Through the Consumer Financial Protection Bureau, a national watchdog organization, the federal government works to protect the rights of consumers and their use of credit. Lenders, credit-reporting agencies, collectors and other users of credit information all must follow strict guidelines set forth and enforced by the bureau. Many of the regulations the CFPB now monitors were originally enacted in direct response to past consumer abuses. Some states, in addition provide consumer protection as well.
Equal Credit Opportunity Act, ECOA
One of the first laws enacted by the federal government to protect consumers makes it illegal to discriminate against credit applicants. This includes discrimination with respect to race, color, religion, nationality, sex, marital status or age. It is also unlawful under ECOA to discriminate against applicants whose income is derived in any way from a public assistance program.
This act applies to any person who operates a credit and lending institution and makes lending decisions, as well as the organization itself. There are stiff civil and criminal penalties associated with discrimination in lending.
Truth in Lending Act
This act requires lenders to disclose the annual percentage rate and other terms of credit to the consumer in writing.
Fair Credit Billing Act
This protects consumers from errors in billing on revolving credit accounts. The FCBA limits consumer responsibility for unauthorized charges, charges for goods and services that were not delivered as agreed, and billing errors made by the credit provider.
Fair Credit Reporting Act
Under the FCRA, credit-reporting agencies, CRA’s must follow specific guidelines regarding the way credit data is reported. The act also details the requirements for removal of inaccurate or unverified items by credit-reporting agencies.
In compliance with the Fair Credit Reporting Act, credit-reporting agencies must strive to maintain accurate records of consumer accounts and to verify the validity of information reported if disputed by the consumer, http://www.yale.edu/hronline/careers/screening/documents/FairCreditReportingAct.pdf. Under the FCRA credit bureaus have 30 days to respond to a consumer’s request for investigation of a reported item. If they find the information reported to be in error they must remove it from the consumer credit file.
If after removing a negative item from the credit bureau report the item must be reinserted into the credit file, the credit bureau must notify the consumer in writing within five days. Credit bureaus must also remove certain negative information such as late payments, tax liens, bankruptcies and judgments within a prescribed time period, (usually 7-10 years).
Creditors, collection agencies, landlords, courts of law, and employers are also required to follow FCRA guidelines when furnishing information to credit-reporting agencies. The FCRA requires that:
- All information reported must be complete and accurate.
- Within 30 days of receiving a consumer notice of dispute, creditors must correct any error or notify the consumer why there is no error.
- Within 30 days, they must inform the consumer that negative information is or has been placed on credit bureau reports. They do not have to notify the consumer in a separate correspondence. They may include this information on the customer’s monthly payment statement.
Users of Information
An information user includes any lender, insurance company, or employer. They are required to:
- Notify the consumer if they have been turned down for any reason based on their consumer credit report.
- Provide consumers with the name of the credit-reporting agency from which information was gathered to make the decision. This allows the consumer to verify or dispute any information on the credit report that may have adversely affected them.
In 2003, an amendment to the FCRA, known as the Fair and Accurate Credit Transactions Act, FACTA passed that required each of the three major credit bureaus, Equifax, TansUnion, and Experian to provide consumers with a credit report free of charge, once every twelve months. The free credit report government mandated requirement allows consumers greater access and opportunity to monitor their credit reports regularly.
The Fair Debt Collection Practices Act
FDCPA regulates the collection practices of creditors and collection agencies. The Consumer Financial Protection Bureau oversees and enforces debt collection practices. Major violations to the FDCPA include:
- Calling Your Place of Employment
Creditors and collection agencies are prohibited from calling you at work if they are previously aware that your company has a policy that forbids this. They are also forbidden from calling you if you specifically tell them you do not wish to be called at work again.
- Contacting Friends and Family Members
It is a violation of the Fair Debt Collection Practices Act for creditors or collection agencies to contact a third party, such as a friend or family member of the debtor. Collectors know that you are more likely to return their calls if they contact a family member or friend of yours.
Out of embarrassment and fear that collectors will call others, most people will contact a collection agency immediately. This practice is illegal however, and a clear violation of the FDCPA.
- Speaking To You in an Abusive or Harassing Manner
It is illegal for collectors to verbally threaten you, swear at you, or call you names. While simply talking in a rude manner may not be a violation, using profanity and threats is abusive and illegal.
- Misrepresenting Themselves
Under the FDCPA no creditor or collection agency may represent himself as someone, or some organization they are not, such as an attorney or government agency. They may also not threaten to file a lawsuit if they have no intention of doing so.
- Calling Your Home At Inconvenient Hours
A creditor or collection agency may not call your home before 8 am or after 9pm. If they do so, it is a direct violation of the FDCPA.
The Consumer Credit Protection Act
This act regulates the amount a creditor may garnish your wages and prohibits employers from firing you if your wages are attached.
Because credit is a vital part of our economy both globally and locally, the Consumer Financial Protection Bureau plays an important role protecting consumers from abuses within the lending industry. Federal and state laws are constantly changing and BestCredit.net provides you with the up-to-date information you need to protect yourself and make good financial decisions for your future. The next time you apply for credit, it’s nice to know someone is watching out for you!