A BROAD UNDERSTANDING OF CONSUMER LAWS UNDER THE CONSUMER CREDIT PROTECTION ACT

Consumer protection laws are set up just to prevent the consumer from having their rights infringed upon. In an age where information about any individual is open to the internet sphere, the ability of creditors to gather financial data about a consumer is a worrying idea to contemplate. 

Credit protection- as one of the many forms of consumer protection- is thus extremely important. The credit protection efforts mostly work to shield consumers from any practice that might harm a consumer’s ability to obtain future credit, typically by preventing practices that might unfairly result in an adverse impact on the consumer’s credit score. Federal laws restrict the information that can be used to determine a consumer’s creditworthiness, and it can be traced back to the Consumer Credit Protection Act of 1968. 

UNDERSTANDING THE CONSUMER CREDIT PROTECTION ACT 

A significant portion of consumer protection laws falls under the umbrella of the Consumer Credit Protection Act of 1968. The Consumer Credit Protection Act of 1968 is the first move that Congress took to protect consumer rights.  The CCPA is a United States law, composed of several titles relating to consumer credit. Being a federal statute, it is designed to protect borrowers of money by mandating complete disclosure of the terms and conditions of finance charges in transactions. It is divided into titles: title I refer to the Truth in Lending Act, title II related to extortionate credit transactions, title III related to restrictions on wage garnishment, and title IV related to the National Commission on Consumer Finance. However, bear in mind that the CCPA has changed significantly from its inception

The CCPA is growing legislation. Since its enactment, amendments have been introduced with regard to [A.] debt collection [B.] credit reporting, [C.] credit billing, [D.] consumer leasing, and [E.] electronic fundraisers, with some additional provisions prohibiting discrimination in the approval or extension of credit to consumers

The CCPA includes several important laws, including the Truth in Lending Act (Title I), Federal Wage Garnishment Law (Title III), Fair Credit Reporting Act (Title VI), Equal Credit Opportunity Act (Title VII), and the Fair Debt Collection Practices Act (VIII). Truth In Lending Act. 

TRUTH IN LENDING ACT 

The Truth In Lending Act was intended “to provide the American consumer with truth-in-lending and truth-in-advertising by providing full disclosure of the terms and conditions of finance charges both in credit transactions and it offers to extend credit.”

The TILA essentially allows consumers to compare the cost of credit so that they can make a well-informed decision on their use of credit. This means that creditors would be required to provide information regarding the transaction.   The Act ensures this by mandating the furnishing of an initial disclosure on the part of the creditor before the first transaction, delineating important information like a statement of billing rights, or the fact that the creditor has or will acquire a security interest in the property purchased. 

The Truth-in-Lending Act does not require a creditor to disclose all lending options to the consumer; rather, the creditor is required to disclose only information relevant to the transaction in question. What needs to be disclosed would be terms like the finance charge and the annual percentage rate. The finance charge is essential to be disclosed insofar as it is the sum of all the charges that are payable to the creditor that the consumer owes, like the interest or the service or carrying charge. Included within the finance charge would be a loan fee [or a finder’s fee or any charge of the like,] the credit report fee, or any premium/charge that insures and guarantees the creditor against the consumer’s default. In a similar vein, the annual percentage rate needs to be disclosed insofar as it is the measure of the cost of credit, and needs to be disclosed on a yearly basis. The consumer cannot be kept in the dark about what they owe to their creditors, and the TILA protects them from paying irrational amounts to companies that keep them in the dark. 

TILA also provides consumers with the agency to cancel credit transactions that involve a lien on their principal residence and also imposes limitations on ‘higher-priced mortgage loans. It regulates credit cart practices and ensures that credit billing disputes are heard in a fair and timely manner. However, it does not regulate charges that may be imposed for consumer credit, and instead merely requires a standardized form of disclosure.

WAGE GARNISHMENT

Title III of the CCPA deals with Wage Garnishment, which is any legal or equitable procedure that withholds a part of the person’s earning in order to repay debt, as mandated by court orders. This often is employed by the IRS or state tax agencies for unpaid taxes or by federal agency administrative garnishments.  The Wage and Hour Division of the United States Department of Labour enforces the provisions.

The restrictions on wage garnishment under Title III guard employees from unreasonable discharge by employers. Anyone cause for debt is not sufficient to fire an employee, and this provision applies to all fifty states. The CCPA contains no provisions controlling the priorities of garnishments, which are determined by state or other federal laws. However, in no event may the amount of any individual’s disposable earnings that may be garnished exceed the percentages specified in the CCPA.

Title IV

The US Credit Repair Organizations Act (“CROA”) is Title IV of the Consumer Credit Protection Act, although the statute itself is not an act. It is intended to prevent credit repair organizations from indulging in unethical and unfair business practices that cause unreasonable hardship for low-income individuals and aims to provide individuals who buy credit repair services from credit repair organizations with information enough to make an informed decision while holding these organizations liable for noncompliance. To ensure this, the CROA lays down how a credit repair company can be paid, often mentioning that it can only be paid after service has been rendered. 

TITLE VIII: FAIR DEBT COLLECTION PRACTICES ACT

The Fair Debt Collection Practices Act is a consumer protection amendment, establishing legal protection from abusive debt collection practices to the Consumer Credit Protection Act, as Title VIII of that Act. The goals of the FDCPA are to [A.] eliminate abusive practices in the collection of consumer debts, [B.] to promote fair debt collection, and [C.] to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy. 

What this means is that debt collectors are allowed to conduct their business, but only under a certain set of guidelines that ensure that the rights of the consumers involved with the debt collectors are defended.

These guidelines, amongst others, require debt collectors to identify themselves to the consumer and remind them through every communication that the consumer is interacting with a debt collector in order to obtain information for the particular case as well as notify the consumer of their right to dispute the debt. Additionally, if the debt collector is requested to provide verification of the debt by the consumer through a written dispute, this request must be honored, else the collection efforts are ceased altogether. Furthermore, if a debt collector chooses to file a lawsuit, it may only be in a place where the consumer lives or signed the contract

THE FAIR CREDIT BILLING ACT

The FCBA was enacted as an amendment to the CCPA and fulfills its purpose to “protect the consumer against inaccurate and unfair credit card and billing practices” by outlining procedures to deal with billing errors in consumer credit transactions. This means that unauthorized or unidentified charges, or even charges for goods that the consumer does not accept, cannot be tacked onto the consumer’s account, and there is no payment owed herein. This also includes failure to mail or deliver a statement to the consumer’s address. 

It must be remembered herein that a consumer is not liable to pay for an item that is currently in dispute.  Additionally, debt-collection tactics cannot be employed by the creditor. An item in dispute does not mean that the consumer’s credit report is affected in any way. However, the FCBA does not prevent the creditor from collecting the undisputed portion of the bill. 

If the consumer has asked for an explanation or proof of purchase for an article, this attracts no payment at that moment or until the issue is resolved. Under the FCBA, consumers are allowed to file a claim with the creditor to have billing errors resolved. However, the consumer must provide notice to the creditor within 60 days of transmission of the first statement that reflects the alleged error so that the creditor gets a fair chance to identify the consumer and examine whether there actually was a billing error that needs to be rectified. This must be acknowledged within 30 days, even if not resolved as such. 

ELECTRONIC FUND TRANSFER ACT (EFTA) 

Similar to the FCBA, the EFTA establishes procedures for resolving mistakes on credit billing and electronic fund transfer account statements. This includes charges or electronic transfers that the consumer has not made or that are incorrectly identified or even those that merely comprise tallying errors. 

Under the EFTA, a consumer is supposed to know the terms and conditions of electronic fund transfer services before they contract for the same. These disclosures need to be in writing and must use simple language so that the consumer can understand their liability with regard to unauthorized fund transfers, limiting the same in accordance with the promptness of the consumer in reporting the unauthorized transfer. 

Furthermore, the consumer is given the explicit right to document all electronic fund transfers that they initiate from an electronic terminal, and must receive intimation of pre-authorized transfers. This must be done via a receipt made available by a financial institution, who are also required to provide a periodic statement for each monthly cycle wherein electronic transfer has occurred. Even if there have been no transfers, a periodic statement should be made available at least every quarter of the year. 

For preauthorised transfers, however, notice must always be provided. This notice must be ensured within two business days of the occurrence of the transfer, even if the transfer was unsuccessful. This also means that the consumer should be allowed to stop these transfers by notifying the financial institution, as long as this notification is done three days before the scheduled payment. 

EQUAL CREDIT OPPORTUNITY ACT

The Equal Credit Opportunity Act (ECOA) was enacted in order to curb discrimination in credit availability, allowing all individuals to apply and be approved for credit. This Act does not prevent discrimination exclusively based on race, color, religion national origin, sex, marital status, or age, but also prevents individuals from being discriminated against whose income derives from a public assistance program. This may include reliable veteran’s benefits, welfare payments, Social Security payments, alimony, child support, etc.

However, it must be considered that creditors can use some factors as a consideration to understand the application itself. A creditor is well within their rights to ask for marital status if they rely on their spouse’s income as a basis of payment or if the spouse is considered contractually liable on the account. 

The ECOA states that creditors must provide the applicant with notification of action taken within 30 days of receiving the application, and need to specify the reason for denial of credit. This requirement will hold true even if credit is granted under different terms than those originally applied under or even if the creditor refuses to increase a line of credit.

The goal of agencies like the Consumer Financial Protection Bureau and the like is to protect individuals from unfair, deceptive, and fraudulent business practices by collecting complaints and conducting investigations, and educating consumers and businesses about their rights and responsibilities. A credit card is not a burden, despite the heavy obligations that come with it, and individuals have the right to be safe and not exploited while availing themselves of consumer financial products or services.

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Sources

1.Pub.L. 90–321, 82 Stat. 146, enacted May 29, 1968

2. The Truth in Lending Act ensures that creditors provide complete and honest information.

The Fair Credit Reporting Act regulates credit reports.

The Equal Credit Opportunity Act prevents creditors from discriminating against individuals.

The Fair Debt Collection Practices Act established rules for debt collectors.

The Electronic Fund Transfer Act protects consumer finances during electronic payments.

3.15 USC CHAPTER 41, SUBCHAPTER IV: EQUAL CREDIT OPPORTUNITY

Prohibits discrimination on account of prohibits using sex, race, color, and religion by creditors and lenders when evaluating a loan application or while making a credit decision. The act also prohibits using any non-creditworthiness determinants when performing a credit evaluation.

4.15 U.S.C.A. § 1601 et seq. [1968]

5.H.Rept. 1040, 90^th Congress, 2^nd Session, (1967), reprinted in 2 USC 1962 (1969)

6.12 C.F.R. 1026.40

7.12 C.F.R. 1026.35

8.15 U.S. Code § 1673.Restriction on garnishment

9.15 U.S. Code SUBCHAPTER II-A—CREDIT REPAIR ORGANIZATIONS

10.15 U.S.C. §§ 1679-1679j: This Act, Title IV of the Consumer Credit Protection Act, prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of “credit repair” services. The Act bars companies offering credit repair services from demanding advance payment requires that credit repair contracts be in writing, and gives consumers certain contract cancellation rights.

11.Pub. L. 95-109; 91 Stat. 874, codified as 15 U.S.C. § 1692 –1692p,

12.15 U.S. Code § 1692.Congressional findings and declaration of purpose

13. P.L. 93-495it. 3, § 306;

14.15 U.S.C. 1693c(a).

15.12 C.F.R. 205.4(a)

16. Modified at 15 U.S.C. § 1691