Appendix 7.02P

Consumer Credit Laws at a Glance

Laws have been passed to help creditors and protect and inform consumers.

Laws to protect consumer access to credit

  • The Equal Credit Opportunity Act prohibits creditors from discriminating on the basis of sex, marital status, race, national origin, religion, age, or the receipt of public assistance. If credit is denied, creditors are required to provide a written statement explaining why credit was denied.

Laws requiring lenders to deal fairly with consumers

  • Truth in Lending Act requires lenders to disclose the terms of credit and loan agreements. Specific information, such as APR, how variable rates are calculated, when payments are due, and all fees are required to be disclosed to the consumer.
  • The Fair Credit Reporting Act guarantees consumers the right to access their credit file and dispute incorrect information. Consumers are entitled to one free credit report from each of the three national credit bureaus each year. If errors are noted, consumers can dispute the information in their file. Inaccurate information must be corrected or removed. If the dispute cannot be resolved, consumers can request that their version of the situation be included in their file.
  • The Fair Credit Billing Act outlines steps for settling credit card billing disputes. This legislation states that consumers should write a letter containing the account holder’s name, account number, and a detailed description of the problem to the creditor using the address on the billing statement for billing errors. The letter and supporting documents, such as receipts, should be mailed certified mail and received by the company within 60 days of the consumer first receiving the bill containing errors. The law states that the company has to respond within 30 days and resolve the claim within 90 days. If the credit company finds that there was a billing error, they are required to credit the borrowers account for the amount of the charge and any related interest incurred. If they find that the charge is legitimate, the consumer must pay the amount billed and any related interest incurred.
  • The Fair Debt Collection Practices Act protects consumers against unfair methods of collecting debts. Consumers are protected against such practices as publicizing their debt to others, the use of threats or abusive language, being contacted at inconvenient times, etc.
  • The Credit CARD Act of 2009 establishes new and extensive law requiting lenders to disclose information to aid consumers in managing their credit accounts. The law stipulates minimum days of

Laws establishing and limiting consumer liability

  • The Electronic Funds Transfer Act protects consumers who use cards that use electronic impulses instead of cash, checks or paper records to activate financial transactions. This law makes the following provisions: consumers must request (EFT) cards, consumer’s rights and responsibilities for using EFT cards must be provided to the consumer, establishes limited liability ($50) to the consumer for unauthorized use, requires paper receipts for transactions, issuers are required to promptly address and correct EFT errors

Consumer Protections

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 offers consumers a new set of protections by prohibiting certain lender practices. The legislation also benefits consumers because all credit card accounts, also known as open-ended credit accounts, must abide by these rules. As a result, consumers are freed from the burden of understanding and keeping track of a wide range of lender-specific rules. The following are a summary of some of the key provisions of the CARD Act.

The following are prohibited practices as of February 22, 2010:

  1. Changing the interest rate at any time for any reason: Card issuers must notify the consumer in writing the reasons for rate increases.
  1. A limit on the period penalty rates can be charged: Penalty interest rates can be charged for a maximum of six months provided the consumer makes on-time payments during the penalty period.
  1. The same criteria must be used for increasing and lowering interest rates: After a six month penalty interest rate period, the account must be re-evaluated for a lower interest rate. If credit reports, general economy or other measures of credit worthiness were used to justify the rate increase these same measures must be used to determine a lower interest rate.
  1. Changing the interest rate on existing balances: Interest rate increases must be applied to new balances occurring on or after the effective date for the new rate.
  1. Double-cycle billing: Interest cannot be charged on the previous month’s balance regardless of whether or not the balance was paid in full.
  1. Late fee traps: Payments cannot be considered late when the due date falls on a date the lender was closed such as weekends, holidays, or other dates the lender is closed.
  1. Mid-day due dates: Payment cannot be required to be received by a specific time during the day, such as noon or 3:00pm. All payments received by 5:00pm on the due date must be counted as on-time.
  1. Changing due dates: Due dates can no longer change each month. The account due date must be the same each month. For example: April 5th, May 5th, and June 5th.

Payment method fees: Lenders may not charge a fee for account payments made by telephone or over the internet. However, a fee may be charged for expedited payment service by a customer service representative.