On December 4, 2003, President Bush signed into law the Fair and Accurate Credit Transactions Act of 2003 (FACTA). This law contains important new safeguards to ensure that Americans are treated fairly when they apply for- and use- a mortgage or other form of credit. The legislation provides consumers, creditors, credit reporting agencies, and regulators with important new tools that enhance the accuracy of consumers' financial information and help fight identity theft.
The bill has been described as among the most significant consumer protection and financial literacy legislation passed by Congress in decades. Beginning January 1, 2004, provisions of the new law will make it easier for consumers in all 50 states to access and review their credit files.
An important feature of the new law is that every U.S. consumer has the right to request a copy of his or her credit report free of charge every year. Previously, only residents of six states (including New Jersey) were able to receive free credit reports. Consumers will be provided the opportunity to review a free report every year to check for errors and evidence of unauthorized activity, including transactions that might be the result of identity theft.
In addition, consumers will have the right to see their credit scores. Credit scores are a three-digit number ranging from the 300s (worst) to 800s (best), which are used by creditors as an indicator of creditworthiness and likelihood of defaulting on a loan.
Another feature of the law is helping to prevent identity theft before it occurs by requiring merchants to leave all but the last five digits of a credit card number off store receipts. This law will make sure that slips of paper that many people throw away do not contain their credit card number, which is a key to their financial identities.
In addition, the law stipulates that consumers be notified if merchants and other creditors are going to report negative information to the credit bureaus about them. It also restricts access to consumers' sensitive health information and allows consumers to block information from being given to a credit bureau and from being reported by a credit bureau if such information results from identity theft.
The law also creates a national system of fraud detection to make identity thieves more likely to be caught. Previously, victims would have to make phone calls to all of their credit card companies and the three major credit rating agencies to alert them to the crime. Now consumers will only need to make one call to receive advice, set off a nationwide fraud alert, and protect their credit standing.
The new legislation establishes a nationwide system of fraud alerts for consumers to place in their credit files. Credit reporting agencies that receive such alerts from customers will now be obliged to follow procedures to ensure that any future requests are by the true consumer, not an identity thief posing as the consumer. The law also will enable active duty military personnel to place special alerts on their files when they are deployed overseas.
It also requires regulators to devise a list of red flag indicators of identity theft, drawn from the patterns and practices of identity thieves. Regulators will be required to evaluate the use of these red flag indicators in their compliance examinations of financial institutions and impose fines where disregard of red flags has resulted in losses to customers.
In summary, this new credit legislation gives consumers unprecedented tools to fight credit card fraud and identity theft. With a free credit report and other powerful new tools, consumers now have the ability to better protect themselves and their families.