Credit Protection Laws: The Consumer Credit Protection Act

Bankruptcy Law BooksYour consumer credit rights are protected in large part by the Consumer Credit Protection Act (CCPA), which became effective in the late 1960s. This act is made up of several laws which each protect an aspect of your personal credit, such as banning discrimination or requiring honest credit reports.

Since its inception, the CCPA has grown to more fully protect consumer rights. The CCPA currently has five main parts:
  • The Truth in Lending Act ensures that creditors provide complete and honest information.
  • The Fair Credit Reporting Act regulates credit reports.
  • The Equal Credit Opportunity Act prevents creditors from discriminating against individuals.
  • The Fair Debt Collection Practices Act established rules for debt collectors.
  • The Electronic Fund Transfer Act protects consumer finances during electronic payments.

Truth in Lending Act

The Truth in Lending Act (TILA) was enacted in 1969 to promote a stable economy and enforce consumer rights. Regulation Z was used to implement TILA and is typically mentioned in conjunction with act.

TILA has been amended over the years to include several other acts. The Truth in Lending Act includes the following amendments to protect consumer rights:
  • Fair Credit Billing Act
  • Fair Credit and Charge Card Disclosure Act
  • Home Equity Loan Consumer Protection Act
  • Home Ownership and Equity Protection Act

Fair Credit Billing Act

The Fair Credit Billing Act (FCBA) of 1974 provides a roadmap for settling disputes related to billing. These can include math errors, charges for the wrong date or amount, unauthorized charges and other similar errors.

For the FCBA to apply to the situation, the error must be related to an “open end” credit account – such as a credit card – or a revolving charge account – such as an account at a department store. The act does not apply to debit cards or installment contracts such as loans.

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To solve a billing dispute that falls under FCBA jurisdiction, send a letter to the creditor within 60 days of the error. Give details of the error and provide copies of receipts and other forms of proof. Send the letter to the address given for billing inquiries and request a return receipt.

After receiving your letter, the creditor must send a written reply within 30 days to acknowledge your complaint. The creditor has two billing cycles, or a maximum of 90 days, to resolve the dispute.

Your liability is limited to $50, meaning you can only be held responsible for up to $50 of unauthorized purchases on your credit card.

Fair Credit and Charge Card Disclosure Act

The Fair Credit and Charge Card Disclosure Act (FCCDA) of 1988 requires companies and financial institutions to disclose certain information when issuing you a new credit or charge card.

They must disclosure interest rates, grace periods and annual fees. If a credit card has an annual fee, you must be reminded about fee before the annual renewal.

If the company offers credit insurance, it must inform you of an increase in rate or decrease in coverage.

Home Equity Loan Consumer Protection Act

Similar to the FCCDA, the Home Equity Loan Consumer Protection Act (HELCPA) of 1988 requires lenders to disclose key information before issuing you a home equity loan.

Lenders must include information on the loan application about interest rates, payment terms and any other charges involved with the loan.

If these terms change, you can refuse to take the loan and request a refund of all application fees.

The HELCPA also prevents lenders from changing a home equity plan except under special circumstances.

Home Ownership and Equity Protection Act

The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 to curb “predatory lending.” These are lending practices designed to take advantage of consumers with lower credit scores, fewer assets and smaller incomes.

These unfair lending tactics may include lying and coercing you and taking advantage of a lack of experience with loans. Lenders might add terms and conditions to the loan which benefit themselves, or they might manipulate you and try to pressure you to agree to a loan.

However, lower income customers tend to pose a higher risk for lenders because they are less likely to be able to repay a loan. These individuals typically receive higher interest rates and fees. Because of this, it is often difficult to differentiate between valid lending and predatory lending.

HOEPA attempts to draw the line between these two loan types. It bars practices associated with predatory lending such as frequently refinancing a loan in order to charge fees.

It also requires certain fair practices. For example, lenders must take into account your ability to repay the loan with interest. They cannot offer a loan which they know you cannot repay.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) was first passed in 1970 to regulate credit reports and establish the rights of consumers. With minimal changes since then, the FCRA remains a list of consumer rights and corresponding rules that credit reporting companies must follow.

The FCRA lays out the following basic consumer rights:
  • If a credit report is used against you – such as to deny credit, insurance or employment – you have a right to know about it.
  • You have a right to know what information your credit reports contain. By request, you may obtain a free copy from each of the three national credit bureaus (Equifax, Experian and TransUnion) every year.
  • You have a right to know your credit scores. In some cases, you may be required to pay for this information.
  • If you find incomplete or inaccurate information on a credit report, you can dispute the items in question. A credit bureau must delete any information found to be wrong.
  • In most cases, credit bureaus must delete negative information older than seven years. However, bankruptcy stays on a credit report for 10 years, and information about a criminal record may remain on a credit report permanently.
  • You have the right to a certain amount of privacy, and only people with a valid need can obtain copies of your credit report. This typically includes insurers, landlords, creditors and others with a similar financial interest. An employer or potential employer can only access your credit report but only with your consent.
  • You have the right to limit unsolicited offers for credit and insurance. These offers typically are sent if you meet certain requirements such as a minimum credit score, but you may choose to opt out of such correspondence by calling 1-888-5-OPTOUT (1-888-567-8688).
  • You have the right to know who requested your credit report within the last year or, for employment-related requests, two years.
  • You have the right to seek damages from anyone violating the FCRA.

Within the Fair Credit Reporting Act are three smaller acts with more precise scopes. The Credit CARD Act increases the accountability of credit card companies. The Dodd-Frank Act keeps the biggest credit associations in check. And the Fair and Accurate Credit Transactions Act protects the rights of identity theft victims and active duty military personnel.

Credit CARD Act

The Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act) says credit card companies cannot increase the rate on an existing balance and must give you 45-day notice before increasing the rate on any new balances.

The Credit CARD Act limits fees and rate increases. It additionally requires credit card companies to provide consistent payment deadlines.

Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) was signed in 2010 to stop ongoing unfair practices of major financial institutions and creditors. The act is intended to prevent a major recession like the one which started in 2007.

The act created an independent watchdog system to monitor information given to consumers. This system is meant to ensure that consumers receive clear and accurate credit information.

It ended “too big to fail” bailouts, meaning that taxpayer money cannot be used to save failing financial firms. It also imposed new requirements of big companies to deter them from growing.

The DFA implemented a new warning system to give the government more advanced notice of problems before they significantly weaken the national economy.

It also forces big financial institutions to be more transparent and accountable. It eliminated loopholes which allowed risky and detrimental behavior, gave investors a greater say in company issues and strengthened enforcement of existing laws.

Rights of Identity Theft Victims

Identity theft is the theft and use of personal, identifying information such as a Social Security number for the purpose of committing fraud. This may include acts such as opening a new credit card account or applying for a loan under the identity theft victim’s name.

People who fall victim to identity theft have further rights under the FCRA to help protect their finances and prevent lasting damage to their credit reports.

If you are an identity theft victim, you have the following rights as outlined by the FCRA’s Fair and Accurate Credit Transactions Act (FACTA):
  • You have the right to place a “fraud alert” in your credit reports. A fraud alert makes potential creditors more wary of credit applications and inquiries in your name, protecting you from any or additional fraud.
  • You have the right to free copies of your credit reports. Peruse these documents for signs of fraud, such as an unauthorized line of credit or a change in address.
  • You have the right to request and obtain copies of documents related to fraudulent dealings. You may be required to show proof of potential identity theft, such as providing a police report.
  • Similarly, you have the right to request and obtain relevant information from debt collectors. This includes details of the debt such as the creditor and amount due.
  • You have the right to request a “block” on information resulting from identity theft. When supplied with adequate proof, credit reporting agencies can prevent an identity thief’s actions from appearing on your credit report and negatively impacting your credit score.
  • Likewise, you have the right to request that businesses not report information related to your identity theft. Once you provide proof that a thief did business in your name, the involved businesses can stop reporting the false information to credit reporting agencies. This similarly prevents the information from negatively affecting your credit report.

Rights of Active Duty Military Personnel

Active duty military personnel have one additional right under the FCRA. Special regulations allow military personnel to place “active duty alerts” in their credit reports.

As with the rights of identity theft victims, this right is outlined by the FACTA under the FCRA.

If you place an active duty alert in your report, creditors must take extra steps to verify your identity. This protects against identity theft while you are deployed by making it more difficult for thieves to impersonate you.

The alert typically lasts one year but may be canceled sooner or may be renewed for longer.

To place or remove an active duty alert, as with a fraud alert, you must call only one of the three national reporting agencies: TransUnion, Experian or Equifax. The agency you contact will then notify the remaining two.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) prohibits credit-related discrimination based on age, marital status, nationality, race, religion or sex.

The act, which dates back to 1976, additionally states that creditors cannot discriminate against individuals receiving government aid or public assistance. This type of income must be considered in the same way as any other.

Under the ECOA, creditors cannot discourage you from applying for credit because of any of these attributes. They also cannot consider any of these attributes when determining whether to grant you credit.

Should your credit application be denied, you also have the right to know why.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) promotes fair, honest and responsible debt enforcement practices. Established in 1977, the FDCPA lays out the rights of debtors.

This includes providing a list of rules for debt collectors, or people hired by a third party to collect or attempt to collect debts.

Under this act, debt collectors can only contact you between the hours of 8:00 a.m. and 9:00 p.m. They must identify themselves to you as debt collectors and must state their purpose for contacting you.

They are also prohibited from lying to you, deceiving you or harassing you.

Debt collectors cannot contact you at work if you state that your employer does not approve. Debt collectors must stop contacting you if you request this in writing.

Electronic Fund Transfer Act

The Electronic Fund Transfer Act (EFTA) was passed in 1978 to protect consumers when they transfer funds electronically.

It applies whether you are paying bills via telephone, using an automated teller machine (ATM) or using a debit card at a retail store’s point-of-sale (POS) terminal.

It only covers transactions that can immediately withdraw money from your account. The act does not apply to transactions made with credit cards.

Unique Card

The EFTA states that when a bank or credit card company gives you a debit card, the card must have a unique identification. This is determined by the magnetic strip and account number.

For additional security, the bank or company typically provides an access code or allows you to choose one. This is your personal identification number (PIN).

Liability Limits

If your card is lost or stolen, EFTA limits your liability. As soon as you notice that your debit or bank card is missing, contact the bank or company that issued it. You can contact the card issuer in person, in writing or by phone.

If you contact the issuer before anyone else uses your card, the card will be canceled immediately and you will be issued a replacement. You will not lose any money from your account.

If you contact your bank within two business days of when you noticed your card was missing, you typically have a maximum loss of $50.

This means that even if someone else used your card to spend more than this, you will only lose $50 from your account.

Some banks specify a higher loss limit. Check with your bank to make sure it has not specified a different liability maximum.

If you wait more than two business days to contact the bank or company, your liability limit increases.

Some people may not notice a lost or stolen card until they see unauthorized transfers on their monthly account statements. If this is the case, contact the bank within 60 days of the statement date. This limits your liability to $500.

If you fail to contact the card issuer within 60 days of the first incorrect account statement, you risk unlimited loss to your account. This means you are at risk of losing all the money in your account.

In order for you to be held accountable for unlimited loss, the card issuer must show that the loss would have been avoided if you had given timely notice of the card theft.

Withdrawal Limits

EFTA requires that banks limit the amount of money that can be withdrawn from your account during any given time period.

Most banks set the limit at $200 or $300 each day, meaning you cannot withdraw electronically more than this amount in cash within 24 hours. This protects you as a consumer by limiting loss in the event that your card is stolen.

Unsolicited Cards

A bank or credit company cannot issue you a debit card without your consent.  You can only be issued a card if you request it or if it is replacing another card.

Required Use

You cannot be required to use an electronic fund transfer, either to make or to receive a payment. Creditors are allowed to encourage this form of payment by offering reduced interest rates, but they must give you some additional payment option.

However, your employer may choose to pay you via direct deposit. If direct deposit is required, you are allowed to choose the bank and account where your paychecks are deposited.

Information Disclosure

When you are first issued a card, the issuer must disclose certain information to you such as fees and liability regulations.

When you make an electronic transfer, such as at an ATM, the bank must offer a receipt. If the ATM is owned or operated by someone other than your bank, you may be charged a fee. This charge must be disclosed at the time of transfer.

The bank is required to provide a periodic statement summarizing account activity.

Preauthorized Transfers

A preauthorized transfer includes any recurring transfer that you approved in advance, such as automatic bill payments.

If the amount varies each month, either your bank or the payment recipient must notify you of the amount. However, you may waive these notifications and choose instead to be notified only if the bill is not within a certain normal range.

You have the right to stop preauthorized transfers at any given time. This right cannot be waived, regardless of any opposing contract terms. To stop future automatic payments, notify your bank at least three days before the next scheduled transfer.

This set of consumer protection laws is probably not set in stone. History shows that abuses happen and that legislation eventually catches up to them.

Al Krulick

Al is an award-winning journalist with dozens of years of writing experience. He served as a drama critic, high school teacher, arts administrator, theatrical producer and director. He also dabbled in politics, running twice for a seat on the U.S. House of Representatives for Florida. Al is a Certified Debt Specialist with the International Association of Professional Debt Arbitrators and specializes in real estate, credit and bankruptcy advice.

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