The Fair and Accurate Credit Transactions Act Explained

Every American citizen has the right to receive one free credit report from each of the nationwide consumer credit reporting companies per year, including TransUnion, Experian, and Experian because of the Fair and Accurate Credit Transactions Act of (FACTA). Passed in 2003, the law functions with full support of the Federal Trade Commission (FTC).

Identity theft and fraud also are combatted by the provisions in this act. When individuals suspect identity theft or other forms of fraud regarding their credit, they can place alerts on their reports whether they are home or abroad. These safeguards help to reduce the risk of integrity breaches.

Identity Theft

As mentioned, provisions to prevent identity theft are included in the title of the act. Specifically, the law has set-up new regulations concerning active duty alerts for servicemen and fraud alerts for civilian applications. It explains that new restrictions be established by some agencies of the government concerning the detection of identity theft by financial institutions and creditors as well as has established new limitations on the printing of consumer credit card number on receipts.

Fraud Detection

Consumer reporting agencies must establish a fraud alert for the files of their consumers for a minimum of 90 days and inform all other consumer reporting agencies of the fraud alert at the request of a consumer who believes they have been or will become an imminent victim of fraud or any other related crime. Further, the title requires that consumer reporting agencies extend fraud alerts to such consumers as requested.

In this case, it requires the reporting agency to disclose this fraud alert in any credit score that it supplies over the subsequent seven years. Again, in the case of extended fraud alert, the particular consumer should be exempt from any list provided to outside entities for the purpose of offering insurance or extending credit to that consumer. Two years from the request, the title also provides for any active duty member to employ an active duty alert, which mandates that the reporting agency reveal such alerts with any credit report issued within twelve months for the request as well as exclude the active duty member from any list distributed to third parties for the purpose of extending credit or offering insurance packages.

Number Security

According to this act, no more than five digits of a credit card number may be printed on a business receipt. These digits usually are the last few of an account number. Moreover, businesses should refrain from printing card expiration dates on any receipt provided to the credit card owner at the point of sale. Per violation, this provision is enforced with statutory damages ranging from $100 to $1000. The amount of damages can be significant when claims are aggregated in a class action suit by a group of wronged consumers.

This provision of the act is not applicable on an imprinted or handwritten receipt. The exception is forced because in this scenario, the only way to record the number of the credit card is by manually writing it. After its enactment, the law did not become effective for three years pertaining to cash registers manufactured before January 1, 2005. After its enactment, it did not become effective for 1 year for any cash registers manufactured after this date.

Red Flags

The Red Flag Rule was established by this piece of legislation as well. It required the FTC, the National Credit Union Administration and federal banking agencies to collaborate in formulating regulations concerning the prevention of identity theft applicable to creditors and financial institutions. Regulations established included special requirements placed on issuers of credit or debit cards to examine the change of address and its validity, if they receive notification of an address change for credit or debit card account of a consumer within a small time period. Later, if they receive application for the change of card, it should be granted. Another mandate required consumer report users to respond to notices of address discrepancies that they receive as well as requiring creditors or financial institutions to maintain and execute an identity theft prevention program in relation with both existing and new accounts.


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