Health Insurance Portability and Accountability Act (HIPAA)

The Fair and Accurate Credit Transactions Act (FACTA), also referred to as the FACT Act, is a federal statute enacted by the U.S. Congress in 2003 to amend the Fair Credit Reporting Act established in 1970. Its primary objective is to enhance consumer safeguards, particularly in response to the rising incidents of identity theft. A prominent provision of this law grants consumers the right to access their credit reports free of charge at least once annually.

FACTA's Impact and Provisions:

FACTA was signed into law during the tenure of then-President George W. Bush, aiming to address the growing threat of identity theft, a concern not adequately addressed by the Fair Credit Reporting Act of 1970.

For instance, FACTA mandates financial institutions to adopt “reasonable” measures to safeguard customers’ sensitive information, including proper disposal of documents containing identifying details and obscuring crucial information such as credit card and Social Security numbers.

Moreover, FACTA imposes obligations on credit bureaus to place fraud alerts on the files of individuals affected by identity theft and to notify other credit bureaus accordingly.

Beyond consumer-facing measures, FACTA introduces various regulations for businesses and financial service providers. Notably, it empowers enforcement agencies to take action on violations of “red flag rules,” compelling creditors and financial institutions to implement programs to detect and prevent identity theft. For example, credit and debit card issuers must verify any changes to customers’ addresses.

In addition to its focus on identity theft prevention, FACTA includes provisions aimed at enhancing consumer protection more broadly. For instance, it imposes new disclosure requirements on mortgage lenders, necessitating the disclosure of credit scores and factors influencing loan approval decisions, including “risk-based-pricing” factors and credit report discrepancies.

Enforcement and Consumer Rights:

The enforcement of FACTA falls under the jurisdiction of the Federal Trade Commission (FTC), which conducts audits of credit bureaus and certain financial institutions. Non-compliant creditors or reporting agencies may receive warnings or penalties from the FTC. The Consumer Financial Protection Bureau shares rule-making authority for FACTA with the FTC.

Under FACTA, consumers are entitled to obtain a complimentary copy of their credit report annually from each of the three major reporting agencies—Equifax, Experian, and TransUnion—via the official website, Additionally, consumers have the right to dispute any inaccuracies in their credit reports, with credit bureaus mandated to investigate and provide findings.

FACTA serves as a critical legislative tool in combating identity theft and credit-related fraud in an era dominated by online transactions. By compelling creditors and reporting agencies to protect consumers’ personal information and facilitating access to free credit reports, FACTA aims to mitigate the risks associated with identity theft. However, despite legislative efforts, consumers must remain vigilant and take proactive measures to safeguard their personal information against potential threats.