Fair Credit Reporting Act

What Are FCRA Data Privacy Laws?

We’ve had an unprecedented last couple of years, and the overall state of the average consumer’s credit is different in many ways than it has ever been before. Now more than ever, when it comes to data and privacy, it’s important that your business is current on the laws and regulations on how you can collect, access, use, and share any data (from both clients and employees) as it pertains to credit reporting. Are you educated and prepared for the next year? Let’s dive into what you need to know about the Fair Credit Reporting Act (FRCA) and data privacy laws. Remember that this isn’t legal advice, but general guidelines to help you navigate any pitfalls that might land you in a state or federal court.

What is the Fair Credit Reporting Act?

Simply put, the Fair Credit Reporting Act (often abbreviated FCRA) is a federal law that was put in place to protect the accuracy and privacy of people’s information when it comes to their credit scores. It was put in place by the Federal Trade Commission back in 1970 and is more important now than ever.

These laws specifically regulate the way that a consumer reporting agency or credit bureau is able to use the information they use in your consumer credit reports. It limits what and how they can collect, access, use, and share the information.

In addition, the FCRA also grants consumers access to their credit history. Every 12 months, Federal law states that every consumer has a right to get a free copy of their credit report. This is to allow people to see any negative information that may have been placed on their credit file without their knowledge. From there, they can take action and dispute any inaccurate information with the various credit bureaus.

What Should You Focus on as a Business?

You and anyone on your human resources staff need to know how important the FCRA is, how strictly it is enforced, and what the legal ramifications are if you don’t follow the laws.

One of the most important aspects of this law is consumer consent. You can’t just pull someone’s credit report without their permission, and that permission must be in the form of written consent. These consent forms have very specific formatting and language that need to be included to be considered compliant.

Additionally, you can’t access anyone’s consumer credit information unless they’re directly related to your company, such as an employee, volunteer, or someone you’re considering as a potential employee.

Something that most companies don’t realize is that the FCRA isn’t just for getting a potential or existing customer’s credit report– it’s also directly connected to any formal background checks. If you follow the guidelines and perform a background check on someone (with their consent), such a request impacts what you have to disclose to that person. For example, if you are thinking of not hiring someone because of something you find on their background check, you have to send them an “adverse action notice” before you make the final decision. The applicant then has time to respond with a reply or reasons they disputed information on the report. If the applicant responds and you still choose not to hire them, you have to send a second adverse action notice letting them know what you decided.

Quentelle Can Help

Do you still have questions about how the FTCA may affect your business? Here at Qunetelle, we serve a growing number of clients and partners just like you. Our turnkey suite of proven solutions is ready for you to give it a test drive.

Our software is smart and simple. Schedule a demo today by filling out a form, or giving us a call.

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