Consumer protection under the Fair and Accurate Credit Transaction Act (FACTA)

Consumer protection under the Fair and Accurate Credit Transaction Act (FACTA)

The Fair and Accurate Credit Transaction Act (FACTA) is an additional section of the Fair Credit Reporting Act that protects consumers from identity theft. The act limits how consumer information should be shared and ensures information privacy and accuracy. The provision also gives consumers the right to access a free copy of their credit reports from the three major credit reporting agencies Equifax, Experian, and TransUnion. Consumers who suspect that they are victims of fraud are also allowed to place an alert message on their credit report files for at least 90 days. Additionally, consumers who want to know their credit score may purchase it, but at a reasonable price. The passing of FACTA comes as good news to consumers since they are now able to view their credit reports for free and input the necessary measures to improve their credit scores.

How FACTA is applied by enforcement agencies

Measures were put in place to ensure that lenders also play a role in spotting identity theft by looking for any suspicious patterns. For instance, enforcement agencies should not print more than five consecutive digits of a customer’s credit card number in a receipt. The act also allows financial institutions like banks and credit unions to come up with identity theft prevention programs to help detect, mitigate and prevent identity theft cases that may occur when a consumer tries to open an account or access an existing account. For instance, if there are any changes in a consumer’s address, credit and debit card issues have to validate these changes. FACTA also includes the red flags rule, which is defined as specific activities that may indicate the existence of identity theft. These include presentation of suspicious documents, creation of suspicious accounts, and other malicious activities taking place in a consumer’s account.

How FACTA helps in identifying identity theft victims

Before the bill was passed, identity theft cases were on the rise. In fact, a survey by the Federal Trade Commission reported that about 10 million consumers were already victims of identity theft over a period of only one year. FACTA plays an important role in protecting consumer information, giving them confidence that both their identity and money are safe when they make purchases using their credit cards.

Free credit reports

The provision of free consumer credit reports by the major credit reporting agencies helps consumers monitor their report and detect any cases of identity theft. Consumers can order their report by telephone or mail. Free credit reports are also available to consumers who are unemployed in the following circumstances;

  • If you want to apply for employment within 60 days after sending your free credit report request
  • When you receive public welfare assistance
  •  When you feel that you are a victim of identity theft or fraud

Fraud alerts and active duty alerts

Credit reporting agencies should also flag accounts of consumers who are victims of identity theft. If you want to place a fraud alert, you first have to show proof of identity to the credit reporting agency. This alert usually remains in your report for 90 days, but this period can be extended up to 7 years upon request. Once you place a 7-year alert, the consumer is entitled to two free copies of their credit reports in a period of one year.

Truncation of debit cards, credit cards, and social security numbers

If full account numbers are included in your credit card receipts, it can, in no doubt, lead to identity theft cases. This is the reason why FACTA requires your credit card information to be truncated. The consumer’s credit card numbers should not contain more than 5 digits when printed in a receipt.

Information available to identity theft victims

If you are already a victim of identity theft, you are also allowed to get copies of the account application and transactions made by the imposter. This is actually the first step to getting back your finances. Businesses that supplied products or services to an individual that used your identity to obtain the products/services should also provide copies of transaction records and credit applications. These documents also have to be provided to a law enforcement agency that you specify. To receive these documents, you have to provide an identity theft affidavit together with a police report. This request:

  • Should be in writing
  • Should be mailed to a specified business addresses

Credit scores    

If you want to apply for a loan or credit, the decision on whether you qualify and how much interest you will be charged depends on many factors, and the main one includes your credit score. Before the act, consumers were not able to receive information that was used to come up with their scores. It was also difficult to know the score itself. Under the Fair and Accurate Credit Reporting Act, consumers are not only allowed to know their scores but should also know the factors that were used to come up with those scores. But unlike credit reports which are available for free on a yearly basis, a small fee is charged when you when to get your credit score information.

Disputing inaccurate information

Among the roles of FACTA is to ensure the accuracy of information contained in consumers credit reports. It is actually normal to get errors in consumers’ credit reports. In fact, 1 out of every 4 consumers detects an error once they receive their credit reports. But this should not be a cause of panic. Under FACTA provisions, consumers are also allowed to dispute any incorrect information in their reports. Rather than disputing the error to the credit reporting agency, you can also dispute it directly to the creditor. While the dispute is under investigation, the creditor is not allowed to report any negative information on the consumer report.

Negative information in consumer reports

One of the ways to detect identity theft is by regularly checking your credit report. Issues of collection actions and late payments can be used to detect fraud early for you to regain your financial health quickly. Creditors are also supposed to give an early warning notice to inform the consumer that something isn’t right with their account. This notice should be sent to the consumer within 30 days after this information is sent to credit bureaus. Such information may include missed payment, late payment or partial payment.

Risk-based pricing

The amount that consumers pay as interest for a loan or credit can vary. If your credit history is poor, you may have to pay more on interest.

The Fair and Accurate Credit Reporting Act states that consumers should be informed when they are offered a loan with less favorable terms compared to others.

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