Identity Violations Spur Changes to Fair Credit Reporting Act: Large-Scale Thefts of Social Security Numbers and Credit Report Data Have Been Making the National News Lately as Identity Crooks Become More Sophisticated and Expansive in Their Targets
Cassar, Joe, Partners in Community and Economic Development
Why steal one identity at a time when you can steal thousands by posing as a legitimate small business?
Recent changes to the Fair Credit Reporting Act (FCRA) in response to increasing incidents of identity theft will provide lenders, consumers, and law enforcement agencies with a new arsenal to combat fraud. Enacted in 2003, the Fair and Accurate Credit Transactions Act (FACT Act) affords consumers more protections than ever before.
Identity theft case affects thousands
Large-scale identity theft can have widespread consequences. In February 2005, ChoicePoint Inc., a data aggregation company, announced it was the victim of a detailed fraud, perpetrated through organized crime. As a result, personal information was released for nearly 145,000 people.
According to ChoicePoint's web site, the exposed files included individuals' names, addresses, social security numbers, credit information, and other matters of public record, such as bankruptcies, liens, professional licenses, and real property data. An article in the Los Angeles Times on March 2, 2005 reported that, according to California court records, ChoicePoint suffered a similar incident of fraud in February 2002. Consumers are clearly becoming more vulnerable to identity theft as criminals become more resourceful.
How can the Fair and Accurate Credit Transactions Act help?
The Federal Trade Commission (FTC) estimates that approximately 10 million individuals were victims of identity theft in 2002. The increasing number of cases was one of the catalysts for the Fair and Accurate Credit Transactions (FACT) Act amendments to the FCRA. The legislation not only aims to prevent identity theft but also provides recourse for identity theft victims and addresses privacy concerns.
The FACT Act adds new protections to the FCRA through the following measures:
* Allows consumers to obtain one free credit report annually from each of the three main credit reporting agencies.
* Allows consumers to place fraud alerts and military active duty alerts on their credit reports.
* Mandates the truncation of card information, account numbers, and social security numbers on receipts.
* Allows identity theft victims to obtain copies of the impostor's account application and transactions.
* Requires collection agencies to inform creditors if a debt is the result of identity theft and restricts creditors from selling or placing such debt for collection.
* Requires financial institutions to adopt procedures designed to spot and "red flag" events usually associated with identity theft.
* Requires consumer reporting agencies and any businesses that use consumer reports to adopt procedures for their proper disposal.
* Requires that identity theft victims receive a notice of rights from credit reporting agencies.
* Allows consumers to request their credit scores along with the factors that went into computing the scores.
* Requires lenders to reveal a customer's credit score and provide four reasons for the score when the customer applies for credit.
* Requires lenders who receive notice of a dispute to investigate the claim and provide notice to credit reporting agencies that the negative information is being disputed.
* Requires creditors to send customers a notice before or no later than 30 days after negative information is furnished to a credit bureau (for example, late payments, missed payments, partial payments, or any other form of default on the account).
* Prohibits consumer reporting agencies from reporting the name, address, and telephone number of any medical creditor unless the information is provided in codes that do not identify or infer the provider of care or the individual's medical condition.
* Allows consumers to obtain one free annual report from "nationwide specialty consumer reporting agencies" that issue non-credit reports, if the report relates to the following information: medical records or payments; residential or tenant history; check writing history; employment history; or instance claims. …