Consumer Protection Laws That Safeguard Consumers from Predatory Debt Consolidation Companies

According to the 2018 annual analysis of U.S. household debt conducted by https://www.nerdwallet.com, credit card balances increased by about 5% to touch $420.22 billion. The study also reported the average credit card revolving debt per household as $6,929. While 9% of Americans think that they would never be able to become debt-free, NerdWallet observes that due to the high rates of interest and expenses outstripping incomes, many households are not only unable to get rid of debt but also continue to take on more. This makes many people seek out different ways of debt relief; the most popular being debt consolidation. However, there are many circumstances, including poor credit scores that prevent them from getting a fair deal. Consequently, many different acts have been passed to protect consumers against unfair trade practices and credit discrimination. A quick overview of the top ones:

The Fair and Accurate Credit Transactions Act

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) was enacted to ensure that everyone got a fair treatment while applying for all forms of credit, including mortgages. Also, known as the Consumer Credit Law, it gives every consumer the right to obtain a free copy of his credit report every year from all the three major credit reporting bureaus. It also requires merchants to blank out all but the last five digits of the credit card number to prevent identity theft. It provides for the creation of a national system of fraud alerts and the detection of identity theft and also requires regulators to come up with a list of alerts indicating identity theft.

The Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) sets out the ways in which the credit information of consumers can be gathered and used. It also makes it obligatory for the three credit bureaus to provide all customers a copy of their credit reports free of charge every year. The credit bureaus are also required to investigate any errors reported by consumers in the credit reports and either correct them or delete them as appropriate. Similarly, any outdated information in the credit report that has the potential to harm customers is required to be removed after the lapse of seven to ten years as specified.

The FCRA also lays down the instructions to companies for reporting information to credit bureaus and other agencies. No inaccurate information may be reported and any information reported earlier that is required to be updated should be done so. Moreover, no company is allowed to report any accounts that have been subject to identity theft once they are aware of such incidents.

Truth in Lending Act (TILA)

Truth in Lending Act (TILA) is a federal law that lays down the minimum standards for information to be contained in a contract for installment contract issued by a creditor. The mandatory disclosures to the debtor before the execution of the contract include the finance amount, the minimum payment required monthly, the total number of monthly payments, as well as the annual percentage rate. TILA also provides for the regulation of credit advertising so that consumers are able to make precise comparisons of the offered credit.

TILA mandates the information to be given to consumers when they are considering credit cards and loan products. All lenders have to disclose information such as the amount financed, APR, the finance charges, including penalties and additional fees, the schedule of payment as well as the total amount to be repaid over the duration of the credit offer. However, given that it is a free economy, TILA does not specify any limits on the interest rate that can be charged by lenders. You can read up on debt consolidation feedback to know more about the typical rates of interest charged on debt consolidation loans.

The Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) has been put into effect with the intention of preventing lenders from discriminating against borrowers due to any non-financial factor. ECOA specifies that lenders are not permitted to discriminate on the grounds of age, religion, race, color, marital status or whether any public assistance is being received by the customer. While it is legal for lenders to request this information in specific circumstances, they are not allowed to use it to decide on the grant of credit to the customer or even determine the terms applicable to approved customers.

The Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) specifies which debt collection agencies can follow-up with consumers for collecting debt and the methods they are allowed to contact consumers. The Act specifies that debt collectors cannot inform any other person of the due debt when they are trying to collect contact information of a consumer. It also regulates the time of the day in which, collectors can contact the consumer unless specific permission has been granted by the consumer. No debt collector is allowed to intimidate, harass customers, make false claims, call repeatedly with an intention to irritate or even threaten to take legal action that they do not intend to take or are not permitted to take. The FDCPA empowers consumers to sue debt collectors who violate their rights.

The Credit Repair Organizations Act (CROA)

The Credit Repair Organizations Act (CROA) has been expressly enacted to protect the rights of consumers who use the services of credit repair companies. The CROA prohibits credit repair companies from lying or encouraging consumers to lie about their credit histories to creditors or to attempt to alter the identity of consumers to get them a new credit profile. No misrepresentation regarding the services provided or payment before the rendering of services is permitted. The CROA also specifies the disclosures that credit repair companies need to make to the consumers and allow cancelation of the contract within a three-day “cooling off” period.

Conclusion

As is evident, there are a host of regulations and laws that safeguard the rights of consumers with respect to financial matters. Any violations should be immediately reported to the Consumer Financial Protection Bureau and you can also move the courts to enforce your rights.