information.

Element (3) is the one that resolves the most common frustration in this area. Calling the bureau about a denial is a dead end by design, because the statute requires the user to tell you in the same breath that the bureau did not make the decision and cannot explain it. Two adjacent provisions extend the same idea further than most people expect: 1681m(b)(1) covers adverse action on credit taken because of information from a source that is not a consumer reporting agency, where the user must disclose the nature of the information on written request made within sixty days, and 1681m(d) requires that a prescreened firm offer of credit or insurance carry a statement that your file was used, why you were selected, and that you may opt out of being included in such lists through the notification system at 1681b(e). The pre-approved mail is not a marketing accident; it is a regulated use of your file with a statutory off switch.

Remedies split on state of mind, and this is the part of the Act nothing else on this site covers. Under 1681n(a)(1)(A), a person who willfully fails to comply is liable for "any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000", plus under (a)(2) "such amount of punitive damages as the court may allow" and under (a)(3) costs and reasonable attorney's fees. A separate limb, 1681n(a)(1)(B), covers a natural person who obtains a report under false pretenses or knowingly without a permissible purpose, and gives actual damages or $1,000, whichever is greater. Under 1681o, negligent noncompliance gives actual damages only, plus costs and fees. The practical consequence is that the statutory-damages floor, which is what makes a case viable where the actual loss is hard to quantify, is available only on the willful side of that line.

Both figures are statutory literals and the Act contains no mechanism for adjusting them, which is why the willful floor is still $100 and its ceiling still $1,000.

The limitation period is the trap, because it is not the longer of the two. Section 1681p permits an action "not later than the earlier of (1) 2 years after the date of discovery by the plaintiff of the violation ...; or (2) 5 years after the date on which the violation ... occurs." A summary that writes "two years, or five years" without the word "earlier" inverts the rule and tells a reader with a six-year-old violation that they have time. They do not, however recently they found it.

Preemption is a patchwork, not a rule. Section 1681t(a) is a savings clause: the Act does not displace state law on the collection, distribution or use of consumer information, or on preventing identity theft, "except to the extent that those laws are inconsistent ..., and then only to the extent of the inconsistency." Then 1681t(b) sets out five paragraphs of total preemption. Paragraph (b)(1) alone lists eleven subjects on which no state requirement or prohibition may be imposed at all, including prescreening, the timing of dispute reinvestigations, the adverse-action duties in 1681m(a) and (b), the prescreen notice in 1681m(d), the contents of reports under 1681c, furnisher responsibilities under 1681s-2, security freezes, and active-duty credit monitoring. Paragraphs (b)(2) through (b)(5) add affiliate information sharing, several file and credit-score disclosures, the frequency of the free disclosures under 1681j(a), and the conduct required by a further nine named provisions. Many of those carry express exceptions preserving particular Massachusetts, California, Vermont, Colorado, Georgia, Maine, Maryland and New Jersey statutes as they stood on named dates in 1996 and 2003. So the answer to "does my state give me more than this?" is genuinely subject-by-subject, and the places where a state can add something are the ones those five paragraphs do not name.

The employment and investigative-report limb belongs to the Act and to nothing else. 15 USC 1681a(e) defines an investigative consumer report as one where information on character, reputation, personal characteristics or mode of living is obtained "through personal interviews with neighbors, friends, or associates", expressly excluding factual credit-record information obtained from a creditor or from the consumer. Section 1681d then requires that the subject be told in writing within three days of the request that such a report may be made, and told of the right to request further disclosure of its nature and scope. Section 1681l bars carrying unverified adverse information from an investigative report into a later report unless it is re-verified or was received within the preceding three months. And 1681k requires an agency furnishing a report for employment purposes that includes adverse public-record information either to notify the consumer at the time it is reported, naming the recipient, or to maintain strict procedures to ensure the information is complete and up to date.

A furnisher reports account data to an agency. The agency compiles it and sells reports to users with a permissible purpose. A user makes a decision and, if the decision is adverse, owes the four-part notice at 1681m(a). If the consumer believes the information is wrong, the dispute machinery in 1681i runs against the agency and, through 1681s-2(b), against the furnisher. If a duty at any of those three points is breached, the consumer's route is 1681n or 1681o, on the earlier of the two 1681p deadlines.

A hypothetical example of how the willful and negligent tracks diverge. Omar is turned down for an apartment because a tenant screening report shows an eviction filing belonging to a different person with a similar name. The screening company is a consumer reporting agency, so the Act applies.

If the company merely made a matching error and corrected it on being told, the claim is negligence under 1681o and Omar recovers his actual damages: on these facts, say the $60 application fee for the apartment he lost plus the $400 fee for the one he took instead, so $460, plus costs and any attorney's fees the court awards. Emotional-distress damages are actual damages too, but they have to be proved.

If instead the company had been told about the mismatch twice before and kept reporting it, the claim can be willful under 1681n, which changes the shape rather than just the size. Omar may take actual damages or statutory damages of at least $100 and at most $1,000 without proving any loss at all, plus punitive damages in whatever amount the court allows, plus costs and fees. The $1,000 ceiling on the statutory figure looks small against a housing loss, and the reason the willful track still matters is the two items with no ceiling: the punitive damages and the fee award.

Pros

• It regulates the user of a report as well as the agency, so a lender or landlord that acts on your file owes you a notice with the score it used in it.
• The adverse-action notice must name the agency and state that the agency did not make the decision, which stops the referral loop before it starts.
• Statutory damages of $100 to $1,000 plus punitives and fee-shifting make a willful case viable where the actual loss is small or hard to prove.
• A prescreened firm offer has to disclose that your file was used and tell you how to opt out, so the mail is a regulated use with an off switch.
• Section 1681t(a) preserves state law generally, so a state may add protections on any subject the five preemption paragraphs in 1681t(b) do not name.

Cons

• Negligent noncompliance gives actual damages only, and an inaccurate file often causes losses that are real but hard to quantify in dollars.
• The limitation period runs from the earlier of discovery plus two years or the violation plus five, so an old violation found today may already be barred.
• The statutory damages range carries no inflation adjustment, so its value in real terms falls every year it is left alone.
• Furnisher duties under 1681s-2 are substantially enforceable only after a dispute has gone through an agency, which puts a procedural step in front of the remedy.
• Preemption is subject-by-subject rather than general, so whether your state adds anything depends on which provision the problem falls under.
• Two sections of the Act sit outside the Consumer Financial Protection Bureau's authority, which makes the enforcement picture less uniform than the statute looks.