What is the Fair and Accurate Credit Transactions Act?
The Fair and Accurate Credit Transactions Act of 2003 (FACTA or FACT Act), is a piece of legislation which was passed to address the growing problem of identity theft. It is an amendment to the Fair Credit Reporting Act which increases responsibilities on the part of financial regulators and institutions while providing people in the United States with more tools which they can use to address identity theft and manage their credit histories.
One of the key features of the Fair and Accurate Credit Transactions Act is a mandate which allows everyone in the United States to access one free credit report a year from each of the three major credit reporting agencies: Equifax, Transperian, and TransUnion. A website, annualcreditreport.com, was established to facilitate easy access to these free credit reports. Consumers were also entitled to be able to access their credit scores with information about the factors which influenced those scores.
Another aspect of the Fair and Accurate Credit Transactions Act involved providing people with the ability to set fraud alerts on their accounts, and created a nationwide alert system. People vulnerable to identity theft, such as members of the military deploying overseas, could reduce the risk of identity theft by flagging their accounts.
Lenders, regulators, and other financial institutions also have obligations under the Fair and Accurate Credit Transactions Act. They are required to monitor account activity and to address suspicious activity in order to take a proactive stance on identity theft. This is designed to eliminate situations in which an institution could reasonably have stepped in to stop identity theft in the early stages and failed to do so. The “red flag rules,” as they are known, require lenders to address suspicious activity, such as spending patterns which appear out of character for a consumer.
Implementation of the Fair and Accurate Credit Transactions Act was a slow process. Like many pieces of legislation, the law did not take effect right away and some components were designed to be implemented over time. This was done in part in response to concerns about industry compliance; some of the aspects of the Act could not be easily put in place immediately. Creating deadlines gave the industry an opportunity to develop a plan for sound implementation. Government agencies which have obligations under FACTA are required to disclose these obligations and provide information to consumers; the Federal Trade Commission, for example, has a section on their website which provides information about the Fair and Accurate Credit Transactions Act.
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