What is the Consumer Credit Protection Act? – Councilor Forbes
The 1960s are known to be an important period in American history. It was a period that ushered in many revolutionary legislative changes, such as the Civil Rights Act of 1964, the Medicare Act of 1965, and the Voting Rights Act of 1965. In the midst of these Revolutionary federal laws, you’d be wrong to forget the Consumer Credit Protection Act (CCPA).
Before the CCPA, consumers in the United States did not enjoy many rights when it comes to loans, debt collection, and credit reports. Back then, lenders could (and often did) benefit consumers. They didn’t have to disclose loan terms or costs up front, could charge outrageous interest rates, and were able to foreclose a significant percentage of your paycheck if you didn’t pay off your debt as promised.
When the Consumer Credit Protection Act (CCPA) was passed in 1968, it aimed to protect consumers from these and other abusive practices. The law has placed restrictions on banks, credit card issuers, debt collectors and more. The law introduced many guarantees that American consumers still enjoy today, more than 40 years after it was passed into federal law.
Over the years, Congress has passed more laws and brought them under the umbrella of the CCPA to help protect the financial lives of American consumers. The Fair Credit Reporting Act, the Equal Credit Opportunity Act, and the Fair Debt Collection Practices Act, along with a number of others, are included in this list.
Below are some of the most important provisions of the Consumer Credit Protection Act and its amendments.
Loan Truth Act (TILA)
The Truth in Lending Act, or Title I, was part of the original Consumer Credit Protection Act that Congress enacted in May 1968. It has undergone several changes since its initial passage.
This section of the CCPA provides for “the wise use of credit”. TILA achieves this goal by requiring lenders and credit card issuers to disclose credit terms when you borrow money.
Some of the details that lenders and credit card issuers must disclose include:
- Annual percentage rate (APR)
- Financial expenses
- Amount financed
- Payment deadline
- Late fee
- Penalties for early payment
- Total number of payments
- Total sale price
Simply sharing this and other required information is not enough. This information should be clear and easy to understand.
With TILA, you know how much you’ll pay when you borrow money. This information allows you to evaluate the store and compare the cost of credit with different creditors before applying for financing.
The ability to compare costs between multiple lenders may be more meaningful than you might think. Rate purchases could save you thousands of dollars in interest. According to Freddie Mac, you could save an average of $ 3,000 by getting five quotes before choosing a mortgage.
TILA also gives you the right to change your mind about a loan if you immediately have buyer’s remorse. You have a three-day termination right to cancel a new loan without financial penalty.
The federal wage garnishment law
Title III of the Consumer Credit Protection Act is known as the Federal Wage Garnishment Act. This is part of the original legislation that Congress passed in 1968. This section of the CCPA places restrictions on lenders and other creditors when it comes to garnishing the salaries of borrowers who default on their credit obligations.
Thanks to this section of the CCPA, you are entitled to the following protections even if you cannot repay your debts as promised.
- Employers can’t fire you because your wages are garnished (unless they are garnished for more than one overdue debt).
- In most cases, no more than 25% of your after-tax salary can be garnished. (Child support, alimony, and overdue taxes are three notable exceptions to this rule.)
The Fair Credit Reporting Act (FCRA)
Title VI of the Consumer Credit Protection Act was not part of the original legislation. The Fair Credit Reporting Act was added under the CCPA when Congress passed it in 1970. The FCRA has been amended several times since the law was first passed.
The FCRA gives consumers many important rights with respect to the information that consumer intelligence agencies collect about them. It requires consumer reporting agencies (including the three major credit bureaus) to ensure that the information they collect and share is fair, accurate and kept private.
Here are some of the main protections you can benefit from through FCRA.
- Most types of negative information can only stay on your credit report for seven to ten years. (Unpaid federal tax liens and unpaid federal student loans are important exceptions.)
- You can access your own credit reports (and sometimes you can access them for free).
- You can dispute incorrect or incomplete information on your case.
- Consumer reporting agencies should remove or correct inaccurate, incomplete, or unverifiable items from your record (usually within 30 days) after submitting a dispute.
- Only those who have a valid need (called an “authorized purpose” in law) can access your credit information. (This usually happens when you apply for credit or insurance.)
- Employers can access your credit, but only with your written permission.
- You can opt out and prevent credit reporting agencies from sharing your information with lenders, insurers, and others who may use that information for marketing purposes to send you pre-qualified offers.
The FCRA offers additional protection to victims of identity theft.
A 2003 amendment to the FCRA known as the Fair and Accurate Credit Transactions Act (FACTA) is the reason you can access free copies of your three credit reports from Equifax, TransUnion, and Experian once all every 12 months. To exercise this right, simply visit AnnualCreditReport.com.
The Equal Credit Opportunities Act (ECOA)
Title VII of the Consumer Credit Protection Act represents another amendment to the original legislation. Congress passed the Equal Credit Opportunity Act (ECOA) in 1974, and it has undergone several changes since then.
The ECOA makes sense because it ends lending discrimination based on any of the following:
- Civil status
- National origin
- Receipt of public aid
Thanks to the Equal Credit Opportunity Act, you cannot be denied a loan or other forms of credit based on any of the above factors.
The ECOA also requires creditors to give you a reason when they deny you credit. However, in some cases you need to ask for an explanation.
Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act is Title VIII of the Consumer Credit Protection Act. This federal law first entered into force in 1978.
The FDCPA has strict rules in place that third-party debt collectors must follow when attempting to collect unpaid debts. The debts covered by the law include:
- Credit card
- Private student loans
- Personal loans
- Medical bills
- Auto loans
- Other household debts
Please note that trade debts are excluded from the above list. So, if you are borrowing money on behalf of a business, the FDCPA will not cover these types of debts.
Some of the most important protections that the FDCPA offers you are as follows.
Debt collectors cannot:
- Conceal their identity (unless you are trying to get your contact details)
- Call before 8:00 a.m. or after 9:00 p.m. (depending on your local time zone)
- Reveal information about your debt to others
- Lying or misleading you in order to get back the money you owe
- Harass you, threaten you with physical harm, use obscene language, or repeatedly call you to pressure you
- Earn additional interest or fees unless your original contract or state law allows it
- Seize funds from your paycheck without a court order
- Call you at work if you ask them to stop
You also have the right to be informed of the debt itself. A debt collector must reveal the name of the original creditor and the amount you owe.
You have 30 days to dispute the debt if you don’t agree. If you dispute the debt, the debt collector should put the collection efforts on hold until they send you the verification details.
At the end of the line
Thanks to the law on the protection of consumer credit and the many laws it covers, you have many rights in matters of financial life. And if it would be impossible to memorize all these rights, it is important to know them.
The CCPA protects you every time you apply for credit. These rights continue to protect you after a lender or credit card issuer approves your request. In the event that you cannot repay the money you borrow as promised, the provisions of the LCCP are there to protect you again against unfair debt collection practices.
When you know your rights, you are better equipped to protect yourself and your loved ones from bad actors. If you believe that a lender, creditor, debt collector, or consumer reporting agency is in violation of the CCPA (or one of its many amendments), you can contact the Consumer Financial Protection Bureau or the Federal Trade Commission to file a complaint. You can also seek the advice of a consumer protection lawyer if you need additional advice.