Since the 1970s, the federal government has implemented numerous acts of legislation designed to protect credit card users from fraudulent lending practices. The largest of these acts are the Consumer Credit Protection Act of 1969 (CCPA) and the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act). These acts regulate the information lenders must provide cardholders, the due dates for payments and the cardholder's options if material changes are made in the terms of their contract.
The Consumer Credit Protection Act of 1969
The CCPA is a compilation of four other acts designed to protect credit card users. The first of these acts was actually created prior to the establishment of the CCPA.
The Truth in Lending Act of 1968: This act is perhaps the largest and most important of those contained in the CCPA. It requires lenders to use a standard calculation to determine interest and other charges. Additionally, it states that lenders must provide prospective and current cardholders with important credit terms and limits cardholder liability for fraudulent use to $50. Finally, it prohibits lenders from issuing unsolicited cards to potential customers.
The Fair Credit Reporting Act of 1970: This act allows cardholders to dispute errors in their billing statements. It also requires that lenders fix those errors and report the changes to the credit reporting agencies.
The Equal Credit Opportunity Act of 1974: This act prohibits lenders from making credit decisions based on race, gender, religion or national origin.
The Fair Credit Billing act of 1974: This act states that credit reporting agencies must provide a consumer with the information contained in their credit report. It also requires that the agencies fix any mistakes after the consumer brings it to their attention.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009
This act mainly protects consumers against fraudulent billing practices and interest rate hikes. It was enacted in three phases, the last of which occurred in August of 2010. The act is quite extensive and its provisions far-reaching. Notable regulations include:
- A prohibition against retroactive interest rate increases on balances. Interest rates can be increased, but only on subsequent purchases;
- The requirement that lenders provide cardholders with a minimum of 45 days notice of any changes to the terms of their contract, including interest rate increases;
- The requirement that payment due dates fall no less than 21 days after a bill is mailed or delivered;
- The obligation that a lender allow cardholders to cancel their cards and pay off their balances within five years if the borrower objects to any changes to their contract;
- A limitation on the circumstances in which lenders can increase interest rates on a card based on the cardholder's default on payment obligations for other debts, such as utility payments. In this circumstance, the interest rate on future balances can only be increased after the cardholder is provided with 45 days advance notice. Additionally, the lender must review the account every six months to determine if the increase remains warranted;
- A rule against lenders advertising within 1,000 feet of a college campus;
- A prohibition against lenders extending credit to individuals younger than 21 without a co-signer or proof of the cardholder's income;
- A clause stating that lenders cannot charge non-use or "dormancy" fees;
- A rule stating that each bill must provide the consumer with information on how long it will take them to pay off the entire balance by making minimum payments.
Other Consumer Protection Acts
Two additional acts protect consumers against harassing debt collection practices and dissemination of their private financial information.
The Fair Debt Collection Practices Act of 1977: This act regulates the times in which a debt collector may contact a debtor. Additionally, it prohibits collectors from calling debtors at work once they have been notified it is unacceptable to do so. It also contains a general prohibition against abusive debt collection practices.
The Right to Financial Privacy Act of 1979: This act states that a consumer's individual banking or other financial information cannot be disseminated without a court order, subpoena or the consumer's written approval. It applies mainly during federal investigations.
Where to Turn For Help
The Board of Governors of the Federal Reserve provides a list of consumer protection laws. Additionally, the Board provides a website containing information about the contents of credit card offers and statements as well as a calculator to determine how long it will take to pay off a card balance.
The Federal Reserve oversees banks that are members of the Federal Deposit Insurance Corporation (FDIC). The Federal Trade Commission (FTC) collects consumer complaints against lenders, which are subsequently investigated by the FDIC.
However, in 2011, the government established the Consumer Financial Protection Bureau (CFPB). The Bureau handles all aspects of a consumer complaint against a credit card company, enabling borrowers to visit one place to solve all of their problems.
Understanding Your Rights
As a cardholder you are entitled to specific rights concerning your interest rate charges, payment due dates and access to financial records. Always read the contract prior to using a card, and do not hesitate to contact the appropriate government agency if you believe that a lender acted improperly.