There are various federal laws protecting consumers in credit situations. Most of these laws have state law counterparts. What follows is a brief discussion of the federal laws.
THE TRUTH IN LENDING ACT helps customers know exactly what they are getting into. The Act requires creditors to disclose their exact credit terms to credit applicants. It also regulates how creditors advertise.
The information which must be disclosed to a consumer buying on credit includes:
- the monthly finance charge;
- the annual interest rate;
- when payments are due;
- the total sale price; and
- the amount of any late payment charges and when they will be assessed.
If a creditor fails to disclose the required information or gives inaccurate information, you can sue for actual damages. In the case of some credit disclosures, you may also sue for twice the finance charge. If you win, the least amount you can be awarded is $100 and the most is $1,000. You are also entitled to recover the costs of your action as well as attorney’s fees.
THE FAIR CREDIT BILLING ACT protects consumers who believe there is a mistake on their credit card bill. Under the Act, the customer must notify the creditor within 60 days after the first bill containing the error was mailed. If the dispute is not resolved, the creditor must respond within 30 days. The creditor must also conduct a reasonable investigation and, within 90 days of receiving the letter, explain why the bill is correct or correct the error.
TIP: During the time that the bill is in dispute, you do not have to pay the disputed amount.
If a creditor fails to follow this procedure, the consumer will receive a $50 credit toward the disputed bill. You can also sue for actual damages as well as twice the amount of any finance charges; if successful, the least you can recover is $100 and the most is $1,000. In addition, a successful plaintiff can recover court costs and attorney’s fees.
If a state law dealing with billing disputes conflicts with the federal statute, the federal statute will control unless the state law gives a consumer more time to notify the creditor about a billing error.
THE EQUAL CREDIT OPPORTUNITY ACT prohibits a creditor from discriminating against a credit applicant on the basis of race, color, religion, national origin, sex or marital status.
Under the Act, a creditor can look at legitimate factors, such as the applicant’s financial status and credit record, before granting credit.
A consumer who has been discriminated against in applying for credit can sue the creditor. If successful, the consumer can recover actual damages as well as punitive damages of up to $10,000 and court costs and attorney’s fees.
SIDEBAR: Although the Act prohibits age discrimination, a consumer can be refused credit if he or she has not reached the legal age for entering contracts.
THE FAIR CREDIT REPORTING ACT covers credit reports issued by credit reporting agencies. The intent of the Act is to protect consumers from being refused credit based on incomplete or incorrect credit report information.
The Act gives consumers the right to receive a copy of their credit report, and ask to have inaccurate entries removed. If the business reporting the credit problem does not agree to the change or deletion or if the credit reporting agency does not make a change or deletion, the consumer is entitled to add a 100-word statement to his or her credit report explaining his or her side of the issue. The statement will then become part of future credit reports.
A consumer may sue any creditor or credit reporting agency that violates the Act. If successful, the consumer is entitled to actual damages as well as punitive damages if the violation is proven to be intentional. A successful litigant can also recover court costs and attorney’s fees.
In addition, any officer or employee of a consumer reporting agency who knowingly and willfully gives credit information to a person who is not authorized to receive the information can be fined, imprisoned for up to 2 years or both.
THE FAIR DEBT COLLECTION PRACTICES ACT prohibits certain methods of debt collection. Personal, family and household debts are covered under the Act.
Under the Act, in the collection of a debt, a debt collector may not:
- harass, oppress or abuse any person in the collection of a debt;
- Use any false, deceptive or misleading representation or means in the collection of a debt; or
- Use unfair or unconscionable means to collect or attempt to collect any debt.
A debt collector found guilty of violating the Act is liable to the consumer for any actual damages sustained by the consumer, additional damages allowed by the court not to exceed $1,000, court costs and attorney’s fees.
THE ELECTRONIC FUND TRANSFER ACT limits a consumer’s liability for the unauthorized use of an ATM card, debit card or other device used in the handling of an electronic deposit, payment or withdrawal.
The Act limits your liability for lost or stolen ATM or debit cards to $50 if you notify your financial institution within 2 business days of discovering the loss or theft. If you wait more than 2 business days to report a lost or stolen card but notify the card issuer about an unauthorized transaction within 60 days of the date the bank mails the statement containing the error, you could lose as much as $500. If you wait longer than that, you may be liable for $500 plus the amount of any unauthorized transactions after the 60-day period.
If your financial institution does not comply with the provisions of the Electronic Fund Transfer Act, you can sue for actual damages as well as punitive damages of at least $100 but not more than $1,000. If you are successful in your suit, you can also recover court costs and attorney’s fees.
THE FAIR CREDIT AND CHARGE CARD DISCLOSURE ACT requires new disclosures on credit and charge cards, regardless of whether they were issued by a financial institution, retail store or private company. Information such as APRs, annual fees and grace periods must be provided in tabular form along with applications and preapproved solicitations for cards. Card issuers that impose an annual fee must provide disclosures before annual renewal. Card issuers that offer credit insurance must inform customers of any increase in rate or substantial decrease in coverage should the issuer decide to change insurance providers.
Any creditor who fails to comply with the requirements of the Act will be liable for actual damages the consumer sustained as a result of noncompliance, twice the amount of any finance charge assessed as a result of the transaction and, in an action relating to a credit transaction not under an open-end credit plan secured by real property or dwelling, not less than $200 or greater than $2,000. A consumer bringing a successful suit can also recover costs of the action and attorney’s fees.
THE CREDIT REPAIR ORGANIZATIONS ACT prohibits false or misleading representations by a credit repair company and requires certain disclosures on the part of these companies. The Act forbids credit repair companies from demanding advance payments, requires that credit repair contracts be in writing and allows consumers certain contract cancellation rights.
A consumer can bring an action against a credit repair company for violation of the Act and, if successful, recover actual damages which are the greater the amount of any actual damages sustained by the consumer as a result of the violation or any amount paid by the consumer to the credit repair organization. A successful litigant may also recover punitive damages in an amount determined by the court as well as court costs and attorney’s fees.
THE MAGNUSON MOSS WARRANTY-FEDERAL TRADE COMMISSION IMPROVEMENTS ACT (TITLE I) authorizes the FTC to develop regulations for written and implied warranties. The Act directs the Commission to establish disclosure and designation standards for written warranties, specifies standards for full warranties and establishes consumer remedies for breach of warranty or service contract obligations.
THE POSTAL REORGANIZATION ACT makes the mailing of unordered merchandise an unfair or deceptive practice in violation of the FTC Act. The Act allows any recipient of such mail to treat the merchandise as a gift.
THE TELEPHONE DISCLOSURE AND DISPUTE RESOLUTION ACT requires the FTC to promulgate regulations respecting advertising for, operation of and billing and collection procedures for pay-per-call or “900 number” telephone services. The regulations must include certain provisions, such as price disclosure requirements, mandatory warnings on services directed to children and required disclosures in billing statements.
THE TELEMARKETING AND CONSUMER FRAUD AND ABUSE PREVENTION ACT prohibits deceptive or abusive telemarketing acts or practices and prohibits telemarketers from engaging in a pattern of unsolicited telephone calls that a reasonable consumer would consider coercive or an invasion of privacy. The act also restricts the hours of the day and night when unsolicited telephone calls may be made to consumers and requires disclosure of the nature of the call at the start of an unsolicited call made to sell goods or services.