VIDEO: What is the FCRA?
In this Compliance Clip (video), Adam provides a brief overview of the Fair Credit Reporting Act or FCRA. He describes how this longstanding law protects consumers and regulates the practices of both consumer reporting agencies and the users of their data.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to give a very general overview of the Fair Credit Reporting Act.
So, what is the Fair Credit Reporting Act?
The Fair Credit Reporting Act is part of the Federal Consumer Credit Protection Act. You may not have heard of this recently because it's not a recent law. This has been around for some time. In fact, it's a group of acts that included the Truth in Lending Act, and was effective back on April 25, 1971. So, the Fair Credit Reporting Act is nothing new. It's been around for decades and is approaching the definition of a group of elderly here in the next couple of decades as well.
Now, there are several amendments that have been made, of course, to the Fair Credit Reporting Act over the years. And so, it has evolved over time.
The Fair Credit Reporting Act is primarily concerned with the use of what they call consumer reports. This, of course, includes a credit report, which is what most of us are most familiar with, but it also includes other types of consumer reports that don't necessarily have to be a credit report. So, it's concerned about that. It also sets requirements for both consumer reporting agencies - those agencies that collect the data and then sell the data to users of the information - as well as the users and those who purchase the information from the consumer reporting agencies.
And so, it sets standards for both those who are the consumer reporting agencies and those who use the data from the consumer reporting agencies. And what it does is it sets standards for things like having a permissible purpose for using a consumer report. It also sets standards for things like rules for users of consumer reports, what they can do with it once they have access to it. They have rules for certain disclosures that have to go out both in adverse action notices, as well as when the credit report is pulled itself. Also, rules for furnishing credit information, handling of consumer disputes, and even have requirements for identity verification, identity theft, and identity theft issues.
So there's a lot of different requirements in the Fair Credit Reporting Act. It's quite big and encompassing.
Again, lots of rules for the Consumer Reporting Agency, but a lot of rules for the users of the information, which of course include creditors and financial institutions. And so lots of things there.
Now, how is the Fair Credit Reporting Act rolled out? It's essentially rolled out through Regulation V. The Federal Reserve Board had a longstanding Regulation V that implemented portions of the Fair Credit Reporting Act. With the formation of the Consumer Financial Protection Bureau, the CFPB also now has a Regulation V. So there's technically the Federal Reserve Board's version of Regulation V and the CFPB's Regulation V that are not exactly identical. There's still some gaps, because neither Regulation V, the Federal Reserve's nor the CFPB's, include the rules for a permissible purpose to use a consumer report.
Over the years, the Federal Trade Commission (FTC) has issued guidance as it relates to FCRA, and there's been some court cases and different things that have gone on, ut that's about all we have time to cover in this compliance clip.
So, that's an overview of the Fair Credit Reporting Act. It's a very important law and implementing regulation to protect consumers when it comes to their consumer information that's collected and sold and used for things like loans and insurance.
Thank you so much for watching this Compliance Clip video.