Enter 'The FACT Act': Identity Theft Law Merges With FCRA

The Fair and Accurate Credit Transactions Act of 2003 has been signed into law by the President. The short name, and one we'll soon get to know intimately, is The FACT Act.

According to the explanation on the new law, The FACT Act was enacted to amend the Fair Credit Reporting Act, prevent identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, make improvements in the use of, and consumer access to, credit information, and for other purposes.

The major changes in financial institutions will be in the lending area. But there are other measures covered, particularly in the area of identity theft, where we will need to rewrite some existing policies and procedures. There are new protections built into the legislation that will, no doubt, be translated in the regulations that will be issued by the Federal Reserve Board and the Federal Trade Commission within the next year. The effective date of the law is December 4, 2004, but mandatory compliance dates may be extended as necessary if operations changes and forms necessary have not been developed in time.

One welcome part of this law is that it expands and makes permanent the preemption of state law on terms regarding the Fair Credit Reporting Act. Preemption of any state law was due to expire at the end of 2003, which would have provided an opportunity for state laws to be enacted which could be more restrictive than the regulation now in effect. Uniform national law now will override inconsistent state laws, certainly pleasing financial institutions whose branches cross state borders.

Basic areas and items that will be affected by the final regulation:
Lending
new notice for borrowers who receive "terms less favorable" on loans
requires a notice to a consumer before giving negative information to a credit reporting agency
must disclose contact information on consumer reports
limits use of medical information

Marketing
new restrictions on sharing information

Operations
no account numbers(except last 5) and no expiration date of a debit or credit card on an electronic receipt
requires verification of address information if a change of address is made and a request for a new card is received within 30 days of the change

Customer Service
must provide records within 30 days to the victim of identity theft of any transactions or activity resulting from the theft
must give identity theft victims a summary of their rights

Credit Reporting Agencies
must improve accuracy of credit reporting procedures
must develop a national fraud alert system to handling identity theft
must provide consumers with a single phone number to notify all credit bureaus of identity theft
There are other, more detailed provisions affecting the consumer, such as the right to see their credit score and also to receive a free
annual copy of their credit report. Other sections address ways of limiting unsolicited marketing offers.
Compliance officers and training directors can anticipate a busy fall season translating and communicating The FACT Act. Bankers' Hotline and BankersOnline will be there to help.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 9, 12/03