Credit and Your Consumer Rights
A good credit rating is very
important. Businesses inspect your credit history when
they evaluate your applications for credit, insurance,
employment, and even leases. Based on your credit payment
history, businesses can choose to grant or deny you
credit provided you receive fair and equal treatment.
Sometimes, things happen that can cause credit problems:
a temporary loss of income, an illness, even a computer
error. Solving credit problems may take time and patience,
but it doesn’t have to be an ordeal.
The Federal Trade Commission (FTC)
enforces credit laws that protect your right to obtain,
use, and maintain credit. These laws do not guarantee
that everyone will receive credit. Instead, the credit
laws protect your rights by requiring businesses to
give all consumers a fair and equal opportunity to receive
credit and to resolve disputes over credit errors. This
brochure explains your rights under these laws and offers
practical tips to help you solve credit problems.
Your Credit
Report
Your credit payment history is recorded in a file or
report. These files or reports are maintained and sold
by "consumer reporting agencies" (CRAs). One
type of CRA is commonly known as a credit bureau. You
have a credit record on file at a credit bureau if you
have ever applied for a credit or charge account, a
personal loan, insurance, or a job. Your credit record
contains information about your income, debts, and credit
payment history. It also indicates whether you have
been sued, arrested, or have filed for bankruptcy.
The Fair Credit Reporting
Act (FCRA) is designed to help ensure that
CRAs furnish correct and complete information to businesses
to use when evaluating your application.
Your rights under the Fair Credit
Reporting Act:
- You have the right to receive a copy of your credit
report. The copy of your report must contain all of
the information in your file at the time of your request.
- You have the right to know the name of anyone who
received your credit report in the last year for most
purposes or in the last two years for employment purposes.
- Any company that denies your application must supply
the name and address of the CRA they contacted, provided
the denial was based on information given by the CRA.
- You have the right to a free copy
of your credit report when your application is denied
because of information supplied by the CRA. Your request
must be made within 60 days of receiving your denial
notice.
- If you contest the completeness or accuracy of information
in your report, you should file a dispute with the
CRA and with the company that furnished the information
to the CRA. Both the CRA and the furnisher of information
are legally obligated to reinvestigate your dispute.
- You have a right to add a summary explanation to
your credit report if your dispute is not resolved
to your satisfaction.
Your Credit
Application
When creditors evaluate a credit application, they cannot
lawfully engage in discriminatory practices.
The Equal Credit Opportunity
Act (ECOA) prohibits credit discrimination
on the basis of sex, race, marital status, religion,
national origin, age, or receipt of public assistance.
Creditors may ask for this information (except religion)
in certain situations, but may not use it to discriminate
when deciding whether to grant you credit.
The ECOA protects consumers who deal
with companies that regularly extend credit, including
banks, small loan and finance companies, retail and
department stores, credit card companies, and credit
unions. Everyone who participates in the decision to
grant credit, including real estate brokers who arrange
financing, must follow this law. Businesses applying
for credit also are protected by this law.
Your rights under the Equal Credit
Opportunity Act:
- You cannot be denied credit based on your race,
sex, marital status, religion, age, national origin,
or receipt of public assistance.
- You have the right to have reliable public assistance
considered in the same manner as other income.
- If you are denied credit, you have a legal right
to know why.
Your Credit
Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic
fund transfer account statements regularly. These documents
may contain mistakes that could damage your credit status
or reflect improper charges or transfers. If you find
an error or discrepancy, notify the company and contest
the error immediately. The Fair Credit Billing
Act (FCBA) and Electronic Fund Transfer
Act (EFTA) establish procedures for resolving
mistakes on credit billing and electronic fund transfer
account statements, including:
- charges or electronic fund transfers that you —
or anyone you have authorized to use your account
— have not made;
- charges or electronic fund transfers that are incorrectly
identified or show the wrong amount or date;
- computation or similar errors;
- failure to reflect payments, credits, or electronic
fund transfers properly;
- not mailing or delivering credit billing statements
to your current address, as long as that address was
received by the creditor in writing at least 20 days
before the billing period ended;
- charges or electronic fund transfers for which you
request an explanation or documentation, due to a
possible error.
The FCBA generally applies only to
"open end" credit accounts — credit
cards, revolving charge accounts (such as department
store accounts), and overdraft checking accounts. It
does not apply to loans or credit sales that are paid
according to a fixed schedule until the entire amount
is paid back, such as an automobile loan. The EFTA applies
to electronic fund transfers, such as those involving
automatic teller machines (ATMs), point-of-sale debit
transactions, and other electronic banking transactions.
Your Debts
and Debt Collectors
You are responsible for your debts. If you fall behind
in paying your creditors or an error is made on your
account, you may be contacted by a "debt collector."
A debt collector is any person, other than the creditor,
who regularly collects debts owed to others. This includes
lawyers who collect debts on a regular basis. You have
the right to be treated fairly by debt collectors.
The Fair Debt Collection Practices
Act (FDCPA) applies to personal, family, and
household debts. This includes money owed for the purchase
of a car, for medical care, or for charge accounts.
The FDCPA prohibits debt collectors from engaging in
unfair, deceptive, or abusive practices while collecting
these debts.
Your rights under the Fair Debt
Collection Practices Act:
- Debt collectors may contact you only between 8 a.m.
and 9 p.m.
- Debt collectors may not contact you at work if they
know your employer disapproves.
- Debt collectors may not harass, oppress, or abuse
you.
- Debt collectors may not lie when collecting debts,
such as falsely implying that you have committed a
crime.
- Debt collectors must identify themselves to you
on the phone.
- Debt collectors must stop contacting you if you
ask them to in writing.
Solving Your
Credit Problems
Your credit report influences your purchasing power,
as well as your chances to get a job, rent or buy an
apartment or a house, and buy insurance. A history of
timely credit payments helps you get additional credit.
Accurate negative information can stay on your report
for seven years. A bankruptcy can stay on your report
for 10 years. If you are having problems paying your
bills, contact your creditors at once. Try to work out
a modified payment plan with them that reduces your
payments to a more manageable level. Don't wait until
your account has been turned over to a debt collector.
Here are some additional tips for
solving credit problems:
- If you want to contest a credit report, bill or
credit denial, contact the appropriate company in
writing and send it "return receipt requested."
- When you contest a billing error, include your name,
account number, the dollar amount in question, and
the reason you believe the bill is wrong.
- If in doubt, request written verification of a debt.
- Keep all your original documents, especially receipts,
sales slips, and billing statements. You will need
them if you dispute a credit bill or report. Send
copies only. It may take more than one letter to correct
problems.
- Be skeptical of businesses that offer instant solutions
to credit problems.
- Be persistent. Resolving credit problems can take
time and effort.
- There is nothing that a credit repair company can
do for you — for a fee — that you cannot
do for yourself for little or no cost.
If you can't resolve your credit
problems yourself or if you need help, you may want
to contact a credit counseling service. Nonprofit organizations
in every state counsel consumers in debt. Counselors
try to arrange repayment plans that are acceptable to
you and your creditors. They also can help you set up
a realistic budget. These services usually are offered
at little or no cost.
Universities, military bases, credit
unions, and housing authorities also may offer low-
or no-cost credit counseling programs. Check the white
pages of your telephone directory for a service near
you.
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