Consumer Credit Protection Act: What You Need to Know
Written by: Kristy Welsh
Last Updated: February 5, 2018
What if you didn’t know what credit was going to cost until you got the bill? What if errors could stay on your credit reports with no dispute process? What if debt collectors could use whatever means they wanted to collect from you? What if they could garnish as much for your wages as they saw fit? What if credit repair companies could lie to you about what they’re able to do? Well, you’d be in a real financial mess with your credit repair options limited, if not non-existent. This is what makes the Consumer Credit Protection Act so groundbreaking and essential.
Since 1968, the Consumer Credit Protection Act (CCPA) has been protecting consumers against credit abuses. This law includes many others, broadening credit protections through the Truth in Lending Act, Fair Credit Reporting Act, Wage Garnishment Law, Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Electronic Funds Transfer Act, and Credit Repair Organizations Act.
Purpose of the Consumer Credit Protection Act
As stated in the CCPA, “it is the purpose of this title 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 and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices…
“The terms of leases of personal property for personal, family, or household purposes so as to enable the lessee to compare more readily the various lease terms available to him, limit balloon payments in consumer leasing, enable comparison of lease terms with credit terms where appropriate, and to assure meaningful and accurate disclosures of lease terms in advertisements.”
Finance charges and annual percentage rates
The CCPA states that finance charges may include:
- Interest, time price differential, and amount payable under a point, discount, or other system of additional charges
- Service or carrying charge
- Loan fee, finder's fee, or similar charge
- Fee for an investigation or credit report
- Premium or other charge for any guarantee or insurance protecting the creditor against default or other credit loss
- Borrower-paid mortgage broker fees, including fees paid directly to the broker or the lender (for delivery to the broker) whether such fees are paid in cash or financed
As for annual percentage rates, the CCPA outlines:
- Computation of rate of finance charges for balances within a specified range
- Allowable tolerances for purposes of compliance with disclosure requirements
- Use of rate tables or charts having allowable variance from determined rates
- Authorization of tolerances in determining annual percentage rates
Some exceptions do apply. For instance, the CCPA does not apply to credit transactions involving the extension of credit for business, commercial, agricultural, governmental, or organizational purposes.
Other Acts Included Under the Consumer Credit Protection Act
The TILA requires lenders to make certain disclosures before extending credit to you. This applies to both open end and closed end credit, also known as revolving and non-revolving credit, respectively.
This law covers what must be disclosed to you:
- About finance charges
- In your billing statements
- In ads and applications for credit cards
- In open end credit secured by a home
- About payment schedules for closed end credit
The FCRA requires that credit reporting agencies and data furnishers provide accurate and fair reporting on your credit history. It also covers consumer privacy.
Specifically, the FCRA says:
- You have the right to see your consumer reports and credit scores
- Data furnishers must ensure accuracy of reported information
- You have the right to dispute consumer report errors
- Consumer reporting agencies must investigate disputes and correct inaccuracies
- Not just anyone can see your consumer reports
- You must be notified if something in your consumer reports results in adverse action
- You can opt-out of prescreened offers
- Negative information can only stay on your consumer reports for so long
- You have the right to place fraud alerts on your consumer reports
Also known as Title III of the CCPA, the Wage Garnishment Law limits how much of your wages can be garnished to pay a debt. It also prohibits employers from firing you simply because your wages are being garnished (unless they are being garnished for multiple debts).
The ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, or age. Creditors are also prohibited from denying you credit if public assistance represents some or all of your income.
That said, creditors can ask questions related to marital status, children, age, and income under certain circumstances. For instance, they can ask about your spouse if the two of you are applying for a joint account of if you live in a community property state.
You could also be asked to volunteer information about your race, sex, and national origin, but only as a means of helping the government detect discrimination.
The FDCPA requires debt collectors to follow a set of standards for collecting on debts owed by you. Specifically, this law covers:
- Locations where they are prohibited from contacting you
- Times when they are prohibited from contacting you
- The type of statements they are prohibited from making
- The type of language they are prohibited from using
- What they can say to third parties about your debt
- Unfair practices
The EFTA requires that electronic funds transfers generate receipts so that you have a record of your transactions, an essential reference in the event of an error. This covers receipts for each individual transfer, as well as periodic statements and disclosures.
The CROA protects consumers from abuses in the credit repair industry. It covers what credit repair companies are prohibited from doing, like making untrue or misleading statements or demanding upfront payment for services they haven’t completed. But it also covers what credit repair companies must do, like providing with you a written contract outlining the services you are paying them for, as well as the allowance of 3 business days to cancel your contract.
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