The FCRA, or Fair Credit Reporting Act, is a law that basically regulates the use of consumer information, including credit information. The law was passed in the early 1970s as a protection to consumers from Consumer Reporting Agencies.
Purpose of the FCRA:
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).
This act sanctions consumers to one free credit report per year. This act also protects consumers in maintaining laws regarding the length of time negative information about a consumer (such as bankruptcies, late payments, and tax liens) may stay on the consumer’s report.
Who does the FCRA affect?
The FCRA ultimately affects everyone with a credit rating and a desire to be employed. Consumer credit information is used by a myriad of companies for many reasons. This act protects consumers against creditors basing financial decisions on information such as:
- sexual orientation
- marital status
- drinking habits
Before a background check or credit report is run, the FCRA requires creditors, employers, and others to provide the following information to consumers:
- The name of the company filing the report
- If contrary or hostile action is taken based on the results of the report
Background screening companies must abide by the FCRA as well as additional rules and regulations as per their company’s policies. The FCRA prohibits information such as medical history without consent.
An important point in the FCRA is that it only directly applies to CRAs (Credit Reporting Agencies) in investigations. Many other private investigation companies are held to similar rules and laws, but do not fall under the jurisdiction of the FCRA.