Mortgage Loan Originator (MLO) Licensing Practice Test

Which legislation allows consumers to obtain one free credit report per year from each credit repository?

1. Gramm-Leach-Bliley Act

2. Fair and Accurate Credit Transactions Act

3. Equal Credit Opportunity Act

4. Truth in Lending Act

The correct answer is: Fair and Accurate Credit Transactions Act

The Fair and Accurate Credit Transactions Act (FACTA) is the legislation that specifically allows consumers to obtain one free credit report per year from each of the three major credit repositories: Equifax, Experian, and TransUnion. This act was enacted in 2003 and aimed to enhance consumer protection against identity theft and ensure consumers have the ability to review their credit information for accuracy. Under FACTA, consumers can request their free credit reports online, by phone, or through the mail, which promotes transparency in the credit reporting process. This empowers consumers to monitor their credit history and take proactive steps to address any inaccuracies, thus helping them maintain good credit health. The other mentioned legislation has different focuses. The Gramm-Leach-Bliley Act primarily deals with financial privacy and the sharing of information by financial institutions. The Equal Credit Opportunity Act prohibits discrimination in credit transactions to ensure fair lending practices. The Truth in Lending Act aims to promote informed use of consumer credit by requiring disclosures about terms and costs. While all these laws play essential roles in consumer finance, it is FACTA that directly relates to the provision of free annual credit reports.