Finance Globe

U.S. financial and economic topics from several finance writers.
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FACT Act 2003 - Most Consumer Credit Protection Projects Complete

The Federal Trade Commission (FTC) testified today to the U.S. House Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services that the agency has completed most of the consumer credit protection projects required by the Fair and Accurate Credit Transaction (FACT) Act of 2003, also known as FACTA.

The FACT Act was signed into law by President George W. Bush as an amendment to the Fair Credit Reporting Act. Since 2004, this legislation is what gives every consumer in the U.S. access to their free credit report once every twelve months from each of the three major credit bureaus.

The participating credit bureaus Experian, Equifax, and TransUnion provide a consumer's credit report at no charge if the consumer requests their report through the only federally-authorized source at - no strings attached. The consumer may purchase their credit score when they order their free report if they choose to, but this is completely optional.

The FACT Act also contains measures to help prevent and reduce identity theft, such as the ability of the consumer to place a fraud alert on their credit report for at least 90 days if they suspect that their personal identifying information has been misused to commit fraud.

For example, if a consumer is aware that an identity thief has used their name to apply for credit, they can put a fraud alert on their credit report. This alerts creditors to be extra diligent in checking that the applicant is really who they say they are.

Further, the FACT Act also requires extra care in the disposal of consumers' sensitive personal information. What good is it for a consumer to carefully protect their name and social security number if all an identity thief has to do is go dumpster-diving at the local mortgage broker's office?

The FACT Act spells out precautions that must be taken with this kind of personal identifying information, and penalizes companies who don't treat consumers' information securely.

This rule also prohibits merchants from printing sales receipts that bear more than five digits of consumers' credit card numbers, another way to protect consumers from crooks who like to dig in the trash.

The FACT Act also directed the FTC, alone or with other agencies, to develop about 20 rules, guidelines, compliance forms, and notices, and to conduct nine studies and issue reports to Congress.

One of the rules developed by the FTC has been in response to confusion among consumers regarding the free credit report mandated by law. Many consumers have responded to commercial advertisements that offer "free credit reports" and find that the only way to get a "free" credit report is to enroll in a credit monitoring service and pay a monthly charge.

The new rule amends the Free Credit Report Rule to put an end to this tricky marketing strategy, by requiring commercial advertisements to clearly disclose that they are not the source for the free credit report authorized by federal law.

Commercial advertisers will also be required to provide a clickable link to from their website. This new rule takes effect April 2, 2010, with certain provisions for TV and radio ads taking effect on September 1, 2010.

Other new developments by the FTC include furnisher rules that call on the companies that furnish information to the credit bureaus to improve the accuracy of information they provide. These rules also give consumers the right to dispute errors in their credit reports directly with the furnishers of the information, in addition to disputing errors with consumer reporting agencies. The rules take effect July 1, 2010.

Another rule that is effective January 1, 2011 is the risk-based pricing rule. Certain creditors will be required to tell consumers when their credit report information has been used to give them less favorable terms than other consumers.

As an alternative to providing risk-based pricing notices to specific consumers, the rules will allow creditors to provide a free credit score, and information about that score, to all consumers. Either way, consumers will get more information and a chance to better manage their credit.

Among the studies conducted by the FTC, one of them is researching the impact of credit-based insurance scores. The FTC expects that upcoming reports on this subject will increase the transparancy of information about credit scores in the insurance industry.

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Wednesday, 12 May 2021

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