CIPP-US practice question 12 of 25

How did the Fair and Accurate Credit Transactions Act (FACTA) amend the Fair Credit Reporting Act (FCRA)?

Answer options

A: It expanded the definition of “consumer reports” to include communications relating to employee investigations

B: It increased the obligation of organizations to dispose of consumer data in ways that prevent unauthorized access Correct answer

C: It stipulated the purpose of obtaining a consumer report can only be for a review of the employee’s credit worthiness

D: It required employers to get an employee’s consent in advance of requesting a consumer report for internal investigation purposes

Correct Answer:

B. It increased the obligation of organizations to dispose of consumer data in ways that prevent unauthorized access

Explanation

The Fair and Accurate Credit Transactions Act (FACTA) of 2003 amended the FCRA by adding several new provisions aimed at preventing identity theft. A key addition was the Disposal Rule, which mandates that any person who maintains or possesses consumer reports for a business purpose must properly dispose of such information. This involves taking reasonable measures, such as shredding or destroying electronic files, to protect against unauthorized access to or use of the information in connection with its disposal. This created a new, specific obligation for organizations regarding the data lifecycle.

Why Incorrect

A. FACTA actually excluded certain employee misconduct investigation communications from the definition of a "consumer report," thereby reducing, not expanding, FCRA's scope in this area.
C. FCRA allows consumer reports for various "permissible purposes" in employment, not just credit worthiness. FACTA did not narrow this scope.
D. The requirement for consent for employment-related consumer reports was part of the original FCRA. FACTA created exceptions for certain internal investigations.

References

1. Federal Trade Commission. (2005). Disposing of Consumer Report Information? New Rule Tells How. Section: "Who must comply with the Disposal Rule?". Retrieved from ftc.gov.

2. Swire, P. P., Desai, D. R., & Miller, C. L. M. (2022). U.S. Private-Sector Privacy: Law and Regulation for the Information Age (4th ed.). Chapter 10, Section on "The Fair and Accurate Credit Transactions Act of 2003 (FACTA)".

3. Fair and Accurate Credit Transactions Act of 2003, Pub. L. No. 108-159, 117 Stat. 1952. Section 216, "Disposal of Consumer Report Information and Records".

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