Our credit scores influence nearly every aspect of our financial lives, from the type of credit we can access, to our home and auto insurance scores, and even the career opportunities we receive. Consumer credit laws help shield us - and our financial records - from abuse.
It’s important to understand your basic consumer rights. Otherwise, you might not know if they’ve been violated. Whether you have great credit or you’re just getting started, here are four influential consumer credit laws to be aware of.
The Fair Credit Reporting Act (FCRA) is a law regulating how credit reporting agencies can collect, use, and share the data in your consumer credit report. Its purpose is to help ensure the accuracy, fairness, and privacy in credit reporting.
The Equal Credit Opportunity Act (ECOA) is a consumer credit law that prevents lenders from discriminating against borrowers for non-financial reasons.
Specifically, it protects consumers from unfair judgment based on race, color, religion, sex, national origin, marital status, public assistance, age, or for exercising their consumer rights.
The ECOA prohibits discrimination in all aspects of a credit transaction. It applies to any organization that may extend you credit – including banks, credit card companies, retail stores, loan and finance companies, and credit unions.
The Fair Debt Collection Practices Act (FDCP) is a consumer credit law that limits how third-party debt collectors can pursue an unpaid debt. It does not protect debtors from anyone attempting to collect a personal debt.
You’re responsible for the repayment of your debts. But you shouldn’t be abused if you fall behind. Under the FDCP, third-party debt collectors cannot:
You have the right to know what you’re getting into before you open a new line of credit. The Truth in Lending Act (TILA) is a consumer credit law that defines which information must be disclosed to individuals and businesses who are being offered credit products.
The purpose of the TILA is to safeguard borrowers from predatory lending and make it easier to compare credit options. It applies to closed-end accounts (like home and auto loans) and open-end accounts (like credit cards).
The TILA does not restrict the conditions of a credit agreement. It simply requires lenders to provide specific information up front, including:
The TILA is one of the most important consumer credit laws. It has been amended numerous times since its passage in 1968. One of the most significant amendments is the Credit CARD Act.
The Credit CARD Act requires lenders to disclose vital information when issuing new credit cards. Issuers must disclose interest rates, grace periods, annual fees up front. It also governs how issuers can change interest rates, charge over-the-limit transaction fees, and offer sign-up incentives.
Consumer credit laws protect your right to fair financial treatment. But many have only been around a few generations, and discriminatory practices from the past still contribute to credit inequities today.
StellarFi is a public benefit corporation founded on the mission to eradicate systemic and cyclical factors that create and perpetuate poverty and wealth inequality.
By making good credit accessible to anyone that pays bills, individuals and families can gain access to property ownership and other accomplishments that build safety nets and encourage generational financial stability.
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The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.