What Is the Fair and Accurate Credit Transactions Act  (FACTA)?

The Fair and Accurate Credit Transactions Act (FACTA) is a U.S. resolution passed in 2003 that is aimed at enhancing protections for identity theft. The FACTA created standards for the handling of consumer information, enhancing privacy and accuracy. The act gives individuals free access to their credit reports and is an amendment to the Fair Credit Reporting Act.

Key Takeaways

  • The Fair Credit and Accurate Credit Transactions Act (FACTA) was passed in 2003 to allow individuals access to their own credit report for free.
  • Per the FACTA, each person can access their credit report from the three credit reporting bureaus for free once a year. 
  • The act forces financial institutions to be more proactive about consumer privacy and the prevention of identity theft.  
  • The passage of Dodd-Frank in 2010 shifted rulemaking for the protection of consumer data from the FTC to the CFPB.

Understanding the Fair and Accurate Credit Transactions Act (FACTA)

With the passing of FACTA, people are now allowed to request their credit reports for free, once per year, from all three of the major credit reporting agencies—Equifax, Experian, and TransUnion. The credit reports can be ordered via annualcreditreport.com, which is the only “authorized website for free credit reports,” says the Federal Trade Commission (FTC). 

Requirements were placed on mortgage lenders to release consumer information regarding credit scores and factors influencing the price of a mortgage. This includes releasing to consumers “risk-based-pricing” notices as well as credit scores concerning any credit denials or less favorable credit offers.

Standards were put into place that requires lenders and regulators to be more proactive in spotting identity theft before it occurs by looking for suspicious patterns. The identity theft protection efforts include letting consumers put fraud alerts in place on their credit files and information.

President George W. Bush signed FACTA into law to protect consumers from identity theft, where digital fraud continues to become more rampant than ever, 16 years later. 

Requirements for FACTA

FACTA allows enforcement agencies to take action on the so-called “Red Flag Rules,” which requires creditors and financial institutions, such as banks and credit unions, to put into action identity theft prevention programs to help detect and prevent identity theft. For example, the issuers of credit and debit cards must take steps to validate any changes to customers’ addresses.

Various red flags include the introduction of suspicious documents or personal identifying information when dealing with accounts. The creation of suspicious accounts or other questionable activity concerning an account can also trigger red flags

Subsequent policies introduced later under the Dodd-Frank Act, which was passed in 2010, transferred many rulemaking requirements from the FTC to the Consumer Financial Protection Bureau (CFPB). 

The Federal Trade Commission was authorized to study the accuracy of credit reports and the effects of issues that relate to the Fair Credit Reporting Act. Even with more recent acts and amendments, the Federal Trade Commission continues to be responsible for overseeing rules on data security red flags and disposal, along with rulemaking provided by FACTA that pertains to certain motor vehicle dealers.