It's FACT: New Federal Law Targets Credit Reports, ID Theft

April 01, 2004

A new federal law tackles two problems consumers might encounter: fair access to credit and identity theft.

Enacted last December, the Fair and Accurate Credit Transactions Act (FACT) amends the Fair Credit Reporting Act of 1996, which established uniform standards regarding what type of information credit agencies can include in credit reports. FACT makes those standards permanent; otherwise, they would have expired Jan. 1. The standards are designed to ensure consumers' credit histories are accurate and that consumers have access to their credit reports.

The new identity theft provisions of the law affect merchants, lenders, credit reporting agencies and federal regulators. The provisions have several goals: prevention, apprehension of criminals and protection of identity theft victims.

The law also gives consumers more control over the types of solicitations they receive, allowing individuals to refuse solicitations from certain businesses for a five-year period. Businesses that have a pre-existing business relationship with customers are not included.

FACT at a Glance

Credit Reports

Consumers are entitled to a free annual credit report from one of the three major credit-rating agencies.
Financial institutions must notify consumers if their credit terms are less favorable because of credit scores.
Agencies must disclose credit scores for a "fair and reasonable fee."
Medical information may not be used when determining eligibility for credit.

Identity Theft

Store receipts will show only the last five digits of a credit card number.
Identity theft victims need to make only one phone call to receive advice, set off a nationwide fraud alert and protect their credit standing. This replaces a requirement to call all of their credit card companies and the three major credit-rating agencies.
Fraud alerts and military active duty alerts may be placed on credit files, requiring credit-reporting agencies to ensure future requests for information are from the customer and not from a thief.
Regulators must devise a list of identity theft indicators and, during compliance examinations, evaluate how financial institutions use them. Fines will be imposed when institutions disregard indicators.
Lenders and credit agencies are required to develop methods to stop identity theft before it causes major damage.

Solicitations

Consumers may refuse to accept solicitations from certain marketing firms.
Businesses that have a pre-existing relationship with consumers are exempt from requested solicitation bans.

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Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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