Consumer Credit Reports and the Fair Credit Reporting Act

Bankers Resource
May 21, 2012 — 1,431 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

Consumer reporting agencies (CRAs) and the organizations that use credit reports or furnish information to CRAs are expected to conform to strict standards under the Fair Credit Reporting Act (FCRA). These potential civil liabilities are explained in sections 616, 617 and 618 of the FCRA. Section 616 details damages and civil penalties for willful noncompliance, section 617 covers penalties and damages for negligent noncompliance and section 618 explains the statute of limitations, which is two years after discovery and five years from the date of the violation.

These regulations apply to consumer credit reports issued by Transunion, Equifax, Experian and other credit bureaus as well as database services, including LexisNexis and Westlaw. These laws apply even if documents are gathered from public records. Credit agencies retain confidential financial information about hundreds of millions of Americans. Unfortunately, these documents can be inaccurate or used for impermissible reasons.

In cases where individuals can prove that their credit report was obtained under false pretenses or without a permissible reason, consumers are entitled to recover $1,000 or actual damages. Punitive damages may also be recovered along with attorney's fees in a successful action. If a consumer reporting agency issues a credit report under false pretenses, officers and employees can be fined up to $2,500 per violation, and they may be subjected to imprisonment for up to two years.

Anyone who furnishes information to credit agencies or obtains credit reports is subject to FCRA laws that are enforced by the Federal Trade Commission. Attorneys, bankers, lenders and anyone who uses consumer credit reports is at risk for potential FCRA liabilities. These include false pretense liability, non-disclosure liability and using confidential consumer information for purposes other than credit issuance, employment or any proper use as defined by the Fair Credit Reporting Act.

When obtaining a consumer credit report, it's imperative to disclose the true purpose of the inquiry and to receive permission from the individual in question. In litigation, this can be achieved with a subpoena or court order that is needed to prove an individual's ability to pay damages, child support and other legal obligations. It's always better to provide an impermissible reason than no reason, which cannot be considered failure to disclose. To recover damages, consumers must illustrate that the violation was negligent or willful, which means there was a motivating factor to injure the consumer.

Bankers Resource