CREDIT PROTECTION LAWS

There are a number of credit laws that were written to protect consumers. Following is a brief description of some important ones:

The Consumer Credit Protection Act (1969)

The Consumer Credit Protection Act is a compendium of consumer protection laws that includes the:

  • Truth in Lending Act, 1969 – written to ensure the meaningful disclosure of significant credit terms to consumers
  • Restriction on Garnishment Act, 1970 – provides a maximum level of wage garnishment and prohibits an employer from terminating an employee simply because their wages have been garnished
  • Credit Repair Organizations Act, 1996 – pertains to credit repair organizations, prohibiting certain deceptive practices, and requiring mandatory disclosures
  • Fair Credit Reporting Reform Act, 1996 – protects consumers from false, misleading, or obsolete credit information by requiring consumer-reporting agencies to adopt reasonable procedures with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.
  • Equal Credit Opportunity Act, 1974 – prohibits discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, age, or if you receive public assistance or you’ve exercised your rights under the Consumer Protection Act.
  • Fair Debt Collection Practices Act, 1978 – prohibits unethical and abusive practices by debt collectors
  • Electronic Fund Transfers Act, 1989 – establishes the basic rights, responsibilities, and obligations of consumers and financial institutions involved in transactions using electronic money transfer.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit C.A.R.D. Act of 2009)

The Credit CARD Act of 2009 is a federal law passed by the U.S. Congress and signed by President Barack Obama on May 22, 2009. The Act describes its purpose to, “… amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan and for other purposes.” In other words, the new law was developed to protect consumers from the credit card industry’s abusive practices such as arbitrary interest rate changes and unfair penalties and fees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)

The definition of this Act is “To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices and for other purposes.” Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act recommended by Democratic Senator Mark Udall of Colorado entitles consumers to a free copy of their credit score if they were turned down for a credit card or auto loan. Prior to this provision, all consumers were entitled to a free annual printout of their credit report but not their actual FICO score. The consumer is also entitled to know the four greatest reasons why a score is not higher, such as delinquent accounts, a low debt-to-credit limit ratio or a history of late payments. Consumers are to receive a free FICO score if they did not qualify for the best interest rates, as well. This provision also applies to a low VantageScore (a scoring system created by the three largest credit bureaus).

Electronic Fund Transfer Act, 1989

The Electronic Fund Transfer Act establishes the basic rights, liabilities and responsibilities of both the consumers who use electronic fund transfer services and the financial institutions that offer them. Liability resulting from the fraudulent use of a debit card is limited to $50, as long as the bank is notified within two days of learning that the card has been lost or stolen. Liability is limited to $500 if you notify the card issuer within 60 days after a statement is mailed to you that an unauthorized charge was made. Wait more than 60 days, and your liability may be unlimited. Visa and MasterCard have voluntarily limited your liability to $50 or less, however, this is not mandated by law and can change at any time. After being notified of fraudulent activity or unauthorized transactions, the bank is given 45 days in which to investigate the situation and reply to the consumer. A financial institution is liable to the consumer if they fail to make an electronic fund transfer or fail to stop payment of a pre-authorized transfer when properly instructed by the consumer to do so.

Equal Credit Opportunity Act, 1974

This act ensures that all consumers are given an equal chance to get credit. It prohibits discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, age, or because you receive public assistance or have exercised your rights under the Consumer Protection Act. You have the right to know whether your application was accepted or rejected within 30 days of filing it. You also have the right to know why your application was rejected.

Fair Access to Credit Scores Act (Pending)

This act was introduced by Senator Mark Udall, D-Colorado. If the Fair Access to Credit Scores Act becomes law, it will allow free access to credit scores for anyone who is denied credit or approved for a disadvantaged rate. The individual would be given the same score that disqualified them. You’ll also be allowed a free score if a credit check resulted in the denial of potential employment.

Fair and Accurate Credit Transactions Act, 2003

FACTA was signed into law in 2003 as an amendment to the Fair Credit Reporting Act. It entitles consumers to an annual free credit report from each of the three nationwide credit reporting agencies (Equifax, Experian and TransUnion). To accomplish this goal, the agencies were required to create the website, www.annualcreditreport.com which provides free access to consumers to obtain their free credit reports. They can also be contacted at 877-322-8828. The act also assists with identity theft by enabling consumers to place alerts on their credit histories if identity theft is suspected.

Fair Credit Billing Act, 1974

This Act applies to credit accounts, such as credit cards and revolving charge accounts. Under this Act, you have the right to withhold payment for a defective purchase until the problem is resolved. If you should find an error on your statement, you are to advise the card issuer in writing within 60 days and ask that it be corrected. Errors might include a charge for a purchase not made, goods or services not delivered, payments not noted, or simple arithmetic problems. The Act requires the credit card company to promptly credit your payments and correct mistakes on your bill without damage to your credit score. The error must be acknowledged by the creditor, in writing, within 30 days after it is received, unless the problem is resolved before that time.

Fair Credit and Charge Card Disclosure Act, 1989

This Act requires credit card companies to inform consumers of the terms of the card they are offering, such as the annual percentage rate (APR), annual fee, cash advance fees, etc. The issuer is required to disclose their terms in writing at the time you apply for the card. The Fair Credit and Charge Card Disclosure Act was an addition to the Truth in Lending Act.

Fair Credit Reporting Act, 1970

The Fair Credit Reporting Act requires credit bureaus to furnish correct and complete information to lenders. You have the right to know what is in your credit report, and in most cases, the source of the information. You also have the right to dispute and correct all errors. The credit-reporting agency is required to give you a list of everyone who has requested your credit report within the past year (two years for requests related to employment).

Fair Debt Collection Protection Act, 1977

This Act limits the power of, and prevents abusive practices by, debt collectors. There is a long list of prohibited activities, which fall into two categories:

  • Actions intended to intimidate, harass, or annoy debtors.
  • Actions that are unfair, misleading, or deceptive.

For example, debt collectors may not call consumer debtors repeatedly, or at their place of business if the consumer has advised the collection agency in writing not to do so. They also can’t call you between the hours of 9:00 p.m. and 8:00 a.m.

Truth in Lending Act (1968)

This Federal law’s stated goal is: “…to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him…” It requires lenders to use uniform methods for calculating the costs of credit and for disclosing credit terms so the consumer can determine how much it will cost to borrow money. The Act also limits your liability to $50 if your credit card is lost, stolen, or used without your authorization. It prohibits the unsolicited issuance of a credit card, as well. The Fair Credit Billing Act and the Fair Credit and Charge Card Disclosures Act were later additions to the Truth in Lending Act … so are many provisions of the Credit CARD Act of 2009.