President Bush recently signed into law the Fair and Accurate Credit Transactions Act of 2003, also known as the FACT Act.

This major piece of legislation will help consumers fight identity theft and correct errors to their credit files, and finally give the Federal Trade Commission authorization to study various aspects of the credit reporting industry.

“In an age when information about individuals can be found easily, sold easily, abused easily, government must act to protect individual privacy,” President Bush said during the signing ceremony. “People work hard to build up good credit histories and rely on their credit to move forward in life. Today, we’re helping to make our credit system fair, fair to all, and to better protect people from those who would abuse it.”

Some consumer advocates aren’t happy with the law, and for good reason. In some instances, the FACT Act pre-empts stricter measures passed by the states. For example, a new California law makes it much tougher for companies to share customer information with affiliated businesses. Under the new law, companies must get a customer’s permission before sharing information.

The FACT Act also restricts the use of consumers’ information among a company’s affiliates and allows consumers to opt out of sharing their information for marketing purposes. For example, your bank might have to ask you first before sharing certain information about you with an affiliate that wants to sell you insurance. You would have the option to refuse such an exchange. The restrictions on marketing solicitations with affiliates is a new privacy protection that did not exist before. However, the federal law is considered by consumer advocates to be far too generous in granting exceptions where notification and the right for a consumer to opt out won’t be required.

“We think this law fails consumers,” said Ed Mierzwinski, the consumer program director for U.S. PIRG, the national lobbying office for state Public Interest Research Groups. “The threat of stronger state laws caused Congress to act. But now the states are limited in what they can do.”

Even though the law has some flaws, it does have many provisions worth trumpeting.

In fact, some of the best provisions in the federal law — requiring businesses to verify identities and addresses before opening accounts and demanding those businesses cooperate with identity theft victims — come from recent state laws, Mierzwinski pointed out.

Chief among the new changes is the granting to consumers of a free credit report each year from the three major credit bureaus. But don’t go rushing off to get your free reports. It will most likely be anywhere from six months to a year before you can get them, according to Scott Duncan, assistant communications director for the House Committee on Financial Services.

Duncan said the FTC has been given six months to draft regulations that will specify how the free credit report distribution system will work.

After that, the agency has an additional six months to make those rules final and fully functional.