FACTA's Free Credit Reports Usher in a New Era

On the first day of December 2004, a new era begins for American consumers — a time when all Americans can give their credit records the close attention they deserve. Starting today, consumers in 13 Western states are entitled to a free credit report each year from each of the three major credit reporting agencies (CRAs) — TransUnion, Experian, and Equifax. The rest of the country will follow in a four-phase rollout moving from west to east, according to a timetable set by the U.S. Federal Trade Commission (FTC).

This much needed consumer freebee is a key element of the recently enacted Fair and Accurate Credit Transactions Act (more commonly referred to as the FACT Act, or FACTA). It's been a long time coming — even though, for most Americans, it hasn't quite arrived. After a protracted debate in both houses of Congress, FACTA was enacted on 4 December 2003. That kicked off the complex process of determining exactly how to implement it — a process led by the FTC, but involving input from the CRAs, legislators and regulators, consumer groups, and a host of other interested parties. Now, almost a year later, this hard-fought battle of wills is finally bearing fruit.

Despite the many compromises and frustrations endured along the way, FACTA was worth the wait. The free credit reports mandated by the new law represent a huge boon for consumers. Whether you're applying for a home or auto loan, scanning your credit history for signs of identity theft, or simply checking for errors in your credit record, credit reports are an exceptionally powerful tool. What's more, this is the first time in history that such a huge segment of the population is entitled to a free credit report. It's also the first time in history that this information is being made available from a centralized source, as mandated under FACTA.

FACTA significantly strengthens the pro-consumer provisions in the Fair Credit Reporting Act (FCRA) in other ways as well. Besides mandating a free annual credit report for all consumers, other provisions of this landmark legislation help to arm the public against identity theft by making it easier to detect and block identity thieves trying to open fraudulent accounts. Among other consumer protections, FACTA empowers consumers to:

• Place fraud alerts in their credit reports to prevent identity thieves from using their names to open fraudulent accounts
• Block data from being given to or reported by a credit bureau if that data is a result of identity theft

Among other pro-consumer provisions of FACTA:

• It requires credit bureaus to share consumer calls on identity theft, including fraud alert requests (the "one-call-for-all" provision).
• It requires lenders to notify consumers before submitting negative credit information.
• It restricts third-party access to consumers' sensitive health data.
• It prohibits merchants from printing more than the last five digits of a payment card on an electronic receipt.

Still, FACTA's most dramatic aspect is the free access it gives all consumers to a fundamental part of their economic lives — their credit reports. And thanks to FACTA, there's also an extremely simple way to get them. A central web site has been set up at www.annualcreditreport.com. You also can order your credit reports from the FACTA-mandated centralized source by phone (toll-free) at 877-322-8228 or by writing to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. In fact, if you want to receive free reports under FACTA, you must order them through this central source — if you order them directly from the CRAs, you still may have to pay.

Here's a suggestion to help consumers get the most out of the free credit report provisions of the FACT Act. When you request your free credit reports from each of the three major credit reporting agencies, stagger them throughout the year rather than getting all three at once. This will give you a series of snapshots of your credit over a period of time. On the other hand, if you have a major credit purchase on the horizon, such as a home or auto loan, you may want to take a look at all three reports right away so you can correct any errors or inconsistencies before you apply. Either way, though, you'll want to get your credit reports from all three credit bureaus, since some lenders report credit information to only one or two of the three — which sometimes means that inconsistencies arise that may need your attention.

Under the FACTA rollout plan, consumers become eligible for free credit reports on the following schedule:

• 1 December 2004: Residents of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
• 1 March 2005: Residents of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
• 1 June 2005: Residents of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas.
• 1 September 2005: Residents of Connecticut, Delaware, the District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, Puerto Rico, and all U.S. territories.

The phased rollout was designed to prevent the nationwide credit reporting agencies from receiving a surge of requests so huge that the CRAs would be able to process them all. In addition, the FTC expressed concerns that a sudden flood of requests could create delays for consumers seeking credit reports for other purposes. Because press coverage has been relatively light, however, we're unlikely to see the logjam of simultaneous requests that the the CRAs feared. Of course, a tidal wave is still possible — but if it does come, it probably won't be today. In any case, you shouldn't let these concerns stop you from stepping up and getting yours.

As it turns out, the word is getting out through a variety of channels, from mass media to word of mouth. In a sense, word of mouth is the best way for this to happen. FACTA's free credit report provision, like many other consumer victories, was the result of a grassroots consumer movement aiming to give all consumers a greater voice in the decisions that affect them — and, thus, greater power over their own lives. So it seems appropriate that news of this victory should spread through the same sort of grassroots network that brought it about in the first place. Mention it to your friends and family, religious and community groups, and neighborhood and employee associations.

FACTA's free credit reports bring a significant change to the consumer credit world by putting this powerful tool into all U.S. consumers' hands for the first time in our history. Now that you know about it, I encourage you to share the knowledge — and be sure to take advantage of this consumer boon yourself.

Evan Hendricks is the publisher and editor of Privacy Times and the author of a new book, Credit Scores and Credit Reports .

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