10 Consumer Protections You Should Know to Safeguard Your Credit

The world of credit can be complex, unforgiving, and very expensive! Consumers need effective protection. The result is a series of laws, protections, and agencies whose purpose is to keep the credit game honest and give consumers a fair opportunity.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) limits debt collectors’ activities and spells out your rights. Highlights include

  • Prohibiting collectors from abusing you or being deceptive.

  • Applying the law to most personal debts.

  • Defining when and where a debt can be collected.

  • Requiring a validation notice that specifies how much you owe and what you should do if the debt isn’t yours or has been paid already.

  • Allowing you to end contact with a collector.

  • Giving you the right to sue for breach of the rules.

The Bankruptcy Abuse Prevention and Consumer Protection Act

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) revised the process of getting a fresh start when you are overwhelmed by debt. The major provisions in this law include

  • Mandatory credit counseling

  • Stricter eligibility

  • Fewer debts discharged and fewer state exemptions

  • Tax returns and proof of income required for means test

  • Mandatory five-year Chapter 13 plan if over your state’s median income

  • Mandatory financial management education

  • Time between Chapter 7 filings increased to eight years

Your lawyer

Here are some points to consider when looking for a consumer attorney:

  • Ask a friend for a referral.

  • Look for someone who specializes in debt.

  • If you already have a lawyer, ask her for a specialist recommendation.

  • Check your local American Bar Association affiliate or attorney association for lawyer referral services.

  • Look for someone your gut says you can work with.

  • A good attorney who charges more can be a bargain if you get resolution quickly.

  • Get all agreements in writing.

Consumer credit counseling

Nonprofit consumer credit counseling agencies act as intermediaries on your behalf with creditors who won’t listen to you. They offer their services for free or for a nominal cost.

You can find a good agency online at Debtadvice.org or AICCCA.org or by calling 800-388-2227 or 866-703-8787. Look for third-party accreditation and HUD certification.

Statute of limitations laws

Each state has a law called a statute of limitations (SOL) that sets a limit on how long a debt collector can sue you in court.

This protection isn’t automatic; you have to ask for it. What do you need to know and do?

  • If a debt is past the SOL, the creditor can’t successfully sue you in court to collect it.

  • Credit reports show a delinquency for seven years.

  • The period used to figure how old your debt is starts when you miss a payment and never make another one.

Your state attorney general

Every state has an attorney general. One of their primary responsibilities is to enforce their states’ consumer protection laws. Every state has a consumer protection statute prohibiting deceptive acts and practices.

If you decide to ask them for help, make sure you are organized and to the point, and have the pertinent information at hand.

The Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau, or CFPB helps protect consumers from victimization. Here are the major protections this agency delivers:

  • Use the question-and-answer service for inquiries.

  • File your complaints with the CFPB here. The CFPB forwards your beef to the company and works to get an answer.

  • It requires anyone who issues credit or prepaid cards to give you better, more easily understandable terms-and-cost disclosures.

  • The CPFB assures that paperwork is understandable.

  • It helps set rules on transaction fees for interchange activity.

  • It closely regulates consumer credit counseling, debt settlement, and debt collectors.

The Credit Card Accountability, Responsibility, and Disclosure Act

Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) to give you a fair playing field in the area of credit cards. Here are your major protections:

  • Credit card companies can’t raise card interest rates except under specific circumstances. Also, double cycle interest billing is no longer allowed.

  • You get 45 days’ notice of changes.

  • You can opt out of changes.

  • Card companies can’t issue cards to people under 21 who have no income.

  • Creditors must give you at least 21 days after a bill is mailed to make your payment.

  • All payment amounts above the minimum payment must be applied to the balance with the highest interest rate.

  • If you exceed your credit limit, the card company must ask you whether you want that transaction to be processed.

The Fair and Accurate Credit Transactions Act

The Fair and Accurate Credit Transactions Act (FACT Act or FACTA) helps you in your dealings with credit bureaus.

  • You must be told about any negative action taken as a result of information contained in your credit report.

  • You can find out what information is in your personal file.

  • You can get a free copy of your credit report at least every 12 months if you ask for one.

  • The data in your file must be accurate, verifiable, and current.

  • Only those who have a legitimate business purpose can see your file.

The Federal Trade Commission

Although the FTC doesn’t deal with individual consumer complaints, it does protect consumers by accumulating and analyzing complaints and then taking industry-wide action to address issues that you bring to it.

Here are the five divisions that you may find useful:

  • Advertising practices: Enforces truth-in-advertising laws.

  • Financial practices: Protects you from deceptive and unfair practices in the financial services industry.

  • Marketing practices: Responds to Internet, telecommunications, and direct-mail fraud; spam.

  • Privacy and identity protection: Protects your financial privacy and helps consumers whose identities have been stolen.

  • Enforcement: Sues to address these issues.

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