The Consumer Credit Protection Act (CCPA) was enacted in 1968 to help guarantee American consumers fair and honest credit practices. This federal legislation standardized practices to ensure lenders throughout the country followed the same sets of regulations.
As banking and credit reporting evolved, additional laws were developed and put into place under the Consumer Credit Protection Act. Although each has a special niche among the financial guidelines, they share a common trait: they were written to protect consumers.
Now the CCPA is an overarching law that contains several acts with more precise scopes. Among these specific laws are the Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Electronic Fund Transfer Act.
One of the key provisions of the Consumer Credit Protection Act deals with garnishment of wages and the ability of an employer to fire a worker who is subject to wage garnishment.
The provision is known as “Title III” and it restricts the amount of earnings that may be garnished to 25% of disposable weekly earnings (that which is left after mandatory deductions for taxes) or the amount by which disposable earnings are greater than 30 times the minimum wage.
An employee can’t be fired because of earnings subject to garnishment for one debt. However, if two or more debts become subject to garnishment, the employee can be fired.
Wage garnishment can only happen through a court judgment. This provision applies to any wage earner, including earnings from pensions or retirement programs.
There are some exceptions to Title III: child support, state and federal tax payments and bankruptcy judgments can allow for a higher percentage of earnings to be garnished. For example, a court could garnish 50% of your earnings for child support payments.
Some states have laws that differ slightly from Title III. For example, wage garnishment is prohibited in South Carolina. In Texas, wages can only be garnished for child support. Pennsylvania only allows wage garnishment for payment of child support and taxes. North Carolina permits wage garnishment only in cases involving child support, taxes and payment for medical services at a “public” hospital. California is a community property state, meaning the wages of a spouse are subject to being levied.
It is best to review the garnishment laws in your state to see whether they differ from the federal law.
Fair Credit Reporting Act
Enacted in 1970, the Fair Credit Reporting Act (FCRA) was the first federal law to regulate how your personal information is used by a private business. This act safeguards your credit by requiring consumer reporting agencies to follow certain standards. It gives you the right to a free credit report annually, protected access and accurate reporting. This act gives you the right to have inaccuracies fixed in a timely manner as well as the right to sue and seek damages for violations.
The Fair Credit Reporting Act contains three smaller acts: The Credit CARD Act, the Dodd-Frank Act and the Fair and Accurate Credit Transactions Act. These deal with the accountability of credit card companies and your rights if someone steals your identity.
Truth in Lending Act
The Truth in Lending Act (TILA) provides consumers with relief from unfair billing practices and deceptive advertising by banks and credit card companies.
TILA requires lenders to provide complete loan cost information to consumers so they can make fair comparisons when shopping for loans. The act has been amended several times, notably in 2008 when it took aim at deceptive lending and servicing practices that contributed to the real estate collapse.
A 2010 amendment granted rulemaking authority under TILA to the Consumer Financial Protection Bureau (CFPB). The CFPB promptly issued rules prohibiting mandatory arbitrations and waivers of consumer rights as well as ability-to-pay requirements for mortgage loans.
Among the key provisions of TILA is the right of rescission, which allows consumers three days to reconsider a loan and back out without losing money.
Equal Credit Opportunity Act
Enacted in 1976, the Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating based on religion, sex, race, color, marital status, national origin, age or because you receive public assistance when determining credit worthiness. Enforced by the Federal Trade Commission, this act protects you from unfairness when applying for credit.
Fair Debt Collection Practices Act
Enacted in 1977, the Fair Debt Collection Practices Act (FDCPA) concerns the way you are treated and contacted by debt collectors. It provides collection agencies with a list of rules to follow that protect you from harassment, false statements and unfair practices. For example, debt collectors can only contact you between 8 a.m. and 9 p.m. They must identify themselves as collectors and explain why they have called. They aren’t allowed to contact you at work if your employer does not approve or if you request they stop contact in writing.
Electronic Fund Transfer Act
Enacted in 1978, the Electronic Fund Transfer Act (EFTA) protects you when you transfer funds electronically, whether you are using an ATM, swiping your debit card at a point-of-sale terminal or paying a bill over the telephone. This act is limited to transactions that immediately withdraw the funds from your account. The act protects you from fraud and limits your liability if your card is lost or stolen. It requires companies to disclose information regarding fees and liability regulations when they issue you cards. It also protects your right to choose a form of payment other than an electronic fund transfer.
Other Consumer Protection Laws Under the CCPA
Congress added several provisions – Title I, Title II, Title III and Title IV – to the Consumer Credit Protection Act to address specific concerns they had with lenders and offer more protection for consumers. Those additions include:
- Title I Awareness of costs. This an attempt by Congress to force lenders to make consumers aware of all the costs of credit. That included meaningful disclosure of credit terms so that consumers could compare various credit terms. This was meant to protect consumers from inaccurate or unfair credit billing and credit card practices. It also was aimed at auto dealerships who provide car leases that confused consumers and resulted in far higher expenses for the consumer. It specifically mentions balloon payments and the need to be sure the consumer understood the terms and responsibilities for those.
- Title II Protection from extortion. This deals with use of extortion to collect debts. The law prohibits express or implicit threat of the use of violence or other criminal means to cause harm to a person, reputation or property as a way to enforce repayment. It also forbids lending money to anyone, who would then use the money to make extortionate extensions of credit.
- Title III Garnishment protection. This was another attempt to protect consumers by limiting the amount of their wages that could be garnished and protects the employee from being fired if pay is garnished for only one debt.
- Title IV Protection from credit repair companies. This was added to protect consumers from credit repair organizations engaged in unfair or deceptive advertising and business practices. Congress felt that credit repair organizations caused financial hardship on consumers, especially people with limited economic means or were inexperienced in credit matter. It directs credit repair organizations to provide consumers with the information necessary to make an informed decision.