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Becoming familiar with all the aspects of your credit report is very important in understanding how your actions, or taking no action, can affect your score. The majority of lending decisions are based on your FICO score, which may not seem important now, but it will be when you suddenly need a loan for a car, home, business, or personal. Becoming familiar with your score will save you money because you will likely get loans with lower interest rates. Another thing worth educating yourself on is your rights as a borrower. Common mistakes can be solved more effectively simply by knowing your rights. Ever have a debt collector call you at 7am? The likely response is “no,” because they aren’t legally allowed to. Has your bank ever made you pay for charges accrued for an unauthorized purchase? We hope not.
The following are Acts all consumers should be familiar with.
1. The Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is important because it was designed to help ensure that credit bureaus provide correct and complete information to businesses that are in the process of looking at your application. Credit reporting agencies must follow a strict set of guidelines, including fixing their mistakes. Your rights include the right to receive a copy of your credit report; the right to know everyone who has had access to your report in the last year, sometimes two; the right to know which credit bureau was consulted if you were denied an application; a right to a free copy of your report when your application was denied as long as it’s done within 60 days of the denial notification; the right to file a dispute that must then be investigated for accuracy; and you also have the right to add an explanation to your credit report about a dispute that may have gone unresolved.
2. The Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) may be more familiar to those who are employed, as they have likely heard of the Equal Employment Opportunity Act (Same general idea, but for the credit card industry). This act prohibits credit discrimination on the basis of race, marital status, religion, national origin, age, or receipt of public assistance. Although some of this information is often requested, it cannot legally be used to make a decision in extending lines of credit. Under this act, you also have a right to know why you may have been denied credit.
3. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA)
The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) usually go hand-in-hand as they protect many of the same things in the same ways. The FCBA applies to certain types of credit accounts such as department store credit cards, traditional credit cards, and checking accounts with overdraft protection (overdraft protection is a form of loan). The EFTA applies to banking transactions that occur electronically, including ATM machines, fund transfers, and debit transactions that occur at the store. Under both these acts you are not liable for unauthorized charges and cannot be charged for errors; you are protected from issues arising from a change of address, so long as you changed it within 20 days before the billing period ended; and are entitled to an explanation of errors and other problems.
4. Consumer Financial Protection Act
The Consumer Financial Protection Act was created to clarify the laws governing financial transactions that were defined in the National Bank Act, as well as to establish an agency to act as the watch dog of financial institutions that may be trying to take advantage of consumers. The Consumer Financial Protection Bureau (CFPB) stemmed out of this revision to the National Bank Act to provide oversight to the banks and to regulate the industry. The main purpose of this amendment is to protect consumers from predatory practices from banks and other financial institutions by giving more power to the federal government for regulation purposes.
5. Truth In Lending Act (TILA)
TILA was put into practice in 1968 to enforce creditors to disclose specific information to borrowers prior to lending. These requirements include APRs, the term of the loan and total costs to the borrower. This information must be made clear before signing. This law applies to most forms of credit and is designed to ensure that the borrowers have a clear understanding of what they are agreeing to prior to taking out a loan. Different states have various forms of requirements, but the main focus remains the same across all platforms -that key information must be relayed to the borrower by the creditor prior to taking out a loan.
6. The Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act (FDCPA) is geared more towards informing you, the debtor, that those annoying debt collectors do, in fact, have a right to try to collect any outstanding debt. The collection of debts under this act applies to personal debts, household debts and family debts. Your rights under this act state that debt collectors can only contact you between 8am and 9pm local time to you, the consumer; they may not contact you at work if your employer disapproves; they must identify who they are on the phone and must stop contacting you if you ask them to in writing; they cannot harass, oppress, or abuse you, and they cannot lie when collecting your debts.
7. The Credit Card Accountability Responsibility and Disclosure Act (CARD)
The Credit Card Accountability Responsibility and Disclosure Act (CARD) monitors the methods and practices of credit card companies and ensures transparency in credit card agreements. The CARD Act appointed the Consumer Financial Protection Bureau (CFPB) as the watchdog over the industry, and to act as the protector for American consumers. The purpose of the CARD Act was to limit the amount of penalties and fees that credit card holders were subjected to pay for late or missed payments and overdraft charges. The other reason for the credit card reform was to control the number of young people that were being marketed towards signing credit card agreements that they were not financially ready to manage appropriately. Since the CARD Act went into effect in 2009, there has been a significant reduction in the amount of penalties and fees paid by consumers, as well as an overall increase in transparency within credit card agreements.
Check out FTC.gov for more in-depth information about your rights under The FDCPA and guidelines a debt collector must follow in the acquisition of a debtor’s location information. If you think a fake debt collector may be trying to “collect” your debt, read this article for more information on how to handle it.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.