FCRA: Legal Exception For Inaccuracy?
Americans’ lives are directly influenced by their credit reports. Today, information in credit reports has become increasingly important in not only lending decisions, but also in employment, rental housing, and insurance opportunities. The FCRA (Fair Credit Reporting Act) was enacted to ensure that credit reporting is fair and accurate. This act provides consumers with the right to know what is in their credit report, the right to dispute inaccurate information, and the right to have errors corrected.
FCRA Regulation on Credit Information
The FCRA also establishes how credit reporting agencies can use consumer information including the collection and dissemination of credit data. Credit reporting agencies must take reasonable steps to ensure that the information in consumers’ credit reports is accurate and complete. In addition, the FCRA requires credit reporting agencies to provide consumers with a notice of their rights under the FCRA before any consumer information is provided to a third party.
Verify accurate credit with a free copy of your
credit reports online.
The #FCRA also establishes procedures for investigating and resolving disputes over the accuracy of information in credit reports. In addition, the FCRA requires credit reporting agencies to maintain reasonable procedures to prevent the inclusion of inaccurate or obsolete information in credit reports.
What Happens When
The FCRA Is Not Followed?
Consumers absolutely need their credit reports to reflect their creditworthiness accurately in order to obtain loans, credit cards, and other forms of credit. Inaccurate credit reports can result in higher interest rates, denial of credit, and other negative consequences. When the FCRA is not followed, and a consumer’s credit report contains inaccurate information, the consumer is at risk of suffering negative financial consequences.
FCRA Violations Are Actionable By Law
A credit reporting agency may be sued in state or federal court if it breaches the FCRA. Actual and punitive damages, as well as attorneys’ fees and costs, are available under provisions of the FCRA. Consumers can sometimes seek compensation for emotional distress in addition to any documented financial losses they incurred as a result of the violation.
The FCRA is enforced by the Consumer Financial Protection Bureau (CFPB). That agency has also recently begun to take new actions against companies that violate FCRA provisions, including filing lawsuits and ordering companies to pay damages to consumers as a result of it’s investigations.
What’s Driving Regulatory Action in the FCRA?
In its semi-annual report the CFPB, released details on credit reporting complaints. The agency received and addressed over 700,000 consumer complaints related to credit reporting. The volume of those consumer complaints constituted some 71% of all complaints received by the bureau. This represented a 122% annual increase in complaints since 2020.
Some examples of FCRA violations:
-Failing to provide a consumer with a copy of their credit report upon request
-Failing to investigate and resolve disputes over the accuracy of information in a credit report
-Including inaccurate or obsolete information in a credit report
-Failing to maintain reasonable procedures to prevent the inclusion of inaccurate information in credit reports
Are There Legal Exceptions For Inaccuracy In The FRCA?
The FCRA does not contain any specific provisions regarding legal exceptions for inaccuracies. However, courts with respect to legal exceptions have previously ruled that credit reporting agencies are not liable for damages if they can show that they acted in good faith and with reasonable care.
That’s not what the law says according to two federal consumer protection agencies. Both weighed in on their interpretation of the FCRA, submitting amicus briefs to the 2nd District Court of Appeals in Sessa v. Trans Union, LLC. and arguing that this provision of the FCRA does not contain an exception for legal inaccuracies.
This is because, first, the text of the statute makes no distinction between factual and legal inaccuracies, and, second, importing a distinction between factual and legal inaccuracies into the law is unworkable in practice. Now there is a line in the sand.
“For years, courts have let credit bureaus off the hook for inaccuracies they think are “legal” in nature. Today @CFPB just weighed in saying “Nope”, no such exception,” said Chi Chi Wu, an attorney and Consumer Advocate who went on Twitter to share the press release by both the CFPB and the FTC:
CFPB: Credit Reporting Companies and Furnishers Have Obligations To Assure Accuracy In Consumer Reports.
FTC: FTC Joins Amicus Brief Opposing Liability Shield For Sloppy Credit Reports
Other consumer protection advocates also believe that consumers are facing a financial FCRA catastrophe and that this law is being interpreted incorrectly. Andy Spears @TheAndySpears has been closely following credit reporting errors and the impact on consumers. He says, “A recent survey suggests 1 in 3 consumers have errors on their credit reports. These mistakes can have devastating consequences if they are not corrected. It is long past time for federal efforts to protect consumers in this space and it is encouraging to see the CFPB finally taking some action.”
Spears points out again that those consequences for consumers could include denial of credit, higher interest rates, and even employment difficulties. The FCRA is a critical law that helps to ensure the accuracy of credit reports and protect consumers from being harmed by inaccurate information.
If you find inaccuracies on your credit report, you should contact the credit reporting agency and dispute the error. You can also file a complaint with the CFPB. Don’t be a victim of credit reporting violations, know your rights and take action if you find inaccuracies on your credit report today.