Introducing the Fair and Accurate Credit Transactions Act |
By Alexander Carl on March 9, 2010
On December 4, 2003, the Fair and Accurate Credit Transactions Act (FACTA) was signed into law, intended to protect consumers from the dangers of identity theft by regulating credit companies.
Let’s look at what it does:
Allows consumers a free credit report, but only once every twelve months.
Lets consumers place alerts on their credit history when suspecting ID theft. These alerts stay active for 90 days.
Outlaws receipts that display a consumer’s entire credit card number.
Requires credit reporting bureaus to share evidence of ID theft. The bureaus are also required to block any credit history that is known to be fraudulent.
Forces mortgage lenders to send credit statements to homebuyers. This was designed to cut down on predatory mortgage practices, by making lenders justify their decisions.
Most significantly, FACTA introduced several “Red Flag Rules” for directly regulating creditors:
Creditors must have a workable ID theft protection program. In addition, creditors must check the validity of address changes and replacement cards. They are also required to investigate any address discrepancies.
From the language of the bill, these regulations seem to benefit for the consumer. So has FACTA worked?
Yes and no.
At the outset, the financial world was confused by the Red Flag Rules; the bill’s authors had not adequately defined what a “creditor” was. The FTC was called in clear things up, and the Rules’ effective date was pushed back to May 2009.
The FTC eventually determined that “creditor” meant any financial institution that oversaw accounts potentially liable for ID theft. While the law became more powerful, it now demands more from financiers, often at the consumers’ fiscal expense.
Consumer groups have been very disappointed with the law. Six states already required free credit reports, and others had their own strict regulations for lenders. FACTA was considerably weaker than some pre-existing laws.
Since Federal statutes trump a state’s, creditors now have less regulation in some places.
Of course, FACTA makes a certain degree of consumer protection nationwide, but the consumer groups wonder if we need more. Regulations for mortgage lenders certainly didn’t prevent the sub-prime crisis of 2008.
Even so, your identity should be a little safer under FACTA.
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