What Is the Fair and Accurate Credit Transactions Act?

LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books.

Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.

The Fair and Accurate Credit Transactions Act (FACTA) of 2003 is a federal law that aims to ensure fairness and accuracy in consumer credit reporting.

Key Takeaways

• FACTA sets the ground rules for accurate and fair credit reporting.
• The act mandates that you can access your credit report from all three bureaus for free once a year through AnnualCreditReport.com.
• If you know or suspect you are a victim of identity theft, or if you are active-duty military, you can add a fraud alert to your credit reports by contacting just one of the credit bureaus.
• You can stop or start prescreened credit card offers by visiting OptOutPrescreen.com.
• Credit report errors can be disputed directly with the business that provided the information. The business must investigate your dispute and update the credit bureau with the results of the investigation.

Definition and Examples of the Fair and Accurate Transactions Act

FACTA was passed in 2003 as an amendment to the Fair Credit Reporting Act. The law sought to better protect consumers from fraud and identity theft and to ensure accurate credit reporting. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are authorized to enforce compliance with the law.

How the Fair and Accurate Transactions Act Works

FACTA provides rules for lenders, credit reporting agencies, businesses, and financial service providers to detect and protect consumers from fraud and identity theft.

Improved Consumer Access to Credit Information

One of the most important provisions of FACTA was giving consumers the right to a free credit report once a year from both the major credit reporting agencies and national specialty credit reporting agencies. National specialty credit reporting agencies maintain information on medical payments or records, tenant history, check-writing history, employment history, or insurance claims.

Note

You can get one free credit report per week from Equifax, TransUnion, and Experian through December 2023 at AnnualCreditReport.com.

Under the law, credit bureaus are required to give consumers credit score access for a reasonable fee. Along with their credit score, consumers should also receive:

• The range of scores they may have
• Key factors affecting their credit score
• The date the score was created
• The business that provided the score

Protection From Fraud and Identity Theft

FACTA established fraud alerts to provide consumers with a way to warn businesses to take additional steps to verify a consumer’s identity before granting credit. A fraud alert lasts one year, while an extended fraud alert lasts seven years.

Consumers have to notify only one credit bureau of the fraud alert. That bureau is responsible for notifying the other credit bureaus.

In addition to establishing fraud alerts, FACTA gave consumers the right to block the reporting of information stemming from fraud and identity theft. Identity theft victims can receive a copy of any application used to get products or services in their name as long as the victim provides proof of identification.

The act includes a “red-flag rule” that requires creditors and financial institutions to take measures to detect and prevent consumer fraud and identity theft. Lenders must take action on suspected identity theft even if the consumer isn’t aware of it.

Note

To prevent credit card fraud, FACTA requires merchants to truncate credit card numbers on store receipts to include only the last five digits of the credit card number.

Control Over Marketing Lists

Sometimes banks and insurance companies purchase prescreened lists of consumers from credit bureaus for marketing purposes. Consumers who do not want to receive unsolicited offers can opt out of prescreening. Any business that shares consumer information for affiliate sharing is required to let the consumers know and allow the consumer to opt out.

Usage of Sensitive Medical Information

FACTA prevents credit reporting agencies from sharing medical information for employment, credit, or insurance purposes unless the consumer gives permission. Lenders generally are not allowed to use medical information to qualify consumers for credit.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. The White House. "Fact Sheet: President Bush Signs the Fair and Accurate Credit Transactions Act of 2003." Accessed June 9, 2021.
2. PR Newswire. "Equifax, Experian and TransUnion Extend Free Weekly Credit Reports in the U.S. Through 2023."
3. FTC. "What To Know About Credit Freezes and Fraud Alerts." Accessed June 9, 2021.

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