Consumer Credit Rights

This section of our Credit Management Series explains what credit laws exist and what your consumer credit rights are.

US Credit Laws

In order to understand consumer credit rights, you have to know what credit laws the US government has enacted to protect you. There are four major credit laws that govern consumer credit rights and how creditors are able to treat you:

The Truth in Lending Act (enacted 1968)

• Total Principal Amount being Financed
• Payment Due Date and Terms
• Total Finance Charges
• Application Fees
• Service Fees
• Pre-Payment Penalties

Q. If I don’t like the terms of the loan, can I back out?
A. Yes. Neither the lender nor anyone working for the lender can charge you for providing terms and costs of the loan.

• Business Related Credit Transactions
• Securities and Commodities Accounts handled by A Broker registered with the Security and Exchange Commission
• Credit Transactions over $75,000.00 (as of 2002); before that credit transactions over $25,000.00 (except consumer’s primary residence)
• Public Utilities regulated by State Law
• Loans made, insured, or guaranteed for by a Program Authorized by Title IV of the Higher Education Act of 1965
• Any Transactions determined not to uphold the purposes behind Truth in Lending Act

The Fair Credit Reporting Act (enacted 1970)

The Fair Credit Reporting Act was created to regulate individual’s personal information (i.e. credit history) assembled by credit reporting agencies. This credit law primarily defends consumers by requiring credit reporting agencies to follow "reasonable procedures" to protect the confidentiality, accuracy, and relevance of credit information.

The Fair Credit Reporting Act has gone through significant changes since its creation. Consumer Credit Reporting Reform Act of 1996 added several amendments to the Fair Credit Reporting Act, regulating affiliate sharing of credit reports and "pre-screening" of credit reports (unsolicited offers of credit made to consumers). Recently, the Fair and Accurate Credit Transactions Act of 2003 amended The Fair Credit Reporting Act to protect consumers against identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, and further regulate the use of credit information.

Here are some common questions related to the Fair Credit Reporting Act:

Q. Can I see my credit report?
A. Yes. You have the right to receive a copy of your credit report.

Q. Do I have to pay for my credit report?
A. Under the Fair Credit Reporting Act, you have a right to a free credit report when your application for credit was denied because of the information supplied by the credit reporting agency. You must request your free credit report within 60 days of the denial of credit. Otherwise the credit reporting agency may charge you for a copy of your credit report.

Q. If I see a mistake on my credit report, what should I do?
A. You should report the mistake to the creditor in question and the credit reporting agency. Both the creditor and credit reporting agency are required to reinvestigate the matter to see if a mistake has been made.

The Equal Credit Opportunity Act (enacted 1974)

Here are some common questions related to the Equal Credit Opportunity Act:

Q. What should I do if I think a lendor discriminated against me?
A. Report the ECOA (Equal Credit Opportunity Act) violation to the appropriate government agency that supervises the lender:

• Federal Trade Commission (FTC) – Most retailers, finance companies and creditors are covered by this agency.
• Office of Thrift Supervision (OTS) – Federally chartered savings banks (have “Federal” or “F.S.B.” after name of the bank)
• Comptroller of Currency (OCC) – National banks (have “National or N.A.” after name of the bank)
• Federal Reserve Board (FRB) – Financial institutions that are members of FRB but are not national banks
• Federal Deposit Insurance Corporation (FDIC) – State chartered banks that are not members of FRB
• National Credit Union Association (NCUA) – Federal credit unions

The Fair Credit Billing Act (enacted 1974)

Here are some common questions related to the Fair Credit Billing Act:

Q. What kind of credit accounts does The Fair Credit Billing Act apply to?
A. This credit law generally applies to “open end” credit accounts such as credit cards, revolving charge accounts (i.e. department store cards), and overdraft checking accounts.

Q. What kind of disputes are covered?
A. The Fair Credit Billing Act only applies to “billing errors” made by a creditor that include but are not limited to:

• Unauthorized Charges
• Charges with Wrong Date or Amount
• Goods and/or Services that were Never Delivered
• Accounting Errors
• Failure to Post Payments or Other Credits Due
• Failure to Send Bills to Current Address (must provide written proof that you notified a creditor of any address changes 20 days before billing period ended)
• Charges that you Requested Additional Explanation or Proof of Purchase because of a possible error.