WHAT IS THE FAIR CREDIT REPORTING ACT?
The Fair Credit Reporting Act ensures that all credit information for a customer is accurate. It gives the customer an outlet to dispute information about their credit if they feel it is unfair or inaccurate. The Fair Credit Reporting Act ensures a customer’s privacy, so that their credit information cannot be shared without permission. It also gives the customer the right to check on their credit periodically and know what exists in their file.
There are two entities that have to follow the law of the Fair Credit Reporting Act; a CRA and an information supplier. A CRA, or credit reporting agency, is typically a credit bureau such as Dun and Bradstreet, Experian or Equifax. An information supplier is usually what a businesses’ accounts receivable department falls under as an entity that reports information about a customer to a CRA.
WHAT YOU SHOULD KNOW AS AN INFORMATION SUPPLIER
As an information supplier, there are rules you must follow according to the Fair Credit Reporting Act:
- You cannot report any information to a CRA that you have reason to believe is inaccurate
- You are obligated to update and correct any inaccurate credit information about a customer as soon as it is known as inaccurate
- You must inform the customer about any negative information you may be reporting to a CRA within 30 days of notification
- You must notify a CRA when a customer closes an account with you
- You must maintain a “reasonable procedure” for handling identity theft issues
Knowing these rules under the Fair Credit Reporting Act is important because violating them opens you up to the possibility of a customer suing you. Each state may have different regulations to additionally remedy the situation for a customer.
As an accounts receivable department offering credit terms to customers, the team should be aware of the stipulations of the Fair Credit Reporting Act. Without it, you may be opening the company up to fines and legal issues. Further, it can help you to gain the trust of your customers to keep them coming back.