Credit and the Law – Fair Credit Reporting Act

Credit and the Law

Many laws exist which govern credit. Because credit is so valuable, the government has seen fit to step in numerous times.

The value of how much credit you have and the way you use it effects where you live, where you work, and other major life details. That’s because employers, landlords, and even the local library may check your credit before doing business with you. Understanding how credit is denied and rewarded and the steps you can take if you feel you’ve been unfairly treated by credit bureaus is important.

Here are the four major pieces of legislation which regulate and control credit in America.

Fair Credit Reporting Act

The Fair Credit Reporting Act was meant to improve both the accuracy and privacy of consumer’s credit reports’ information. The FCRA also controls the use of credit reports and dictates that credit bureaus keep accurate files.

The two biggest pieces of legislation in the FCRA for consumers are the right to review your credit report and the right to have false information corrected on your credit report.

Credit bureaus are required by law to interpret your report for you. Also, they are prohibited from selling your credit report to people or entities without a legitimate business purpose. Basically, the only people who have access to your credit report are you, your creditors, employers, insurers, and a few government agencies.

By the FCRA, you have the right to have errors on your report fixed, but first you must report errors in writing. The bureau then has to investigate and correct or remove errors. The source of the error, a creditor or lender, has to report to all three bureaus that they made a mistake.You also have the right to add a statement of 100 words or less to your actual credit report.

Any time you are turned down for a line of credit, you have the right to a free copy of your report, including a reason why you were denied, within 30 days or your request. Along those lines, you have the right to have a copy of your report re-issued to lenders who checked your credit within the last six months.

The FCRA is also the reason why consumers in America are entitled to one free credit report a year for certifying in writing that you are either unemployed, on welfare, or that your current report is inaccurate due to identity theft or fraud. This is on top of the one free report every American consumer gets every year from the Federal Trade Commission.

Finally, the FCRA is the law that says that consumers are legally allowed to sue any consumer reporting agencies, users, and credit providers in either state or federal court for specific violations of the act itself.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act says that all creditors must apply the same credit standards to customers fairly. It doesn’t mean that all creditors have the same credit standards and doesn’t guarantee loan approvals.

This law says simply that lenders cannot discriminate on the basis of sex, marital status, race, religion, national origin, age, income, or if you exercise your rights under the Consumer Protection Act. The only credit criteria to be used in judgement of your creditworthiness are a consumer’s ability and intent to repay a line of credit.

Credit applications that ask questions about gender, race, color, religion, or nationality are illegal unless you are applying for real estate assistance. You are not required to answer any question along these lines when applying for credit.

Also, a person’s marital status is not a legal question on line of credit applications, and creditors are prohibited from asking about your future family plans.

The only legal questions about age are those that help determine if you are of a legal age to enter into financial contracts or to estimate how long you will continue to work. But this law states specifically that your age cannot be used to deny credit, especially for people aged 62 or older.

This law also stipulates that lenders have to notify applicants of a loan decision within 30 days after the application is completed. If credit is denied, the creditor must provide a written statement that includes a valid reason for denial, a list of the applicant’s legal rights, and the name and address of various federal agencies charged with looking after credit companies.

Fair Credit Billing Act

The Fair Credit Billing Act is a simple law that allows the quick correction of any errors on open-ended credit accounts. These are accounts for department store credit cards or other lines of credit that have no ceiling. This law also protects your credit rating during the time of a dispute settlement. This law is meant as an addendum to the FCRA.

By the wording of the Fair Credit Billing Act, creditors cannot report a consumer’s account as delinquent while a dispute is ongoing. This applies to credit cards, revolving charge accounts, and even overdraft checking accounts. Consumers who put a question into writing have to notify their creditor within 60 days of receiving a bill for this act to take effect.

Fair Debt Collection Practices Act

This law applies mostly to debt collectors. The Fair Debt Collection Practices Act makes it illegal for debt collectors to use unfair, deceptive, or abusive practices in trying to collect any debt.

Debt collectors can only contact people other than the debtor to find the original debtor, not to force them to pay someone else’s debt. Debt collectors are required to send written notice informing the debtor of the amount of the debt, the name of the creditor, and a statement reading that the consumer’s debt will be considered valid unless disputed within 30 days, as part of the Fair Credit Billing Act.

Debt collectors cannot harass, insult, or act abusively at all while collecting a debt. They cannot make threats, use obscene language, or make multiple annoying and anonymous phone calls.

Debt and credit are a huge industry in America. Everyone has some amount of credit and probably some amount of debt. Thankfully, the US government has stepped in to provide some legislation regarding fair and unfair debt practices.