One of the interesting provisions of the FACT Act is to help with identity theft by way of the Notice of Negative Information Provision, which is covered in section 623(A)(7).
The FACT Act requires creditors to give an early warning notice, which is to alert you that something is amiss with an account. However, the notice is not a substitute for your own close monitoring of your credit reports, bank accounts, and credit card statements. A financial institution that extends credit must send you a notice no later than 30 days after negative information is furnished to a credit bureau. Negative information includes late payments, missed payments, partial payments, or any other form of default on the account.
Does This Apply Only to Accounts With a Bank?
No. A financial institution has the same meaning as under the Gramm-Leach-Bailey Act. In addition to a bank, this can mean a merchant that extends credit to you or a collection agency that routinely reports information to a credit bureau.
Will You Get a Notice Every Time the Account is Delinquent?
It’s a one-time notice as long as the late payment or other negative information has to do with the same account. After the one-time notice, the financial institution can continue to report negative information about the same account. For example, if you are late on your credit card payment three months straight, you are only entitled to the notice either before or within 30 days after the first late payment is reported.
Will You Receive a Separate Notice or Registered Letter?
You will almost certainly not receive a registered letter. FACT Act requires the financial institution to give you this notice along with any notice “of default, any billing statement, or any other materials provided to [you].” The one place the notice cannot appear is in the Truth in Lending Act notice you get when you first open an account. The notice must be clear and conspicuous, but need not be in bold or enlarged type.
What Does the Notice Look Like?
The Federal Reserve Board was directed by Congress to write sample notices for financial institutions. Below are sample notices adopted by the Federal Reserve Board that are short and to the point.
Notice before negative information is reported. We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.
Notice after negative information is reported. We have told a credit bureau about a late payment, missed payment, or other default on your account. This information may be reflected in your credit report.
If the Original Creditor Does Not Notify You of This Negative Information, Are They in Violation of the FCRA?
Absolutely. You may sue the original creditor in court (or negotiate to merely have the negative information removed) for $1,000 per the terms of the FCRA.
