History of the Fair Credit Reporting Act (FCRA)

The FCRA, Public Law No. 91-508, was enacted in 1970 to promote accuracy, fairness, and the privacy of personal information assembled by Credit Reporting Agencies (CRAs). [1] CRAs assemble reports on individuals for businesses, including credit card companies, banks, employers, landlords, and others. The FCRA provides important protections for credit reports, consumer investigatory reports, and employment background checks.

The FCRA establishes rights and responsibilities for "consumers," "furnishers," and "users" of credit reports. Consumers are individuals. Furnishers are entities that send information to CRAs regarding creditworthiness in the normal course of business. Users of credit reports are entities that request a report to evaluate a consumer for some purpose.

The FCRA is a complex statute that has been significantly altered since 1970 by Congress and the courts. The Act's primary protection requires that CRAs follow "reasonable procedures" to protect the confidentiality, accuracy, and relevance of credit information. To do so, the FCRA establishes a framework of Fair Information Practices for personal information that include rights of data quality (right to access and correct), data security, use limitations, requirements for data destruction, notice, user participation (consent), and accountability.

The FCRA was passed to address a growing credit reporting industry in the United States that compiled "consumer credit reports" and "investigative consumer reports" on individuals. The FCRA was the first federal law to regulate the use of personal information by private businesses.

The first major credit reporting agency, Retail Credit Co, was started in 1899.[2] Over the years, Retail Credit purchased smaller CRAs and expanded its business into selling reports to insurers and employers. By the 1960s, significant controversy surrounded the CRAs because their reports were sometimes used to deny services and opportunities, and individuals had no right to see what was in their file.[3]

By the late 1960s, there was abuse in the industry, including requirements that investigators fill quotas of negative information on data subjects. To do this, some investigators fabricated negative information, others included incomplete information. Additionally, the investigators were collecting "lifestyle" information on data subjects, including their sexual orientation, marital situation, drinking habits, and cleanliness. The CRAs were maintaining outdated information, and in some cases, providing the file to law enforcement and to unauthorized persons. Public exposure of the industry resulted in Congressional inquiry and federal regulation of CRAs.[4]

Years of legislative leadership by Representative Leonor Sullivan and Senator William Proxmire resulted in the passage of the FCRA in 1970. After its passage, Senator Proxmire attempted to broaden the FCRA's protections over the next ten years. Shortly the FCRA took effect on April 25, 1971, CRAs were pursued for violations of numerous provisions of the Act. Most recently, in January 2000, the three CRAs paid $2.5 million in a case settlement brought by the FTC.

The most comprehensive amendments to the FCRA were contained in the Consumer Credit Reporting Reform Act of 1996 (P.L. 104-208). The Amendments contained a number of improvements to the FCRA, but it also included provisions that allow affiliate sharing of credit reports, "prescreening" of credit reports (unsolicited offers of credit made to certain consumers), and limited preemption of stronger state laws on credit.