Credit bureaus and loan institutions will assume the burden of keeping consumers' credit reports accurate and can face fines if they don't, federal regulators said Monday.
Amendments to the Fair Credit Reporting Act, which take effect today, are intended to better ensure consumer privacy and the accuracy of information often provided to employers.
"In the past, consumers were often frustrated because they were denied credit or employment based on inaccurate information in their credit reports, which they had trouble correcting," said Jodie Bernstein, director of the Federal Trade Commission's Bureau of Consumer Protection.
Officials said about 450 million pieces of credit information are collected each month from an estimated 1 billion credit cards in use in the U.S. They are tracked by only 661 credit bureaus.
Nearly one in five credit reports contain serious errors that "could cost someone a loan, a job or a credit card," said Michelle Meier, counsel for government affairs for the Consumers Union, a Washington-based consumer-rights group that conducted a study on the issue.
The previous law "constituted a burden of proof on consumers, but the new law shifts that burden," said Paul Richard, director of education for the National Center for Financial Education.
In response to a series of congressional and commission hearings on consumers' complaints, the amendments now require credit bureaus to conduct an investigation, review all relevant information and report inaccurate or incomplete information to all national credit bureaus.
The new law requires credit bureaus to correct mistakes within 30 days of being notified by a consumer. It also allows consumers to bring up to $1,000 in civil claims against individuals who knowingly obtain a credit report under false pretenses, and lets the FTC seek up to $2,500 in fines and injunctive relief against individuals or agencies who violate the amended act.