Fair and Accurate Credit Transactions Act of 2003

Question 1

Fair and Accurate Credit Transactions Act of 2003 (FACT Act) Purpose?

Answer 1

• Address identity theft
• Facilitate consumer access to CRA information
• Improve the accuracy of consumer reports

Question 2

FCRA vs FACT ACT?

1) The FCRA was designed to promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies (CRAs).
2) It regulates the collection, dissemination, and use of consumer information, including consumer credit information.
3) The act ensures that consumers have access to their credit reports and the ability to dispute incorrect information.

vs

FACT ACT

Purpose:

1) The FACT Act is an amendment to the FCRA aimed at enhancing consumer protections and combating identity theft.
2) It builds on the FCRA by introducing additional provisions to improve consumer access to their credit information and to enhance the accuracy of credit reports.

Answer 2

FCRA

Key Provisions:

1) Consumer Rights: Consumers have the right to access their credit reports and dispute inaccuracies.

2) Permissible Purposes: Specifies who can access credit reports and under what circumstances (e.g., creditors, employers with consent, insurers).

3) Obligations of CRAs: CRAs must ensure the accuracy of the information they report and investigate consumer disputes.

4) Limitations on Reporting: Specifies the time limits for reporting negative information (e.g., bankruptcies for 10 years, most other negative information for 7 years).

FACT ACT

Key Provisions:

1) Free Annual Credit Reports: Requires CRAs to provide consumers with a free credit report once every 12 months upon request.

2) Fraud Alerts and Active Duty Alerts: Allows consumers to place fraud alerts on their credit reports if they suspect identity theft or are on active military duty.

3) Red Flag Rules: Mandates financial institutions and creditors to implement identity theft prevention programs to detect and respond to red flags signaling possible identity theft.

4) Credit Score Disclosures: Requires that consumers be informed of their credit scores and how they are used.

5) Truncation of Credit Card Numbers: Protects against identity theft by requiring that receipts print only the last five digits of a credit card number.

6) Dispute Procedures: Enhances procedures for consumers to dispute inaccurate information on their credit reports.

Question 3

FCRA VS FACT ACT

Key Innovations:

FCRA: Introduced basic consumer rights regarding credit reports and the responsibilities of CRAs.

FACT Act: Introduced free annual credit reports, fraud alerts, credit score disclosures, and additional protections against identity theft.

Answer 3

TRUE

Question 4

What action must be taken if a CRA decides to decline or rescind a block on information resulting from identity theft?

- a) Ignore the consumer's request
- b) Inform the consumer promptly
- c) Report the consumer to law enforcement
- d) Block all information permanently

Answer 4

Inform the consumer promptly

Question 5

What are financial institutions required to do under the Disposal Rule?

- a) Share consumer information with third parties
- b) Securely dispose of consumer information to prevent unauthorized access
- c) Store all consumer information indefinitely
- d) Disregard requests for information disposal

Answer 5

Securely dispose of consumer information to prevent unauthorized access

Question 6

18. Who must be given a notice of consumer rights under the FACT Act?
    
    • a) All consumers, regardless of their request
    • b) Consumers who report identity theft
    • c) Only consumers with perfect credit scores
    • d) Consumers with overdue loan payments

Answer 6

Consumers who report identity theft

Question 7

What are the penalties for willful noncompliance with the FACT Act?
- a) No penalties
- b) Minor fines only
- c) Actual damages, punitive damages, and attorney’s fees
- d) Mandatory community service

Answer 7

Actual damages, punitive damages, and attorney’s fees

Question 8

18. Who must be given a notice of consumer rights under the FACT Act?
    
    • a) All consumers, regardless of their request
    • b) Consumers who report identity theft
    • c) Only consumers with perfect credit scores
    • d) Consumers with overdue loan payments

Answer 8

Consumers who report identity theft

Question 9

17. What are the penalties for willful noncompliance with the FACT Act?
    
    • a) No penalties
    • b) Minor fines only
    • c) Actual damages, punitive damages, and attorney’s fees

Answer 9

Actual damages, punitive damages, and attorney’s fees

Question 10

16. What type of reports are CRAs required to provide for free annually under the FACT Act?
    
    • a) Employment reports
    • b) Medical reports
    • c) Credit reports
    • d) Insurance reports

Answer 10

Credit reports

Question 11

What must financial institutions do if they detect red flags indicating possible identity theft?
- a) Ignore the red flags
- b) Notify the affected consumer immediately
- c) Take steps to prevent and mitigate the identity theft
- d) Disclose the red flags to all account holders

Answer 11

Take steps to prevent and mitigate the identity theft

Question 12

What information must mortgage professionals provide to applicants under the FACT Act?
- a) Only the loan amount
- b) The applicant’s credit score and relevant information
- c) Details about other applicants
- d) Personal opinions about the applicant’s creditworthiness

Answer 12

The applicant’s credit score and relevant information

Question 13

Which entity primarily enforces the FACT Act?
- a) Federal Reserve
- b) Federal Trade Commission (FTC)
- c) Consumer Financial Protection Bureau (CFPB)
- d) Office of the Comptroller of the Currency (OCC)

Answer 13

Consumer Financial Protection Bureau (CFPB)

Question 14

How long must CRAs maintain an extended fraud alert?
- a) One year
- b) Three years
- c) Five years
-d) Seven years

Answer 14

Seven years

Question 15

What is a fraud alert under the FACT Act?
- a) A notification about the consumer’s employment history
- b) A statement in a consumer’s file indicating the consumer may be a victim of fraud or identity theft
- c) An alert about a consumer’s new address
- d) A warning about overdue loan payments

Answer 15

A statement in a consumer’s file indicating the consumer may be a victim of fraud or identity theft

Question 16

What should an Identity Theft Prevention Program include according to the Red Flags Rule?
- a) A method for reporting employees
- b) Processes for identifying, detecting, preventing, and mitigating identity theft
- c) Only paper-based records
- d) A list of employee salaries

Answer 16

Processes for identifying, detecting, preventing, and mitigating identity theft

Question 17

What are “covered accounts” under the Red Flags Rule?
- a) Only business accounts
- b) Personal, family, or household accounts allowing multiple payments or transactions
- c) Accounts with no transaction activity
- d) Accounts exclusively for high-income individuals

Answer 17

Personal, family, or household accounts allowing multiple payments or transactions

Question 18

8. Under the Red Flags Rule, what must a financial institution or creditor do to prevent identity theft?
   
   • a) Nothing, as identity theft is not their responsibility
   • b) Establish an Identity Theft Prevention Program
   • c) Only notify law enforcement of suspicious activities
   • d) Ignore potential identity theft cases

Answer 18

Establish an Identity Theft Prevention Program

Question 19

What is the purpose of the Red Flags Rule?
- a) To establish interest rates for mortgages
- b) To detect, prevent, and mitigate identity theft
- c) To provide grants for housing
- d) To regulate financial advisors

Answer 19

To detect, prevent, and mitigate identity theft

Question 20

Which of the following is a requirement under the Disposal Rule?
- a) Storing all consumer information indefinitely
- b) Burning, pulverizing, or shredding papers containing consumer information
- c) Sharing consumer information with unauthorized third parties
- d) Ignoring requests for information disposal

Answer 20

Burning, pulverizing, or shredding papers containing consumer information

Question 21

What is required from mortgage professionals when a consumer requests information about fraudulent transactions?
- a) An immediate response without verification
- b) Provision of transaction records within 30 days upon verified consumer request
- c) Charging a fee for the information
- d) Directing the consumer to the CRA

Answer 21

Provision of transaction records within 30 days upon verified consumer request

Question 22

4. How often can consumers request a free credit report under the FACT Act?
   
   • a) Monthly
   • b) Annually
   • c) Every six months
   • d) Every five years

Answer 22

Annually

Question 23

3. What must CRAs do when they receive a request for a fraud alert from a consumer?
   
   • a) Ignore the request if it seems frivolous
   • b) Create a fraud alert and maintain it for one year
   • c) Delete the consumer’s credit history
   • d) Forward the request to law enforcement

Answer 23

Create a fraud alert and maintain it for one year

Question 24

2. Which statement best describes an “active duty alert” under the FACT Act?
   
   • a) An alert indicating a consumer’s bankruptcy status
   • b) A statement in a consumer’s file indicating they are on active military duty
   • c) A notice about a consumer’s new loan application
   • d) An alert about a consumer’s overdue payments

Answer 24

A statement in a consumer’s file indicating they are on active military duty

Question 25

1. What was the primary reason Congress enacted the FACT Act?
   
   • a) To regulate mortgage interest rates
   • b) To address identity theft and improve the accuracy of consumer reports
   • c) To establish a national credit bureau
   • d) To provide grants for financial literacy programs

Answer 25

To address identity theft and improve the accuracy of consumer reports