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Fair and Accurate Credit Transaction Act (FACTA)

NEW PROTECTIONS FOR IDENTITY THEFT VICTIMS

The Fair and Accurate Credit Transactions Act of 2003 ("FACTA") was enacted on December 4, 2004. The provision made amendments to the Fair Credit Reporting Act to provide new, stronger measures, to prevent identity theft and to facilitate the recovery of identity theft victims. Some of these measures simply write into law many of the voluntary measures initiated by the financial industry and improve other recovery procedures already in place.

Previously, free credit reports were available only when the consumer suffered adverse action, believed that fraudulent information may be in his or her credit file, was unemployed, or was on welfare. Otherwise, consumers had to pay a to obtain the information in their own file, though some states required the credit reporting agencies to provide free annual reports to consumers at their request. 

The new law recognizes a nationwide specialty consumer reporting agency as a consumer reporting agency that compiles and maintains files on consumers relating to medical records or payments, residential or tenant history, check writing history, employment history, or insurance claims, on a nationwide basis. Beginning in December of this year with a regional rollout, nationwide and nationwide specialty consumer reporting agencies must provide free credit reports to consumers once annually, upon request. Free reports will enhance consumers' ability to discover and correct errors, thereby improving the accuracy of the system, and also enabling consumers to detect identity theft early.

Other measures that FACTA covers to prevent identity theft include a National Fraud Alert System. Consumers who reasonably suspect they have been or may be victimized by identity theft, or who are military personnel on active duty away from home can place an alert on their credit files. The alert will put potential creditors on notice that they must proceed with caution when granting credit in the consumer's name. 

The new provision also requires the 'joint fraud alert' to be standardized and information shared with the other two nationwide credit reporting agencies once a victim has requested that a fraud alert be placed on their file thereby eliminating the need for the victim to contact each of the three agencies separately. The act also requires the truncation, or shortening of the credit card number on receipts to prevent anyone from acquiring this information, the Red Flagging of characteristics that may indicate identity theft is likely or has taken place. This is an effort to collect data for analysis on identity theft patterns so appropriate action can be taken to prevent the crime in the first place or detect it more quickly when it does. 

The act also proscribes the manner in which consumer information and records must be handled, or more precisely, how they are disposed of. This requirement will help to ensure that sensitive consumer information, including Social Security numbers, is not simply left in a trash dumpster, for instance, once a business no longer needs the information.

The new FACTA also includes measures that will assist victims with their recovery such as, Identity Theft Account Blocking, which requires credit bureaus to stop reporting account information on a consumer immediately upon notification that an identity theft has been reported. This keeps credit records containing false, adverse information from harming the consumer. The agencies must also notify the entities that provide information to the agency that must then also stop furnishing information that is fraudulent. In addition, if the consumer requests it, a creditor or business must give victims copies of applications and business records relating to the theft of their identity. With this information a person can then prove identity thieves have targeted them.

The law is designed to work by making it a crime to unlawfully use any name or number, alone or in conjunction with any other information, to identify a specific individual, including, among other things, name, address, social security number, driver's license number, biometric data, access devices (i.e., credit cards), electronic identification number or routing code, and telecommunication identifying information. This is a new approach to the problem of identity theft.

Previously, since an individual's financial liability was limited, the financial institutions tended to be viewed as the primary victims. This law acknowledges and seeks to assist consumers who have been hit by this type of crime and gives them tools for correcting and recovering from such an ordeal.

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