The Fair Credit Reporting Act

In general, the extension of credit is not a right and you may be denied credit even with a strong credit report.   However, where you suffer damages based on what you think may be a violation of the law, you should consider consulting an attorney about your rights.  A variety of laws protect consumers’ credit standing and against identity theft.  The primary federal law is the Fair Credit Reporting Act.  In California, additional state laws may amplify protection of individual credit records.  If your rights under the fair credit reporting laws are violated, you may be able to sue for monetary damages in federal or state court.

A preliminary case under the Fair Credit Reporting Act is demonstrated by showing that you suffered damage because the credit reporting agency either willfully or negligently failed to comply with the Act.  Justin Baxter and Michael C. Baxter, 18 Causes of Action 2d 1 (Originally published in 2002.)  Such failure to comply includes (1) Furnishing a consumer report for impermissible purposes; (2) Failing to follow reasonable procedures to assure maximum possible accuracy; (3) Reporting obsolete information; (4) Failing to make mandatory disclosures; (5) Failing to conduct mandatory reinvestigation; (6) Failing to correct inaccurate or incomplete information; or (7) Failing to comply with the requirements relating to reinsertion of disputed credit information into the consumer's file.  Id.

You have the right to know what is in your credit file.  The FACT Act, signed in 2003, has given individuals the right to obtain one free credit report each year.  It is a good idea to review the report carefully each year to ensure that you do not disagree with the information creditors are listing about you.  If you discover something is inaccurate or incomplete and you do nothing, you may waive your right to pursue a lawsuit later.

You must also be informed if your file has been used against you and your information cannot be dispersed for impermissible purposes.  Permissible disclosures include by court order, by your request, as part of a transaction involving employment, insurance, licensing, investment, or other legitimate business needs, or for the purpose of enforcing a child support order.  You further must give permission for certain disclosures, including disclosures to employers.

Information that reflects negatively upon your credit can often only be listed on the report for seven years, or ten years in the case of bankruptcy.

If you dispute any of the information contained in the file as incomplete or inaccurate, you have the right to, and should promptly report this to the reporting agency (Experian, Equifax, or Transunion).  The agency then has the duty to investigate and correct the information within 30 days.  They should also notify any potential providers of bad information (credit card companies, banks, etc.) of your dispute within five business days and the provider must also investigate your claim.  If these investigations are not carried out reasonably, you may be entitled to damages.