Signed into law by George W. Bush in 2003, the Fair and Accurate Credit Transactions Act (FACTA) is designed to help shield consumers from identity theft.
An amendment to the Fair Credit Reporting Act, FACTA has key provisions that hold lenders and merchants to a higher standard, with regards to the protection of their patron’s data. Another key benefit is free access to credit reports, along with fraud alerts if your identity is compromised.
Read on to learn more about FACTA and how it helps protects consumers from identity theft.
Key Provisions of FACTA
Merchants and Card Protections
When you swipe your credit or debit card to make a purchase, you may notice that only the last four digits appear on your receipt. The other 12-digits are notated with an “X” so anyone viewing the receipt won’t be able to make out your full card number.
But why do merchants do this? Well, FACTA mandates that merchants truncate your credit card number to add another layer of protection of your financial information and protect you from identity theft. And failure to comply will result in a $100 to $1,000 fine from the Consumer Financial Protection Bureau to the merchant.
What about circumstances that warrant a written receipt because the merchant is not currently swiping cards for payment due to a power outage? In this case, the merchant is not in direct violation of FACTA since the credit card number is not recorded in the payment processing system with a swipe. Consequently, it will have to be input manually at another time to complete the purchase.
Free Access to Credit Reports
Thanks to FACTA, you can access your credit reports from the three credit bureaus on an annual basis for free. All you have to do is visit AnnualCreditReport.com, a site created to comply with the provisions of FACTA, to get started. You should also know that your credit score won’t be impacted when you check your own credit report.
Quick note: there are several websites offering free credit reports from the three credit bureaus. However, the only legitimate site to obtain your official credit reports without incurring a fee is AnnualCreditReport.com.
Do you suspect you’ve been victimized by a fraudster? If so, FACTA allows you to place a fraud alert on your credit report for 90 days, free of charge.
Doing so not only alerts creditors and lenders that you’ve been victimized by fraud, but it adds another layer of protection when you apply for credit. How so? Well, as creditors and lenders are required to do additional legwork to verify the authenticity of any application for credit submitted using your information.
Once the 90 days are up, you have the option to extend the fraud alert. And if you do request an extension, it’ll automatically expire after 12 months have lapsed. That’s unless you opt for another extension, which will keep the fraud alert intact for seven years.
Identity Theft and Credit Reports
It’s unfair for a consumer’s credit rating to suffer due to the presence of information stemming from identity theft. Consequently, FACTA mandates that this data be blocked from credit reports if the consumer can prove that they were victimized and the information is bogus.
Be prepared to provide the following to the credit bureaus:
- A copy of your identity theft report
- A comprehensive list of fraudulent items
- An official statement from you detailing that you played no part in the transactions
Otherwise, the credit reporting agencies have a right to leave the information intact.
Transparency from Mortgage Lenders
Long gone are the days of mortgage lenders assessing high-interest rates to credit-challenged applicants without providing additional insight. Per FACTA, they are required to provide “risk-based-pricing” disclosures so subprime borrowers understand why their rates are substantially higher than advertised. Mortgage lenders must also provide credit scores used to render a lending decision to consumers who are denied financing.
Red Flags Rule
Another key provision of FACTA is the Red Flags Rule, which requires both creditors and financial institutions to devise a written Identity Theft Prevention Program (ITTP) to help protect their customers.
But what is a red flag? Simply put, it’s any activity, pattern, or practice that possibly indicates identity theft, notes Experian.com. And for this reason, red flags should be included in the ITTP devised by the creditor or financial institution.
Under the Red Flags Rule, financial institutions must also send out a change of address notice to consumers and confirm the validity with a set window. Since a change of address is usually one of the first signs of identity theft, this practice helps minimize the damage done to consumers in the event their information is compromised.
Where Can You Find More Information About Identity Theft?
If you suspect you’ve been victimized by identity theft and need a recovery plan or just want to learn more about your rights, visit IdentityTheft.gov. Or you can check out this guide for detailed instructions on how to proceed if your personal and financial information is compromised.