Imagine that some unscrupulous bank employee took your credit report, complete with your Social Security number, and started applying for credit cards in your name.
So you put a fraud alert on your credit file, warning companies not to issue credit. But one ignored it and issued another card to the identity thief.
Then imagine that when you got the bills from the thief's latest shopping spree, you contacted the bank that issued the card, but the bank wouldn't give you any information.
All those scenarios would have played out differently under the new Fair and Accurate Credit Transactions Act, which provides more tools to fight identity theft and protect consumers' privacy.
Under the law, you can request that not all of your Social Security number appear on your credit file. Also, it will be illegal for companies to ignore a fraud alert.
And every identity theft victim who files a police report can get transaction records from businesses where a thief opened accounts or bought things in his or her name.
"Before this law passed, a consumer did not have the right to obtain records where the thief used their name," said Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, a consumer organization in Washington, D.C. "Before the business would say: 'How do we know you're not a fraudster? We can't give you records you say aren't yours.' Now they have to."
The FACT Act makes sweeping changes and additions to the Fair Credit Reporting Act, which governs the accuracy and privacy of the information used in credit reports. The new act adds several provisions to combat identity theft and to enhance accuracy and consumer access to credit information. The changes affect insurers, lenders, collection agencies, employers, rental agencies and all companies that use, compile and furnish information for consumer reports.
Not tough enough
But consumer advocates have greeted the law with a lukewarm response.
"There are some parts of it that are good," said Jay Foley, co-executive director of the Identity Theft Resource Center in San Diego, which monitors identity theft crimes. "There are other parts of that that are not anywhere near as adequate as we want them to be."
Requiring businesses to provide transaction records to identity theft victims is a good thing, but "there's not one provision if they fail to provide the information," he said. "They could refuse any and all of it."
Businesses must have grounds to refuse you the information -- for example, if they're not sure of your identity, said Oscar Marquis, a partner at Oldaker, Biden & Belair LLP in Chicago and former general counsel of credit bureau TransUnion.
"The idea is not to let the fraudster actually get the information," Marquis said.
Most parts of the FACT Act go into effect Dec. 1, but that requirement takes effect June 4.
Credit report ease
The FACT Act also makes it easier to get a copy of your credit report. The act gives you the right to one free credit report each year, regardless of your circumstances, effective Dec. 1.
Indications are that consumers will take advantage of that feature of the FACT Act.
Seventy percent of consumers who have obtained their credit report have done so even though they weren't denied credit and weren't a victim of identity theft, according to a survey sponsored by Equifax, Experian and TransUnion, the three major credit bureaus.
For consumers who have a dispute about information on their credit report, the FACT Act empowers them to approach the financial institution that furnished the incorrect information.
Under current law, you have to dispute the information through the credit bureau.
Fraud alert focus
The FACT Act also requires creditors to honor fraud alert statements put by consumers on their credit files. The fraud alert tells lenders to contact a person before granting credit in his or her name because there's a risk that fraud is being perpetrated.
Many creditors haven't been vigilant about respecting fraud alerts because it hasn't been law, consumer advocates said. The fraud alert also must be included with a credit report and when consumers receive their credit scores.
"Before, credit bureaus would put an asterisk on credit reports, but it would be buried and have small type," Mierzwinski said. "Merchants didn't see them because they were buried in the credit report, and often bureaus sold them a score that didn't even include the alerts.
"Now, the alert will be sold with any product, and it will be illegal to issue credit when there is a fraud alert."
The FACT Act also requires a credit bureau to inform other bureaus that a fraud alert has been placed in the file.
The act aims to cut down on identity theft by limiting the circulation of credit-card and Social Security numbers. Also under the FACT Act, businesses must leave all but the last five digits of a credit-card number off receipts.
Consumer advocates say that while the FACT Act is a step forward in some ways, it also trips up some stronger state laws.
"Virtually every single positive reform in this law is based on recent state laws," Mierzwinski said. "The states have been the leaders, and Congress is taking the state cops off the beat."
Features of the FACT Act include:
¢ Allowing every consumer one free credit report a year.
¢ Requiring that credit-card numbers be masked on cash register receipts.
¢ Enabling identity theft victims to call one credit bureau to place a fraud alert in their credit file, with other bureaus automatically notified.
¢ Making it illegal for a company to ignore a fraud alert.
¢ Requiring businesses to provide identity theft victims with records of transactions that a thief has generated.
¢ Prohibiting a bank from sharing medical information about you with its affiliates.
¢ Enabling consumers to dispute mistakes on their credit reports by approaching the creditor that furnished the information.
¢ Promoting financial literacy.