Before you try to fix your credit yourself, you’ll find it helpful to understand the four major laws that are your key weapons against unfair creditors and collectors. That way, if any of the credit bureaus or creditors start getting cute, you can set them straight fast.
Believe me, once you cite a few Code Sections of the various laws, those credit bullies are going to fall in line. There is nothing that strikes terror in the hearts of creditors more than a consumer who knows her rights and isn’t afraid to use the law to get justice.
The good news is you don’t have to go to law school to get a handle on these regulations. Here’s the skinny on the four most important consumer credit protection laws and how to use them:
Fair Credit Reporting Act
This is also known as FCRA and it’s the granddaddy of consumer credit protection law. This is a federal law that controls how information about your credit is gathered, shared and used. The law is administered by the Federal Trade Commission.
As you know, credit bureaus (aka credit reporting agencies or CRAs) gather all the financial information about you they can. The first part of FCRA forces these credit bureaus to provide you with one free credit report annually and to verify the accuracy of any item you report as an error to them. That last bit is the important part.
If an item is inaccurate, the bureau has to remove it. If they later discover that the error has been corrected they can’t put the negative item back in your report. But if they do that they first have to tell you 5 days before they reinstate the item.
Next, the Fair Credit Reporting Act mandates how long the CRA can keep negative items on your report. Typically, most blemishes have to come off your credit report in 7 years. The exception is bankruptcy which stays on your record for 10 years.
FCRA also spells out the rules of conduct for anyone reporting to the credit reporting agencies. That includes creditors, collection agencies, courts and employers (past and present). These people can only report information that is complete and accurate. And they must investigate any item that you dispute.
If they find a mistake, they have to fix it within 30 days. If they still believe their report is accurate, they have to tell you why within 30 days. Last, they are obligated to let you know when they report a negative item to a credit bureau but they have 30 days from the time they report the negative to let you know about it.
If a party who reviews your credit decides to not do business with you or to charge you more because of the information they see in your report, they have to tell you which reporting agency issued the report. This way, you have the opportunity to make sure the report is accurate.
What happens if creditors or credit bureaus don’t comply?
Here’s the good news. If you find a discrepancy and the other side willfully ignores your request to correct the error, you can recover the greater of your damages or $2500. On top of that, you may be able to get punitive damages plus your legal fees and other costs. To get this relief however you will have to sue the offender and you’ll have to do so within 5 years of the date you uncover the error.
If you don’t have the patience to sue someone, don’t worry. There is a much faster and cheaper way to get this issue resolved. I’ll cover that here.
Fair Credit Billing Act
This is also a federal law and it’s really part of the Truth In Lending Act. The goal here is to safeguard you against unfair billing and to lay out the way errors are supposed to be corrected. You can use this law to get satisfaction from unfair business practices:
- You are charged for something you didn’t buy.
- The amount you are charged is wrong.
- You never received the items, you received the wrong items, they weren’t delivered as agreed or were damaged when you got them.
- You don’t get credit for your payments.
- Statements are sent to the wrong address.
How To Use The Fair Credit Billing Act
This law gives you as the consumer a lot of fire power but you have to play by the rules. First, if you find a mistake, send a snail-mail letter to the “billing inquires” address of the creditor – not the address you send payments to. Once the error appears on your statement, you have to make sure the creditor gets your dispute letter within sixty days of the statement date. For these reasons, I suggest you use an overnight mail delivery service or registered mail.
Sometimes creditors allow you to dispute claims via online websites but if you go that route you may waive your protection under this law. Find out before you submit your dispute. And no matter what anyone says, you aren’t protected under the law if you phone in your gripe.
The creditor has to acknowledge they received your letter within 30 days and they have 90 days to either make the correction or tell you why they aren’t going to. If you get turned down, you have the right to request all the creditor’s documentation proving there is no error.
Hidden Gem – This law has a hidden provision you can use with your credit card company. If you make the transaction in your home state or within 100 miles of your home address and the dollar amount exceeds $50, you can dispute the quality of what you received with the credit card company. As long as you make a good faith effort to work things out with the vendor, the credit card company will likely refund the amount you spent once you return the product or stop using the service.
Again, the Federal Trade Commission administers this law so you can take up your grievance with them. Of course you can also file a lawsuit. If you do, you might recover your actual damages plus twice the mistaken finance charges plus your attorney fees and other costs assuming you win the suit.
Truth in Lending Act
Also another federal law, the Truth in Lending Act (TILA) is also known as the Consumer Credit Protection Act or “Regulation Z”. It covers disclosures about terms and costs. It also makes sure that there is uniformity in how creditors calculate finance charges. This enables you to shop for the lowest rate. But this law does not determine how much a creditor can charge. The only mandates that they disclose their charges in a way you can easily understand without getting an economics degree.
Have you ever seen the term “Annual Percentage Rate” (APR)? Based on this law, the government forces creditors to calculate APR uniformly and disclose it to you. The government passed this law in order to stop vendors from advertising misleading interest rates.
Fair Debt Collection Practices Act
As the name implies, this law protects consumers (not business) from debt collectors’ nasty behavior. It also provides a way for you to get your hands on the information you need in order to dispute a charge.
The definition of who is and who is not a “debt collector” changes over time. At first, this law only applied to companies that buy debt at a discount and then try to collect it. But over time the definition has broadened. Now attorneys involved in debt collection fall under this law and that means you have more protection against more collectors.
What conduct isn’t allowed
The law stops debt collectors from engaging in “abusive and deceptive” behavior when they try to collect debt. That includes:
- Contacting you after you’ve requested a validation of the debt.
- Calling you when the collector knows you are working with an attorney.
- Calling you after 9 pm or before 8 am local time.
- Contacting you at work if your employer prohibits it.
- Non-stop calling just to be a nuisance.
- Reporting or threatening to report false information to credit bureaus.
- Publicly embarrassing you – that includes sending you a “debt postcard” or putting an embarrassing stamp on note on a letter they send you. It also includes publishing your name on a “bad debt” list.
- Talking with people other than your spouse or attorney about the collection.
- Using abusive language, threatening to have you arrested or other legal action they can’t legally take.
- Trying to collect higher amounts than are owed.
- Misrepresenting themselves such as saying they are police or attorneys when they are not.
- And the granddaddy of them all – the debt collector has to stop contact with you after they receive your written notice demanding that they stop contacting you or that you refuse to pay the bill. The only exceptions are they can contact you to tell you that they are no longer going to pursue the matter and they can contact you to tell you they are going to start litigation against you.
Not only does the law prohibit the debt collector from doing certain things, the act also requires that the collector act professionally. Specifically, here is what the law requires of them:
- They have to identify themselves in every communication and disclose that any information you offer will be used to collect the debt.
- If you send a written request for the name and contact information for the original creditor, they must give you that information.
- They must give you formal notice that you can dispute the debt.
- If they file a lawsuit it has to be filed where you live or where you signed the contract.
- If you make a written request within 30 days of getting notice of the collection process, the collector must mail you information that verifies the debt or stop the collection process completely.
The Consumer Financial Protection Bureau and FTC enforces this law but you can also file a lawsuit privately. If you win your suit you might receive damages, fees and costs. The good news is, you don’t have to prove your damages. If you win your case, the debt collector will have to pay you up to $1000 plus reasonable attorney fees. Just be careful. If the court finds that you filed case furiously and you lose, you may have to pay the debt collectors legal fees.
These four laws (and others) were passed in order to protect you and your good name. Even if you technically owe the money, if the creditor doesn’t play by the rules, you can use these laws to get them off your back. Take a little time to review how these laws work in your favor and let your creditor know that you know. If that doesn’t get them to back off, you may want to use the assistance of experienced professionals that know exactly what to do in these situations.