1996 act clarifies rights of consumer

by Rick Hale

for the Business Journal

Many of us never see them, but they're out there: credit reports maintained by big corporations that document our every financial move.

While we may not know what's in our reports, you can bet they have a tangible impact on our lives determining whether we get a home mortgage or rent an apartment, allowing or denying us credit cards, and even influencing whether or not we get a sought-after job.

The problem is, the companies keeping our credit reports and the creditors that supply information to them don't always get the information right. And while a credit report mistake can prevent you from getting something you want, it has been difficult in the past to learn whether your credit report was a factor and, if so, how to correct any errors.

Amended law offers more protection. The federal Fair Credit Reporting Act was passed in 1971 to protect consumers from inaccurate credit reporting, but it didn't mandate specific responsibilities under the law. Consumers gained more control over their credit reports with passage of the 1996 Consumer Credit Reporting Act.

The act which took effect in 1997 more clearly defines your rights regarding your credit reports and outlines specific actions credit bureaus, creditors and employers must take to ensure those rights. Requirements of the act include:

?A potential creditor must tell you if information in your credit report caused it to deny you credit. And if you ask, the company must provide a specific reason for the denial, plus the name of the credit bureau that provided the negative report.

This information will help you determine whether the denial is based on a reporting error. And knowing about an error is the first step in correcting it.

Contesting incorrect information. If you contest information on your credit report, the credit bureau must remove it from your report unless the creditor that supplied the information can verify its accuracy. The credit bureau must get a response from the creditor within 30 days of your complaint.

After that time, the credit bureau must notify you of its findings. If the creditor cannot prove that the negative information is accurate, it also must send a notice of correction to all other credit bureaus to which it sent the information.

Written permission. A potential employer must get your written permission to obtain your credit report. In the past, employers routinely checked job applicants' reports without their knowledge. Employers may still require a credit check before offering a job, but at least you will know about it and have an opportunity to explain any negative information.

Free copy of credit report. If you're unemployed and seeking a job, a welfare recipient or a victim of credit fraud, you are entitled to a free copy of your credit report from each credit bureau. If you've been denied credit, you can get a free report for up to 60 days after the denial an extension from 30 days previously.

Limit to costs. If you're not entitled to a free copy of your credit report, credit bureaus are limited as to how much they can charge you for one ($8 in 1997). Some states mandate an even lower fee for reports.

The Federal Trade Commission will adjust the federal maximum charge according to inflation each year.

Stop the sale of your name for marketing purposes. You can stop credit bureaus from selling your name to banks and other companies for use in direct marketing. Many firms buy data from the bureaus to build lists of prospects according to the information on their credit reports.

The act requires that the nation's major bureaus provide one toll-free telephone number you can call to have your name withheld from all the bureaus' lists.

Getting credit when it's due. A good credit rating is a critical aspect of your financial health, so you'll want to review your reports occasionally and right away if you are denied credit for an unexplained reason. Thanks to the 1996 Consumer Credit Reporting Act, that job is now considerably easier.

(Richard A. Hale, CFP, is a financial advisor with American Express Financial Advisors Inc.)

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