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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.
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.
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.
f 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.
