Difference Between the Fair Credit Reporting Act and the Fair Debt Collection Practices Act

Most of us will use credit at one point or another, for big purchases such as homes, cars and furniture. There is a price for this resource which comes in the form of interest charges and lenders use your past history to determine how much interest you will pay. The process happens when the lender would contact Equifax, Transunion or Experian and request your file. Depending on how good your report is, your interest rate would be determined.

Now the reason for the fair credit reporting act is due to the fact that you are not included in the transaction…a creditor could easily report inaccurate or incorrect information to the bureaus and it would still be recorded on your report. There has to be some way for you the consumer to challenge any information contained in your report, and that’s what the FCRA allows you to do among other things.

It also defines the actions the bureaus must take to investigate your challenge and get back to you within a reasonable amount of time. On the other hand the fair debt collection practices act governs third party collection agencies. Once a creditor cannot collect on a severely past due debts they will usually write it off on their books and have it listed on the consumer’s report as a “charge off”. At that point it is sold to the third party collection agency, and these are the group of businesses that are covered under the FDCPA.

The reason for this act was due to all the abusive tactics that were noted by such companies. The act covers how collectors interact with consumers in the process of debt collection efforts.

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