What Is FACTA (Fair and Accurate Credit Transactions Act)?

A solid credit history and a good credit score can make it easier to access loans and housing. Unfortunately, identity theft and credit report errors can get in the way. And when they do, consumers should be able to resolve the problem and protect their credit.

That’s the line of thinking behind FACTA, a major consumer protection law passed in 2003. What is FACTA, and why does it matter? We’ll explore the answer.

What is FACTA?

What does FACTA stand for? It’s an acronym for the Fair and Accurate Credit Transactions Act. 

FACTA is a federal law passed in 2003 to expand consumer rights and to regulate lenders and credit reporting agencies. The law built on existing protections to further reduce the rate of identity theft, increase transparency, improve fraud detection, and protect consumers’ sensitive data.

Key consumer protections under FACTA

This major piece of legislation introduced several key provisions that address consumer rights.

Access to credit scores

FACTA made it easier for consumers to access and track their credit reports and scores. It’s the law that established AnnualCreditReport.com, a government-authorized website that allows everyone to access a free copy of their credit report each year.

In 2020, all three credit bureaus started allowing Americans to access free weekly credit reports through AnnualCreditReport.com. Their reasoning behind this decision was to help people cope with the financial challenges of the pandemic. The credit bureaus later decided to make this change permanent.

Receipt security

If you’ve ever visited a business and paid for a purchase with a credit or debit card, you might have noticed that the receipt printed only the last few digits of your card number. That change was introduced by FACTA to make it harder for would-be identity thieves to steal your financial information.

Consumer data disposal

If a business keeps printed records of your credit report and related information, that exposes you to increased risk of identity theft. 

FACTA requires businesses to securely dispose of this information. Companies can’t just throw important financial documents in the trash once they’re finished with them. They must shred, burn, or otherwise destroy them to prevent unauthorized parties from stealing your information.

Improved identity theft protection

FACTA introduced something called the “Red Flags Rule,” which requires creditors and financial institutions to proactively look for signs of identity theft. These institutions must create a written plan for identity theft protection and train key staff members to implement it.

Fraud alerts

If you think you may be at risk of identity theft, you don’t have to wait until after you become a victim to take action. That’s because FACTA allows you to place a fraud alert on your credit report.

A fraud alert isn’t the same as freezing your credit. Instead of preventing creditors and others from accessing your report, it effectively puts a red flag on it. That signals creditors to take extra identity verification steps before approving any applications for credit.

In a similar vein, deployed members of the military can put an “active-duty alert” on their credit reports. Active-duty military personnel are commonly targeted by fraudsters because they have steady incomes and are often unable to regularly monitor their credit reports.

Transparency in risk-based pricing

If your credit is below average, you might still be able to get a loan. However, in many cases, lenders will increase interest rates or offer otherwise unfavorable loan terms to make up for the risk you present.

Under FACTA, a lender who offers you less favorable loan terms based on information in your credit report must notify you.

This information can be very helpful for your credit-building journey. When you know what’s hindering you, you can take meaningful steps to improve it. For example, if you can’t get a car loan at a good interest rate because of your limited credit history, Kikoff can help you build a longer history of on-time payments.

Improved dispute resolution processes

Consumers could still dispute inaccurate credit information before FACTA. However, FACTA streamlined the dispute resolution process in a number of different ways:

• Allowing consumers to file disputes directly with creditors (and not just with credit bureaus)
• Requiring credit bureaus to investigate disputes within 30 days
• Requiring data furnishers to review all documents that consumers send in with their disputes

These key changes have helped improve the accuracy of credit reports while reducing instances of unfair credit damage.

How FACTA compares to FCRA

If you’re familiar with the Fair Credit Reporting Act (FCRA), you might think that many of the provisions of FACTA sound familiar. That’s because FACTA was passed as an amendment to FCRA.

FCRA was passed in 1970 and went into effect in 1971. It was a landmark piece of consumer rights legislation. These were some of its key provisions:

• Only people or businesses with a legitimate purpose could access credit reports
• In most cases, negative information had to be removed from reports after 7 to 10 years
• Lenders had to tell consumers if they were denied credit based on their credit reports
• Consumers gained the right to sue for damages if lenders violated the law
• Clear dispute procedures were established to promote more accurate records

Like most consumer protection laws, FCRA is updated periodically. There were several reasons that legislators created FACTA as an amendment to the law, but these are some of the most important ones:

• In the late 1990s and early 2000s, identity theft was becoming increasingly common
• Many people were having trouble accessing and monitoring their credit reports
• Credit report errors were fairly common and difficult to resolve

FACTA strengthened consumer rights and added greater protections against identity theft.

Conclusion

Thanks to FACTA’s consumer protections, your personal financial data is more secure. And if you do spot an error on your credit report, you know that there’s a clear path to fixing it. 

But what if your credit score isn’t quite where you want it to be? Countless people want to boost their credit scores but aren’t sure how to start, and that’s why we’re here. Kikoff is a credit-builder app designed to make working on your credit easy and even fun.

We offer a variety of free and premium plans to help you learn about credit and boost your score, and we make it easy to track your progress right from your phone.

If you want to know more about what we do, get in touch. Or if you’re ready to get started, open your account with us today.