Identity Theft Provisions and
the Fair and Accurate Credit Transaction Act (FACT)

Signed by President Bush in December, 2003, the Fair and Accurate Credit Transaction Act (FACT) amends the Fair Credit Reporting Act (FCRA) of 1996 in a few very important ways. FACT makes permanent national standards for consumer protection that were previously set to expire in 2003, and more importantly, creates new provisions to combat identify theft and help victims. These provisions include the following:

• National reporting agencies are now required to provide consumers with one free credit report annually at the consumer’s request. Fraud victims, or individuals who have placed a fraud alert on their report, are entitled to a free credit report. FACT also demands that the national reporting agencies create a centralized source for consumers to order their credit reports. The centralized source will be subject to oversight by the Federal Trade Commission (FTC).

• Consumer credit reporting agencies are now obliged to make consumers aware of their ability to obtain a credit score when they order a credit report. There may be a charge for the credit score. Reporting agencies must also disclose specified information about the credit score, including an indication that the score may not be the same as that used by lenders. Moreover, some mortgage lenders will be required to disclose credit scores for free.

• Tradeline blocking is another important provision. With this amendment, consumers who have filed an identity theft report (as defined by the FTC) will now be able to have credit reporting agencies block the fraudulent information from appearing on their credit report. However, there will be situations where a consumer reporting agency may decline to block information, e.g. misrepresentation by the consumer.

• FACT also clarifies some standards for fraud alerts. For instance, a consumer may file an “initial” fraud alert that will now stay on their credit report for 90 days. Additionally, consumers who have filed an identity theft report are given the added opportunity to file an “extended” fraud alert, which will appear on their credit report for 7 years.

• FACT provides added protection to consumers serving in the military who may request an “Active Duty Alert” be placed on their credit report for 12 months.

• Under FACT, lenders are now required to take “reasonable steps” to contact consumers before issuing credit if a fraud alert appears on their credit report.

• Reporting identity theft should now be a less painful process for consumers because according to FACT, consumers will be able to contact one of the three national credit bureaus, and that credit bureau will refer the information to the other two bureaus systems..

• Credit reporting agencies must take note of address discrepancies and notify credit report requestors if an address provided is significantly different from the address in the credit file.

• Merchants are required to truncate credit card numbers on receipts to the last five digits on the credit card, and not show the expiration date of the card.

• Financial institutions must notify consumers in writing when the credit information they are going to report to the national bureaus is negative. Only one notice is required with respect to the same customer.

• Under FACT victims of identity fraud may now request and obtain information from creditors regarding the fraudulent applications and accounts.

• Finally, Congress has called upon the FTC to create a media campaign providing information to consumers about how to avoid identity theft. The FTC is also responsible for creating a summary of consumers’ rights under the FCRA. This summary of rights will be issued to fraud victims by credit reporting agencies as well as contact information for the FTC.

This is only a summary of our understanding of some provisions of the new law. For the actual text of the law, go to:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_public_laws&docid=f:publ159.108