FACTA: What's the Fair and Accurate Credit Transactions Act?

Becoming a victim of identity theft or other financial fraud is an experience most people would probably like to avoid. Thankfully, there are laws that can help protect consumers’ personally identifiable information and support those who’ve been affected.

The Fair and Accurate Credit Transactions Act of 2003 (FACTA), for example, strengthens consumer protections against identity theft, inaccurate credit reporting and fraudulent credit activities. FACTA, sometimes also referred to as the FACT Act, is a federal law that was written to be an amendment to the Fair Credit Reporting Act (FCRA), which helps protect consumer credit information. 

Key takeaways

• FACTA amends the FCRA to help consumers protect their credit information and make sure it’s accurate.
• With FACTA, consumers can get information about their credit, including credit reports, credit scores and insights into lending decisions.
• FACTA helps prevent identity theft by letting consumers place fraud alerts on their credit reports and protecting their sensitive information.
• Financial institutions, like banks and credit unions, credit reporting bureaus and other users of consumer reports, must comply with FACTA. 

FACTA contains several provisions to protect access to consumer information and prevent identity theft. It’s not to be confused with FATCA, the Foreign Account Tax Compliance Act.

Consumer access to information

FACTA contains several measures to help consumers get information about their credit, including:

• Free credit reports: FACTA was the motivation for the three major credit bureaus—Equifax®, Experian® and TransUnion®—to establish AnnualCreditReport.com. Consumers can request a free copy of their credit report once a year from each bureau. All three are currently offering one free credit report per week until December 31, 2023.
• Credit scores for a fee: Under FACTA, consumers may buy their credit scores, along with information about how the score was calculated, from credit reporting bureaus.
• Mortgage decision information: Mortgage lenders must provide consumers with copies of credit information that factored into any mortgage lending decisions. 

Identity theft protection

Identity theft provisions in FACTA include:

• Availability of alerts: Victims of identity theft can typically place a fraud alert on their credit reports.
• Fraudulent information blocking: Credit reporting bureaus are required to block fraudulent information from being distributed and to inform other credit bureaus.
• Protection of credit and debit card information: During a transaction, businesses can print only up to five digits of the customer’s credit card or debit card number and can’t include the expiration date on the receipt.
• Proper disposal of consumer information: Anyone who uses a consumer report for business purposes must take reasonable measures to securely dispose of any materials containing consumers’ sensitive information.

Development of the Financial Literacy and Education Commission

FACTA established the Financial Literacy and Education Commission in 2003. Led by the U.S. secretary of the Treasury, the commission sets best practices for teaching financial literacy at higher education institutions and reviews federal programs to support the financial well-being of Americans.

FACTA also developed a financial literacy website called MyMoney.gov. The site includes resources for educators, researchers and people who are new to money management.

The Federal Trade Commission (FTC) created the Red Flags Rule in 2008 to add to FACTA’s efforts. The rule helps detect red flags—suspicious patterns or actions—and reduce the damage caused by identity theft to covered accounts like credit card or savings accounts.

FACTA is an amendment to the FCRA. Anyone who uses credit reports to evaluate an individual, for example to determine creditworthiness or eligibility for government benefits, should comply with FACTA. This covers government entities, financial institutions and individuals, as well as:

Credit bureaus

This includes Equifax, Experian and TransUnion as well as other smaller groups that report consumer credit information. It might also include companies that use credit information to help landlords screen potential tenants or employers screen job candidates.

Furnishers

A furnisher is any company, like a lender, that reports people’s credit information to credit bureaus. Under the FCRA’s furnisher rule, they must make sure the information they provide is accurate.

FACTA is enforced by the FTC. Penalties for noncompliance with FACTA typically include a federal penalty of up to $2,500 and a state penalty of up to $1,000 for each violation.

FACTA protects consumers by providing things like preventive measures against identity theft and free access to annual credit reports. There are also things that you as a consumer can do to help safeguard your credit and personal information. For example, monitoring your credit could give you a chance to check for errors and help detect fraudulent activity. 

Using CreditWise from Capital One is one way you can monitor your scores and report for free anytime, without hurting your credit scores. Plus, it’s free for everyone—even if you don’t have a Capital One credit card.