Credit - Head Matters

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5. Describe the Rights and Responsibilities of Buyers and Sellers Under Consumer Credit Protection Laws.


Consumer credit protection laws give you rights when you use credit cards or get a loan. They also spell out the responsibilities of the businesses and the users of credit.

There are many different pieces of legislation created to help consumers deal with lenders and manage credit.  They’re referred to as consumer protection acts. Some of the highlights of the most major acts are as follows.

Name of legislation What it does for consumers
Fair Credit Billing Act
Fair Debt Collection Practices Act
Debt collectors cannot use unfair or deceiving practices to collect overdue money on a debt that a creditor has forwarded to them.
Fair Credit Reporting Act You have an opportunity to dispute information on your credit report.
Equal Credit Opportunity You cannot be denied credit based on your race, sex, marital status, religion, national origin, age, or because you are on public assistance.
Truth in Lending Act A creditor must give you written notice of the cost of credit and the terms of repayment before you get a loan or credit card.
The Bankruptcy Abuse Prevention and Consumer Protection Act Changes the requirements for Chapter 7 and Chapter 13 bankruptcies.
The Consumer Protection section of the Bankruptcy Abuse Prevention and Consumer Protection Act Requires consumers who file bankruptcy to take counseling or an approved course in personal finance.



New Credit Card Rules
Recently enacted new rules for credit card companies are good news for consumers! Among other things, the rules will:

  • Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.
  • Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.
  • Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.
  • Limit the high fees associated with subprime credit cards.
  • Ban creditors from using the "two-cycle" billing method to impose interest charges.
  • Prohibit creditors from allocating payments in ways that maximize interest charges.

You can learn more about changes to credit card accounts by visiting the Federal Reserve's new online publication. "What You Need to Know: New Credit Card Rules." It explains key changes as a result of the new rules. The Fed's  Consumer's Guide to Credit Cards has great tools and resources as well! 

For more information on consumer protection laws, visit the consumer protection section in the Spending Course.
 

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