Common Fair Credit Reporting Act Violations Explained

Credit reporting errors happen more often than you'd think, and when they do, they can become a major headache for anyone trying to collect a debt. Suppose you're a collection agency, law firm, or company dealing with credit issues. In that case, you're probably already familiar with how tricky it can get when someone claims a violation of the Fair Credit Reporting Act (FCRA).

The FCRA is meant to protect consumers from inaccurate or unfair reporting. But even small missteps, like reporting outdated balances or mixing up identities, can lead to big problems. These violations don’t just cause delays. They can trigger lawsuits, damage reputations, and disrupt recovery efforts. 

In this blog, we’ll walk you through the most common Fair Credit Reporting Act violations so you know what to watch out for and how to avoid costly consequences.

The Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) sets the rules for handling consumer credit data. For collection agencies, law firms, and credit issue companies, understanding their core provisions is essential for staying compliant and avoiding costly mistakes.

1. Purpose of the Fair Credit Reporting Act

Section 602 defines the purpose of the FCRA: to ensure fairness, accuracy, and privacy in how consumer information is used. You must rely on accurate data when collecting debts or handling legal actions.

The law promotes:

• Accurate reporting of consumer information
• Protection from misuse of credit data
• Proper sharing of data with authorized parties

2. Regulation of Credit Reporting Agencies

The FCRA outlines clear rules for credit reporting agencies (CRAs), which can also affect your operations.

Key sections to note:

• Section 603 defines what qualifies as a consumer report and who qualifies as a CRA
• Section 607 requires CRAs to ensure the accuracy of reported data
• Section 611 mandates that CRAs investigate disputes within 30 days

For your team, this means ensuring the accuracy of the data you're working with and knowing how to handle disputes quickly and effectively.

3. Consumer Rights Upheld by FCRA

The FCRA also protects consumers' rights. These include:

• Section 609: The right to request a copy of their credit report
• Section 604: The requirement that credit reports only be accessed for a permissible purpose
• Section 610: The right to know the sources of information in their credit report
• Section 611: The right to dispute inaccurate or incomplete data
• Section 615: The right to be notified if their credit report leads to adverse action, such as a credit denial

Compliance often depends on how well your systems communicate. Tratta’s REST APIs make it easy to integrate and maintain accurate data exchange across platforms.

Once you understand the framework, the next step is to look at one of the most common violations: reporting data that is either inaccurate or no longer relevant.

Also Read: Understanding Regulation F's Impact on Debt Collection Practices

Furnishing and Reporting Inaccurate or Old Information

Accurate and timely reporting is crucial in debt collection and legal recovery. Under the FCRA, collection agencies must ensure that the information you report is correct. Inaccurate or outdated data can cause disputes, compliance issues, and legal challenges.

1. Timeliness and Accuracy Requirements

Section 607 of the FCRA requires that the information reported by credit furnishers is accurate and updated regularly. This includes:

• Verifying information before it’s submitted to credit reporting agencies (CRAs)
• Correcting any errors found in the data
• Updating reports to reflect changes like debt settlements or payments

The data you rely on must be precise for collection agencies, law firms, and credit issue companies. Using outdated or incorrect information can delay your collection process or interfere with your legal actions.

2. Examples of Inaccurate or Outdated Information

Some common examples of inaccurate or outdated information include:

• Outdated account statuses: For instance, a past-due account may still be marked as current
• Incorrect payment history: Payments might not be recorded appropriately or reported inaccurately
• Old balances: Settled or paid-off balances may still be listed as due
• Mixed-up identities: Information from one person may be mistakenly listed under another due to similar names or Social Security numbers

While handling collections, catching these errors early is essential to avoid complications in your recovery efforts.

3. Implications of Outdated and Inaccurate Reporting

Inaccurate or outdated reporting can seriously affect consumers, agencies, and legal teams managing consumer or commercial debt. Some of the risks include:

• Legal disputes: Inaccurate reporting may lead to lawsuits under the FCRA, resulting in time and cost burdens for your business
• Regulatory action: Failing to meet the FCRA’s accuracy and timeliness requirements could prompt investigations by regulatory bodies like the Consumer Financial Protection Bureau (CFPB)
• Damaged reputation: Consumers may lose trust in your agency if they discover that incorrect data has been reported, making it harder to collect on debts

Staying compliant starts with visibility. Use Tratta’s Reporting and Analytics to track and audit your data accuracy across accounts in real-time.

In addition to data accuracy, the FCRA also sets boundaries on who can access credit information and for what purpose. This leads us to the next critical area: privacy violations and unauthorized access.

Also Read: Understanding the 7-in-7 Rule for Debt Collection

Privacy Violations and Unauthorized Access

Privacy is a fundamental part of the Fair Credit Reporting Act (FCRA), which every collection agency, law firm, and credit issue company must take seriously. Violating privacy laws or accessing credit information without proper authorization can have serious consequences.

1. Defining Privacy Violations

Privacy violations occur when credit information is accessed or shared in ways that don’t align with the FCRA’s strict rules. Section 604 of the FCRA outlines when and how credit reports can be accessed. You must ensure that:

• Accessing credit reports is done for a permissible purpose, such as debt collection, credit underwriting, or employment screening
• Consumer consent is obtained if required, especially when accessing sensitive personal information

If you access a credit report for any reason other than those the FCRA allows, it’s considered an unauthorized access violation.

2. Consequences of Unauthorized Access to Credit Reports

Unauthorized access to consumer credit reports can lead to significant legal and financial consequences for your agency. Some of the potential risks include:

• Legal action: Consumers can sue for damages if their credit report is accessed without proper authorization
• Fines and penalties: The FCRA allows for civil penalties, including fines for each violation of unauthorized access
• Loss of reputation: If consumers or clients learn that their information was accessed improperly, it can severely damage your agency’s reputation, impacting your future business relationships

For collection agencies and law firms, ensuring that all access to consumer credit reports is authorized helps avoid these penalties and protects your agency’s standing in the industry.

3. Remedies for Privacy Violations

If a privacy violation occurs, there are steps you can take to resolve the issue:

• Correct the breach immediately: If a violation of privacy is discovered, take swift action to correct the error and prevent further unauthorized access
• Notify the consumer: If their credit report was accessed without permission, inform them about the breach and explain the steps you're taking to resolve it
• Implement better controls: Strengthen your access protocols to ensure that only authorized personnel can view sensitive credit information
• Legal action and settlements: Consumers may be entitled to compensation depending on the situation. You may need to settle or go through legal proceedings to resolve any damages

Even with the best intentions, errors can occur when consumer files get mixed or data is misattributed. This type of mistake can trigger compliance issues and damage trust.

Also Read: TCPA Consent Rule Changes for 2025

Mixed Files and Incorrect Reporting

Mixed files are a common issue that can cause serious problems for consumers and businesses in the debt collection industry. Under the FCRA, collection agencies, law firms, and credit reporting companies need to ensure that credit reports are accurately attributed to the right individual. Misreporting due to mixed files can lead to confusion and disputes, ultimately complicating the collection process.

1. Definition and Examples of Mixed Files

A mixed file occurs when information from two or more consumers is merged or mistakenly attributed to a single credit report. This can happen when:

• Consumers share similar names or Social Security numbers
• Credit reporting agencies incorrectly match personal data, leading to an inaccurate report

Examples of mixed files include:

• A debtor’s credit report containing information from someone with a similar name, leading to the wrong credit history being used in collections
• A married couple’s separate accounts being mistakenly merged under a single report
• An individual’s report being mistakenly combined with that of a relative or roommate

2. Impact of Mixed Files on Consumer Credit

Mixed files can have serious consequences for consumers, and they can complicate your collection efforts. Some impacts include:

• Incorrect credit scores: A mixed file can cause a consumer’s credit score to be higher or lower than it should be, based on incorrect data
• Wrongful collections: If an account is wrongly attributed to a consumer, they could face collections for debts they don't owe
• Delay in resolution: Incorrect reporting can delay debt recovery efforts, as consumers may dispute the information and request it be corrected
• Legal issues: If mixed files lead to incorrect legal actions, it could result in lawsuits or damage your agency’s reputation

3. Remediation Steps for Mixed File Errors

When mixed files are identified, it’s essential to act quickly to resolve the issue. Here’s how your business can address mixed file errors:

• Initiate an investigation: Under Section 611 of the FCRA, once a dispute is raised about a mixed file, you must investigate the issue within 30 days and correct any inaccuracies
• Correct credit report: If a mixed file is discovered, ensure that the consumer’s credit report is corrected by removing any inaccurate information or transferring it to the correct individual
• Notify the consumer: Inform the affected consumer about the mixed file issue and the steps taken to correct it
• Work with credit reporting agencies: Collaborate with credit bureaus to ensure that mixed files are properly flagged and that the correct information is reported going forward
• Improve data entry protocols: Ensure that your team follows strict protocols to verify consumer identity information to avoid future mixed file issues

If your current tools can’t adapt to the nuances of your data, errors become more likely. Tratta’s Customization & Flexibility ensure your system aligns with your workflow and compliance standards.

Another key part of staying compliant involves knowing how to handle disputes. When a consumer challenges a credit report entry, how you respond can make all the difference.

Failing to Follow Debt Dispute Procedures

Debt disputes are a common and important part of the collection process. Collection agencies, law firms, and credit issue companies must follow the right procedures when handling disputes to avoid legal problems and ensure compliance with the Fair Credit Reporting Act (FCRA). 

1. Credit Bureau Responsibilities During Disputes

Under Section 611 of the FCRA, credit bureaus have specific duties to investigate the claim when a consumer disputes an item on their credit report. The credit bureaus must:

• Investigate disputes: They must conduct a reasonable investigation into the dispute within 30 days of receiving a notice
• Notify furnishers: If a consumer disputes a debt or item, the credit bureau must notify the party that provided the information (e.g., your agency or law firm)
• Report results: After investigating, the credit bureau must notify the consumer about the results of the dispute and update the report accordingly if the dispute is resolved

2. Consumer Rights in Disputing Debts

Consumers have several rights when it comes to disputing debts under the FCRA:

• Right to dispute: Consumers can dispute any item on their credit report that they believe is inaccurate or incomplete
• Right to notification: If a debt dispute is successful, the consumer has the right to be notified about the resolution
• Right to corrections: If a dispute results in an error, the consumer has the right to have the report corrected or the item removed
• Right to add a statement: If a dispute is not resolved in their favor, consumers can add a statement of dispute to their credit report, which will be included in any future credit inquiries

3. Outcomes of Procedural Failures in Disputes

Failing to follow proper dispute procedures can lead to several negative outcomes, including:

• Legal consequences: If your agency or law firm fails to investigate a dispute within the required time frame or does not handle it correctly, consumers can file lawsuits for noncompliance, resulting in financial penalties
• Regulatory scrutiny: The Consumer Financial Protection Bureau (CFPB) and other regulatory bodies may investigate failures to follow proper dispute procedures, leading to fines and reputational damage
• Delayed collections: Incorrectly or improperly handling a dispute can prolong the debt recovery process and delay any collection actions
• Damaged relationships with consumers: Disputes mismanaged may erode trust with consumers, making it harder to resolve future debts or obtain favorable outcomes in other legal matters

To avoid these negative consequences, your business needs to be thorough and compliant with FCRA dispute procedures. This ensures that disputes are resolved promptly, and the collection process remains efficient and legally sound.

Conclusion

Understanding and addressing FCRA violations is vital for collection agencies, law firms, and credit issue companies. It ensures compliance with the law and protects your business’s reputation and consumer relationships. By staying proactive and informed, you can avoid costly mistakes and manage credit reports accurately, minimizing disputes and maintaining client trust.

If your business is unsure about handling FCRA requirements or needs help ensuring compliance, seeking legal assistance is a wise move. Legal professionals can guide you through complex regulations and help mitigate the risks of violations. 

Get started today with a free demo of Tratta’s tools to streamline your processes and stay compliant with ease.