Fair and Accurate Credit Transactions Act of 2003 (FACTA)

The Fair and Accurate Credit Transactions Act of 2003, commonly known as the FACT Act or FACTA, is a United States federal law whose purpose is to help consumers protect their credit identities and recover from identity theft. It amended the Fair Credit Reporting Act, adding new consumer protections specifically aimed at the growing problem of identity-related fraud.

One of the Act's most widely used provisions entitles consumers to request and receive a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies, Equifax, Experian and TransUnion, giving individuals a regular opportunity to check their own credit history for errors or signs of fraud without paying a fee.

FACTA is the law behind the now-familiar idea that anyone in the United States can check their own credit report for free, once a year, from each major bureau — a direct response to recognizing that identity theft often goes unnoticed until a victim actively checks their own credit history. It also introduced other protections, including rules on how businesses must handle and dispose of sensitive consumer information.

Before FACTA, obtaining a credit report typically required paying a fee, which discouraged many consumers from ever reviewing their own file until a problem, like a loan denial, forced the issue.

Beyond the free annual credit report right, FACTA established fraud alert rights allowing consumers who suspect identity theft to flag their file so creditors must take extra verification steps, required businesses to truncate most of a card number on printed receipts, and set rules for the proper disposal of consumer information to prevent dumpster-diving identity theft.

FACTA's free report requirement is fulfilled in practice through a centralized website, AnnualCreditReport.com, jointly operated by the three major bureaus specifically to provide consumers a single, secure way to request their reports under the law.

FACTA is enforced primarily by the Federal Trade Commission and the Consumer Financial Protection Bureau, with businesses facing potential penalties for violations such as improperly disposing of consumer data or failing to comply with fraud alert and truncation requirements.

FACTA requires most businesses to print no more than the last five digits of a customer's card number on an electronically printed receipt, and to omit the card's expiration date entirely, specifically to reduce the risk that a discarded or stolen receipt could be used to commit fraud.

FACTA also introduced the Red Flags Rule, requiring certain financial institutions and creditors to develop a written program to detect warning signs of identity theft among new and existing accounts, formalizing a proactive fraud-detection obligation that had previously been left largely to each institution's own informal practices.

FACTA's disposal rule requires businesses that maintain consumer information derived from a credit report to take reasonable measures to properly dispose of it, such as shredding paper records or securely wiping electronic files, specifically to prevent discarded records from becoming a source of identity theft.

FACTA created a special active duty alert that service members can place on their credit file while deployed, requiring extra verification steps before new credit is extended in their name and specifically addressing the elevated identity theft risk service members face while away and less able to monitor their own accounts closely.

• AnnualCreditReport.com