Have you ever found yourself being verbally berated by an aggressive debt collector or wondered what recourse you have if you find inaccurate information on your credit report? Fortunately, there are several laws designed to ensure that the process of applying for credit, borrowing money, and repaying debts is as fair as possible. Here are five laws of particular importance that all American consumers should at least have a working knowledge of.
The Fair Credit Reporting Act
Your credit report is an extremely important document. It contains information such as your outstanding debts and credit payment history, and is the basis for your credit score, which can determine if you can borrow money and how much in interest you'll pay.
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The Fair Credit Reporting Act, or FCRA, is designed to make sure that the information contained in your credit report is complete and accurate.
For one thing, the FCRA gives you the right to receive a copy of your credit report, which you can get annually from each of the three credit bureaus, free of charge. This way, you can see the information a prospective lender would see and check your report for errors or outdated information.
You also have the right to know who has received your credit report in the past year (two years if it was for employment purposes), and any creditor that denies your application must let you know which bureau's report was used in its decision. After a denial, you can get a free copy of your credit report, in addition to the annual report you're entitled to.
The FCRA is also the legislation that gives you the right to dispute the information in your credit report with the credit bureaus, and that legally obligates the credit bureau to investigate your dispute. Finally, the FCRA gives you the right to add a written explanation to your credit report to explain any information you feel isn't reflective of your creditworthiness.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act, or ECOA, is the legislation that makes it illegal for a creditor to discriminate against you based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.
To name a couple of examples, the ECOA is what makes it illegal for a lender to deny a creditworthy borrower a mortgage simply because they're 80 years old -- or for a lender to decide that it doesn't want to loan to a certain religious group.
Another provision of the ECOA says that if you do receive public assistance in a reliable manner, you have the right to have this income considered in credit decisions.
Fair Credit Billing Act and Electronic Fund Transfer Act
These two acts serve a similar purpose, so we can discuss them together. Essentially, the Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (ETFA) are designed to prevent billing or payment errors from damaging your credit.
Specifically, these acts establish procedures for resolving mistakes such as unauthorized charges, charges with incorrect amounts or dates, computational errors, and the failure to reflect payments and other credits properly. They also legally require creditors to mail billing statements to you (or deliver them electronically if you choose) in a timely manner.
The FCBA applies to revolving accounts, such as credit cards. On the other hand, the EFTA covers electronic transfers, such as ATM transactions and other electronic debit/banking transactions.
Fair Debt Collection Practices Act
Millions of Americans have at least one late payment, collection account, or legal judgment on their credit report, and the Fair Debt Collection Practices Act (FDCPA) sets rules for what is and is not an acceptable way for creditors to attempt to collect a debt.
Generally speaking, this prevents debt collectors from engaging in aggressive, deceptive, or unfair activities.
For example, the FDCPA prevents debt collectors from calling you after 9 p.m. or before 8 a.m. They cannot harass you, nor can they lie to you. For example, a debt collector isn't allowed to threaten to have you arrested if they know they can't do that. They also must clearly identify themselves and tell you that they're trying to collect a debt.
