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The Consumer Credit Protection Act is federal legislation that provides legal protection of consumers against creditors.
The Consumer Credit Protection Act (CCPA) was created to protect consumers from creditors. Its goal is to provide maximum transparency to consumers and to close the knowledge gap, making financial concepts easy to understand and accessible for everyone. Additionally, it aims to prevent discrimination from lenders when considering an application for credit.
The federal legislation originally only consisted of the Truth in Lending Act, which established the National Commission on Consumer Finance. Since it was drafted in 1968, the act has been through multiple revisions and additions and now encompasses many aspects of consumer finance, including:
- Debt collection
- Credit reporting
- Credit billing
- Consumer leasing
- Electronic fund transfers
The foundation of the Consumer Credit Protection Act is rooted in four basic consumer rights:
- Right to safety: Ensures standards, testing and proper warning labels for all products and services.
- Right to information: Requires companies to provide truthful and accurate information.
- Right to choose: Prevents unfair competition and lets consumers choose alternative products.
- Right to be heard: Promises that the government will listen to complaints and act on them.
7 key components of the Consumer Credit Protection Act
If you have applied for a credit card, loan or mortgage, chances are you have interacted with some aspect of the CCPA. For example, when you apply for a mortgage, you will receive a loan estimate and a closing disclosure with relevant information about fees, interest and more.
Whether or not we are consciously aware of it, consumer rights are protected by these seven amendments:
1. Equal Credit Opportunity Act
The Equal Credit Opportunity Act (ECOA) aims to provide equal financial opportunity to all Americans applying for credit.
It prevents creditors from denying an application based on any non-creditworthiness factor, including:
- National origin
- Sex
- Race
- Marital status
- Age
- Color
- Receipt of public assistance
- Religion
If an organization has shown a history of discrimination, they can be held accountable by the Department of Justice. If you are asked any of these personal questions when applying for a loan, they are not required for approval and you may choose not to answer.
Main protection: Prohibits creditors from denying a loan application on the basis of race, color, sex or religion.
2. Federal Wage Garnishment Law (Title III)
Title III was enacted to stop creditors from claiming a high percentage of employees’ wages to pay off their debts.
Here are three key features included in Title III:
Limits wage garnishment: Title III limits the amount creditors can take from employee wages. Title III allows for 25 percent to be taken from their disposable income after taxes or 50 percent for child support, taxes and bankruptcy judgments.
Requires a court order: Title III requires a court order to establish wage garnishment and prohibits employee discharge due to any one specific debt under wage garnishment.
Protection against discharge: Title III prohibits employers from firing employees because of a single wage garnishment order.
Title III applies to all employers and consumer creditors operating in the United States. This protect all employees in the country from garnishments exceeding the stipulated limits.
Main protection: Limits wage garnishment and protects employees from being fired on the basis of garnishment.
3. Truth in Lending Act
The Truth in Lending Act (TILA) requires that creditors provide consumers with all the necessary information for a personal loan, mortgage or other line of credit. This includes all fees, interest rates and other necessary information, which must be presented in an easy-to-understand way.
TILA helps consumers by:
- Making it easier to compare loan offers
- Preventing surprise fees and charges
- Protecting against high-interest loans
- Providing a right to cancel the loan without penalty
By providing consumers with comprehensive information about credit products, TILA empowers them to make informed financial decisions and promotes fair lending practices in the marketplace.
Main protection: Requires that creditors explain the true cost of credit.
4. Fair Credit Billing Act
The Fair Credit Billing Act (FCBA) was designed to give consumers the right to dispute billing errors, which may include unauthorized charges, unidentified charges, mathematical errors, failure to provide an account statement or failure to credit an account with a payment. Under the act, consumers can file a claim within 60 days of the error, and they are not required to pay the amount until the issue is resolved.
Main protection: Gives consumers the right to dispute errors or unauthorized credit use.
5. Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) ensures that consumers have the right to the information listed on their credit report. Prior to this act, enacted in 1970, consumers could not order a copy of their credit report, check the accuracy of the items on it or dispute these items. This meant that credit bureaus could get away with inaccurate reporting with no repercussions.
Here are some important things included in the FCRA:
- Right to a free credit report
- Right to dispute errors
- Limitations on reporting
- Notification of credit inquiries
The law also restricts the amount of time for reporting negative information, helping consumers rebuild their credit histories over time.
Main protection: Requires creditors to tell consumers when their information is being used and gives consumers the right to protect their information.
6. Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) gives consumers who have defaulted on a loan certain rights and protections. This is because debt collection agencies have a history of aggressive and unfair tactics to coerce consumers into paying back their debts.
FDCPA protects consumers by:
- Limiting how and how often consumers can be contacted
- Forbidding debt collectors from discussing a consumer’s debt with anyone other than the consumer or their attorney
- Giving consumers the right to dispute the validity of the debt or the amount owed
The FDCPA is enforced by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). Consumers may also file a private lawsuit against a debt collector for violations of the FDCPA.
Main protection: Protects consumers from harassment at the hands of debt collection agencies.
7. Electronic Fund Transfer Act
With the rise of ATMs and the fall of paper checks, the government enacted the Electronic Fund Transfer Act (EFTA) to give consumers the same level of confidence in making electronic payments as they have with paper payments.
Here are some of the payment methods the EFTA covers:
- Automated Teller Machines (ATMs)
- Point-of-sale (POS) transactions using a debit card
- Direct deposit of payroll, government benefits or tax refunds
- Online bill payments and transfers between accounts
- Telephone transfers between accounts
- Mobile banking and payments
- Electronic check conversion
Under the Electronic Fund Transfer Act, consumers have protections against liability for unauthorized transactions through prompt notification to the financial institution. This act also mandates financial institutions to investigate and correct errors promptly, ensuring accurate electronic fund transfers.
Main protection: Ensures protection for electronic transfers and limits financial penalties for errors.
How to leverage your credit protection rights
As you navigate through life’s financial opportunities and challenges, you’ll work with various creditors, financial advisors and more. As a consumer, it’s important to be well-informed on your rights so that you can recognize when they’re violated and exercise your right to be heard, should you need to file an official complaint. If you believe you’ve been discriminated against or misled, any of the following organizations will hear your complaint:
File a complaint with the Federal Trade Commission here:
https://www.ftccomplaintassistant.gov/
File a complaint with the Better Business Bureau here:
https://www.bbb.org/consumer-complaints/file-a-complaint/get-started
File a complaint with the U.S. Attorney General here:
https://www.justice.gov/crt/filing-complaint
File a complaint with the Consumer Financial Protection Bureau here:
https://www.consumerfinance.gov/complaint/
Before working with a credit repair company, make sure they understand and value your rights. Lexington Law Firm helps you leverage your rights by complying with the Credit Repair Organizations Act—and we have helped clients legally address millions of questionable items on their credit reports. To learn more about your rights as a consumer and how to better understand your credit, get a free credit assessment from Lexington Law Firm.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
