Understanding the Fair and Accurate Credit Transactions Act (FACTA)

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

The Fair and Accurate Credit Transactions Act (FACTA) of 2003 is one of many acts intended to protect consumers in the United States, especially from identity theft. FACTA is an amendment to the Fair Credit Reporting Act (FCRA) initially introduced in 1975. 

These two pieces of legislation are some of many that are meant to protect American consumers, such as the Truth in Lending Act, the Fair Debt Collection Practices Act, the Consumer Credit Protection Act and the Credit Repair Organizations Act. 

It’s important to know what FACTA is so that you can fully understand your rights and protections, especially if you suspect you’ve been a victim of identity theft. 

What is the Fair and Accurate Credit Transactions Act?

The Fair and Accurate Credit Transactions Act was enacted in 2003 to make provisions to the FCRA. President George W. Bush passed this piece of legislation in response to increasing cases of identity theft. This act aimed to protect consumers, establish regulations around consumer reporting data, allow consumers to have a say in the type and quantity of marketing materials they receive and regulate the use of sensitive consumer medical information. 

The act is most known for establishing the rule that all American consumers have access to a free copy of their credit report every 12 months from all three major credit reporting agencies (Equifax, Experian and TransUnion). To accommodate this new legislation, the credit bureaus created AnnualCreditReport.com so that consumers could access their free reports quickly and easily. 

In total, FACTA has seven major titles:

1. Identity Theft Prevention and Credit History Restoration
2. Improvements in Use of and Consumer Access to Credit Information
3. Enhancing the Accuracy of Consumer Report Information
4. Limiting the Use and Sharing of Medical Information in the Financial System
5. Financial Literacy and Education Improvement
6. Protecting Employee Misconduct Investigations
7. Relation to State Laws

Overall, FACTA has provisions that impact or protect consumers, military members, mortgage lenders and credit reporting agencies. 

What does FACTA cover?

FACTA added several provisions to the Fair Credit Reporting Act, including the following:

• It allows all consumers to add extended alerts, activity duty notices and initial fraud alerts to their credit reports.
• It gives consumers the ability to check credit reports and pay for credit scores.
• Creditors may go through a reasonably thorough identity verification if a consumer has a fraud alert or an active duty alert on their file.
• If an extended alert is placed on a consumer’s file, lenders can’t issue new credit unless they contact the consumer through a previously designated method.
• Consumers can formally write to creditors to request copies of fraudulent charges opened under their name.
• Creditors must have reasonable processes in place to stop re-reporting fraudulent charges to credit reporting agencies after the identity theft has been confirmed.
• Mortgage lenders must provide consumers with a written copy of their credit scores and other factors that contributed to their decision when evaluating mortgage applications.
• Creditors must have processes in place to properly dispose of consumer information after reviewing consumers’ credit reports.
• Creditors must notify their borrowers if they’re reporting negative information to a consumer reporting agency.
• Creditors must disclose “risk-based pricing factors” and any specific notes or issues noted on the consumers’ credit reports that influence their lending decisions.
• Red Flag Rules require creditors, financial institutions and lenders to have systems in place to prevent and detect identity theft. For example, issuers of debit and credit cards always have to validate changes to a consumer’s address.

All these rules serve two purposes: first, to hold creditors and financial institutions somewhat responsible for reducing identity theft, and second, to give consumers some power to identify and correct when they have discovered that they are victims of identity fraud. 

Potential negative consequences

Ironically, while FACTA was meant to reduce the risk of identity fraud, some have argued that it has, in part, had the exact opposite result. Because some lenders might be required (by FACTA) to get more information about consumers to confirm their identities for safety purposes, this means there might be more information available for hackers to steal. Many have pointed out that since the introduction of FACTA, identity theft instances have only continued to rise. 

5 steps to take if you think you’ve been a victim of identity theft

If you believe you’re a victim of identity theft, follow these steps as soon as possible.

1. File a report with the FTC and the police

The first step is to file a report with the Federal Trade Commission (FTC) and the police. You can file an identity theft claim with the FTC by calling 877-438-4338 or filling out an online form at IdentityTheft.gov. When filing this claim, provide as many details as you can. The FTC will give you an official Identity Theft Report. You’ll need to use this report to verify your identity theft claims with creditors when attempting to repair your credit later on. 

After filing a claim with the FTC, you’ll want to file a claim with your local police station. You can bring your Identity Theft Report with you to the police. Similar to reporting to the FTC, the police report is more about leaving a paper trail to protect yourself. It’s unlikely the police will be able to do much about your case. Instead, you’ll want to keep a copy of the police report on hand when you need to dispute charges with creditors in the future. 

2. Contact your bank and other companies

The next step is to contact your bank, lenders and all types of financial institutions you’re part of. If someone is trying to use your credit card, a quick phone call to your credit card provider will halt all spending on your account. However, you may want to consider contacting the IRS or your health insurance provider if you’ve noticed someone has tried to file an income tax return or medical claim under your Social Security number. 

3. Check all three of your credit reports

Under FACTA, you’re entitled to one free copy of your credit report from each major credit reporting agency every 12 months. You’ll want to order all three copies and examine your reports for accounts you don’t recognize.

Note that you don’t necessarily need to rush to order your credit reports if your identity theft just happened. Creditors usually report to the credit reporting agencies on a monthly basis. So, it might take a couple of weeks before you’ll see the fraudulent accounts on your report. 

4. Consider freezing your credit or setting up fraud alerts

If you’re worried that your identity may be compromised and people can open new accounts under your name, consider a credit freeze or fraud alert on your account. A fraud alert stays on your credit report for a year and ensures creditors take extra precautionary measures when new accounts are opened under your name.

An added benefit of setting up a fraud alert is that it gives you access to an additional copy of your credit report—outside of the regular free report every 12 months—from each credit reporting agency. 

If you think a fraud alert isn’t enough, you can take things one step further with a credit freeze. A credit freeze will deactivate your account so your credit report won’t be shared with anyone and new credit can’t be approved. Both credit freezes and fraud alerts are free to request thanks to FACTA. 

5. Work to repair your credit

Unfortunately, working to fix your credit after identity theft is often a long and complicated process. You might want to consider getting the help of a professional credit repair service if the damage to your credit was especially bad. A credit repair agency, such as Lexington Law Firm, knows how to work with creditors and credit reporting agencies to help you file disputes and work to fix incorrect negative items.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.