Consumer Credit Laws And What You Need To Know About Them
There are certain laws in place specifically meant to help consumers in terms of credit, debt, and the lending industry. The Consumer Credit Protection Act (CCPA) is a consumer credit law that was enacted in 1968 to ensure that consumers in the United States would receive only fair and honest credit practices. Some examples included within the law include the Fair Credit Reporting Act (FCRA) and the Truth in Lending Act (TILA). It’s important to know the details of these laws and how they can protect consumers from unfair practices.
The Fair and Accurate Credit Transactions Act of 2003 was signed into law by former President George W. Bush on December 4, 2003. The purpose of the act is to ensure that all citizens are treated fairly when applying for a mortgage or other forms of credit.
This is also known as the Consumer Credit Law. Additionally, the act:
- Gives every consumer the right to a free copy of their credit report from
- All three major credit bureaus, every year.
Helps to prevent identity theft before it happens by requiring merchants to leave all but the last 5 digits of a credit card number off store receipts.
- Creates a national system of fraud detection to make identity thieves more likely to be caught.
- Establishes a nationwide system of fraud alerts for consumers to place on their credit files.
- Requires regulators to devise a list of red flag indicators of identity theft.
- Requires lenders and credit agencies to take action before a victim even knows a crime has occurred.
The Fair Credit Reporting Act (FCRA) dictates how a consumer’s credit information can be collected and used. It governs the credit bureaus and consumer reporting agencies. As per the FCRA, consumers are legally obligated to receive their free credit report from each of the major credit bureaus, TransUnion, Equifax, and Experian on an annual basis. The consumer has a right to review their credit report to ensure that it contains only accurate information. If any errors are detected, the consumer can legally report and dispute them with the credit bureaus, which are required by law to investigate any reported errors. Once errors are confirmed, the credit bureau is required to delete or correct them.
If any inaccurate information is found on a credit report or there is outdated information that can potentially harm the consumer, that information must be removed from their credit report after seven to 10 years.
The FCRA also provides companies with instructions on reporting information to the credit bureaus and other agencies. By law, companies are prohibited from reporting information that is inaccurate. As a result, they are required to inform the consumer of any negative information that is reported to the credit bureaus and they are required to update any information that is inaccurate that was previously provided to credit bureaus. Additionally, companies are not allowed to report any accounts that were the target of identity theft once they have been notified of the crime.
Truth in Lending Act (TILA) is a federal law that sets minimum standards for the information that a creditor must provide in an installment credit contract. This information includes the amount being financed, the amount of the required minimum monthly payment, the total number of monthly payments and the annual percentage rate (APR) and must be provided to the debtor prior to entering into the consumer credit contract. The Truth in Lending Act also regulates the advertising of credit, enabling consumers to make accurate comparisons of credit offered.
The TILA determines what information is given to consumers when they are offered credit products such as credit cards and loans. As per this part of the law, the lender is required to disclose the following information:
- Annual percentage rate
- Amount financed
- Finance charges, including any additional fees and penalties
- Payment schedule
- Total repayment amount over the duration of the loan
The TILA does not include any restrictions on the amount of interest a consumer can be charged on a credit card or loan.
The Equal Credit Opportunity Act (ECOA) prevents lenders from discriminating against people or businesses based on non-financial factors. This is a consumer credit law that also applies to businesses as the majority of the others only apply to people. According to the ECOA, it’s illegal for a lender to discriminate against someone applying for credit or a loan based on the following criteria:
- Marital Status
- The Receiving of Public Assistance
In specific situations, lenders are allowed to ask for this information, but that information cannot be used to determine whether or not it gives credit to an applicant. It also cannot be used to determine the terms of those applicants who are approved.
The Fair Debt Collection Practices Act (FDCPA) governs which third-party debt collectors can collect a debt from a consumer. This particular law pertains only to personal debt and includes third-party collectors such as collection agencies and collection attorneys and not the company with whom the consumer originally created debt.
According to the FDCPA, if a debt collector calls someone close to the consumer from whom they are trying to collect a debt, they are only allowed to get contact information. By law, the collector is not allowed to inform the other person that they are trying to collect a debt from the consumer in question.
In addition, the FDCPA has mandated that debt collectors are only allowed to contact a consumer between 8 am and 9 pm unless the individual has given explicit permission to contact them at another time. Consumers can legally stop debt collectors from contacting them by writing a cease and desist letter.
Consumers can also sue any debt collector who violates their rights. You can stop debt collectors from calling you by sending them a written cease and desist letter letting them know that you want their calls to stop. When they’re trying to collect a debt from you, collectors can’t make false claims, intimidate you, harass you, call you repeatedly to irritate you or threaten to take any legal action that they’re not allowed to make or that they do not intend to make. For example, a debt collector can’t threaten to sue you if they’re not allowed to sue you or if they do not plan to sue you. Under the FDPCA, you have the right to sue a debt collector who violates your rights. You could receive up to $1,000 in addition to actual damages and attorney fees.
The Credit Repair Organizations Act (CROA) applies to consumers who are considering using the services of a credit repair company should know how the law protects them. The CROA applies to any person or business that takes money in exchange for improving your credit.
Under the CROA, credit repair companies cannot lie to your creditors about your credit history. They also cannot encourage you to lie to current or future creditors. Credit repair companies are prohibited from altering your identity in an attempt to get a new credit history.
The company must be completely honest about the services provided to you. They cannot misrepresent that they are providing you. You should not be asked to pay for services before they have been provided. All credit repair companies have to provide you with a disclosure that details your right to obtain a credit report and dispute inaccurate information yourself.
The credit repair company, before performing any services for you, should give you a contract and allow you a 3-day “cooling off” period after you’ve signed the contract. You’re allowed to cancel the contract within three days with no cancellation fee. Any company who asks you to waive your rights under the CROA is violating the law. Any waiver you sign is void and will not be enforced.
Dealing With Businesses Who Break the Law is an obligation and should be a top priority. You can complain to the Consumer Financial Protection Bureau about most financial companies who violate these rights. With enough complaints, the CFPB may impose a fine or penalty against the company and may even require the company to make full or partial refunds.
The Federal Trade Commission and your state Attorney General or other entities you can complain about companies who break the law. If you believe you’re owed damages, consult with an attorney to find out the process for filing a lawsuit against a company who has violated your rights. If you need help figuring out something confusing on your credit report, give Advantage CCS a call and ask to speak to one of our certified credit counselors. We’d be happy to help!