March 19, 2012

Its a FACTA, Identity Theft Victims Appear Satisfied, But There Is Room for Improvement

Seller Beware: Consumer Protection Insights for Industry

On Monday, March 12, the FTC released the results of a survey issued to identity theft victims to gauge their experiences with consumer reporting agencies (CRAs). The survey also inquired as to consumers’ experiences exercising their rights to recover from identity theft under the Fair Credit Reporting Act (FCRA) as amended by the Fair and Accurate Credit Transactions Act (FACTA). The results showed that for the most part, consumers have been satisfied with their experiences, but there is also room for improvement.

The FTC is one of the agencies tasked with enforcing the FCRA. To do so, the agency brings law enforcement actions, manages an Identity Theft Clearinghouse and offers consumer educational materials on identity theft. In 2007, an Identity Theft Task Force was created to develop a national strategy to help further combat identity theft. The Task Force recommended that consumer surveys be used to assess the impact and effectiveness of the rights established by FACTA. FACTA gives consumers, among other things, the right to place fraud alerts with CRAs and request free credit reports from each of the three national CRAs.

For this most recent survey, the FTC hired a contractor to conduct six focus groups of 52 identity theft victims across three cities to learn more about the consumers' experiences exercising their rights under FACTA. The results of these focus groups were used to craft the survey, which was then disseminated to 3000 consumers who had previously contacted the agency hotline to report that they were victims of identity theft. Some of the highlights include:

  • Of the 634 respondents, 87% contacted one or more of the three national CRAs (Equifax, Experian and TransUnion). Of these consumers, 50% contacted all three of the major CRAs.
  • The vast majority of respondents reported that they attempted to speak with a live representative. While 81% were eventually able to do so, 36% found it either somewhat or very difficult to reach a live representative, and 13% found it very difficult.
  • Most of the consumers who participated in the focus groups reported that they did not have a clear understanding of their FACTA rights and did not have a clear plan for remedying their identity theft upon contacting the CRAs. In addition, most of the participants did not know they should contact the CRAs until it was recommended to them by the FTC, a creditor or law enforcement.
  • One of the primary tools created by FACTA is the fraud alert. FACTA allows consumers who believe they have, or are about to become, identity theft victims to place an initial fraud alert on their credit files. The survey results show that 44% of participants who contacted a CRA were unaware of their right to place a fraud alert, although 85% ultimately did so. Additionally, only 60% of consumers who contacted a CRA were aware of their right to dispute inaccurate information on their credit report.
  • Both focus group and survey respondents reported concerns that upon contacting the CRAs, it was recommended that they purchase identity theft protection products, and some consumers even felt pressured to buy products or services their did not want.

The results of the survey show that while consumers that are the subject of identity theft are generally satisfied with the information and assistance they are receiving, there is certainly room for improvement. The FTC recommends that the CRAs do more to educate the public about their rights, while the agency renewed its commitment to making consumer education about identity theft an important priority. The FTC concluded that both the CRAs and the FTC should better target their outreach programs to address FACTA rights for consumers. The FTC also concluded that both it and the Consumer Financial Protection Bureau should use their authority to address consumers' concerns about CRAs selling identity theft products to victims that contact them for advice or reporting.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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