Laws Protecting Consumer Credit
In 2013, the Federal Trade Commission conducted a study showing that 21% of all consumers had found errors on their credit reports, and 13% had errors affecting their credit scores. Even worse, 5% said they had been denied credit or forced to pay higher interest rates because of the error(s).
Concern for consumer rights began legislatively in the late 1960s with the enactment of the Consumer Credit Protection Act (CCPA). The Fair Credit Reporting Act (FCRA) of 1970 is the latest piece of legislation to protect consumer rights, specifically when it comes to credit reports. FCRA provides consumers with several rights, including:
- The right to know when a credit report is used against you, such as in a denial of credit or employment
- The right to know the information contained in your credit report, with free yearly copies available (additional copies by fee)
- The right to dispute inaccurate or incomplete information contained in your report
- The right to have negative information deleted after seven years (10 years for bankruptcy)
- The right to privacy: Only those with a valid need — such as insurers, landlords, or creditors — can access your report. Employers and others must seek your permission
- The right to seek damages from anyone violating the FCRA
Contained with the FCRA are three other, more tightly focused acts: The Credit CARD Act places new levels of accountability on credit card companies, the Dodd-Frank Act places checks and balances on the largest credit associations, and the Fair and Accurate Credit Transaction Act protects the rights of victims of identity theft and military personnel on active duty.
Errors You Can Dispute
In general, you can dispute credit report entries that are inaccurate, incomplete, out of date, or that you believe to be unverifiable. You can also dispute:
- Payments reported late that were actually on time
- Inaccurate account status, such as an account reported to be past due that is actually current
- Accounts that don’t belong to you
- Inaccurate credit line/loan amount information
- Inaccurate creditors
Disputing Credit Report Errors
As mentioned above, once a credit reporting agency is informed of an error on a consumer’s report, it has 30 days to investigate and respond. If you find an error, you can contact the relevant reporting agency — Equifax, Experian, or TransUnion — online, or by fax, phone, or mail. You may wish to send your request via certified mail to receive a return receipt showing when the letter was received.
The reporting agency is required to act on your request unless it deems your dispute to be “frivolous,” but if so, it must inform you within five days that it has chosen not to pursue the matter and why.
Since the entries on your credit report come from outside sources — called “furnishers” — your dispute will be forwarded by the agency to the relevant furnisher for verification.
Important Factors to Watch
Take note, because this is where you can get shortchanged. The credit reporting agency will often convert your dispute into a two- or three-digit code, which it forwards to the furnisher. The furnisher will then check that code against your digitized record. Your computer record will likely contain the original error and will just confirm it as accurate once again. The result? The error stays on your credit report.
Credit Agency Reponses
The credit reporting agency must send you notice of its investigation and what it found. If it confirms your dispute and agrees with you, it also must notify the other reporting agencies so they can correct their reports as well, if necessary. More likely, however, is that your dispute may never get resolved despite repeated attempts.
In those cases, remember your right under the FCRA to “seek damages from anyone violating the FCRA,” but you can do so only if you have filed the dispute properly with the agency and then been rejected.
If you sought correction by directly contacting the furnisher — a credit card company or other — and they fail to resolve matters, they are not legally liable for your credit report, and you cannot take legal action against them. Always start with the reporting agency.
If your dispute is rejected, you can also file a complaint with the Consumer Financial Protection Board (CFPB), along with a copy of the dispute materials you sent to the agency.
Why You Need an Attorney
You have rights and protections under the law. If you’re being ignored or rejected by the credit reporting agencies, you can pursue legal action, especially if their reporting errors have caused you harm when seeking employment or in obtaining fair treatment from financial institutions.