Most people don’t realize the credit card was only introduced roughly 60 years ago. Ultimately, the system led to credit scoring, the profile, and the modern system for financial payments.
The federal government ultimately established the consumer credit protection legislation to protect the consumer when it became clear that these cards would be used frequently and for daily spending.
This legislation ensured fair treatment and set boundaries for interest rate increases and fees and charges. The legislation monitors credit reports, and, in a turbulent economy, protections are in place for consumers facing financial difficulty from predatory lenders.
Let’s examine the individual Acts and how they protect consumers’ rights in today’s credit card market.
Legislation For Consumers’ Credit Card Protections
Congress has passed numerous critical laws for the optimal protection of the consumer’s credit.
Becoming familiar with your rights under each Act and other vital legislation will allow informed decision-making if you have difficulty making credit card payments, are unsure which card to choose, or are uncertain which debt to satisfy first. Please visit https://www.kredittkortinfo.no/rettigheter/ to learn about your rights with credit cards.
Here, we’ll examine each Act individually to see how they benefit the consumer in today’s credit card market.
The Credit Card Act
Formerly referred to as “The Credit Card Accountability Responsibility and Disclosure Act,” this is among the most prominent reform bills passed in 2009. It offers consumers many protections, including the following:
- The interest rate: Before increasing the interest rate on a credit card, issuers must alert the consumer 45 days before the increase takes effect. The rate increase can only apply to existing balances, like if the introductory period ends for an interest-free APR card.
- The fees: Issuers are limited in the fees charged on credit cards, with restrictions placed on how many late fees and the amount charged for these. With each billing cycle, the creditor is permitted only one “over-the-limit” charge.
- Billing: Consumers must receive 21 days for their grace period without arbitrary payment deadlines like early a.m.
- Payment allocation: Payments above the minimum balance due should have the extra principal applied to the highest interest balances. The issuer can apply the minimum payment as they wish.
- Opt-out: If a consumer is dissatisfied with an issuer’s changes to the credit card account, the consumer can opt out upon notification of the change, which results in the account being closed. In this situation, the consumer is given five years to repay the debt with the original terms and conditions.
The Truth in Lending Act
The TILA- Truth in Lending Act was introduced and passed in 1968 to allow consumers greater efficiency in comparing lenders. Before this law was effective, loan providers were deceptive in their methodologies, often hiding the actual interest rate the consumer would be responsible for.
Lenders would use this same language to upsell borrowers to higher-interest products. Now, lending agencies must be transparent with details and clarify terms and conditions for their clients. This Act allows the consumer to back out of certain loans within a three-day timeframe.
Fair Credit Billing Act
The FCBA—Fair Credit Billing Act amended the Truth in Lending Act in 1974, allowing disputes when errors appeared on credit card statements. Creditors are now required to issue statements 21 days before the due date to allow review of the statement and potential dispute of errors.
Fair Debt Collection Practices Act
The FDCPA—Fair Debt Collection Practices Act—restricts third-party agencies and debt collectors’ actions when pursuing debt sent to them. This Act mandates that collection calls be made from 8 in the morning to 9 p.m., and the consumer has the authority to request that the agents not contact them at their place of employment.
When pursuing debt, the agents must send a valid written notice five days after contacting a consumer about a debt. The notification must indicate the original creditor’s details, the debt amount, and the FDCPA consumer rights, including the ability to dispute the debt.
Ignoring the creditor and avoiding the notifications is tempting, but these will not go away. It’s better to be cooperative and work out a plan where the debt, if yours, can be repaid in good standing and in a way that’s comfortable for your current situation.
Fair Credit Reporting Act
The FCRA—Fair Credit Reporting Act—has been amended numerous times since it was originally passed in 1970, but the legislation’s basis is to regulate credit details gathered on consumers, make these accessible to the consumer, and allow the consumer to dispute the details.
Essentially, the Act monitors what goes into your credit profile. It also dictates which organizations can inquire about the history and alert you if details in the profile lead to a denial of credit, employment, or other essential life circumstances.
How To Handle Credit Card Debt You Can’t Repay
As a priority, consumers should keep balances low and manageable so the debt can be repaid each month in full without being carried over to the next month. This prevents default, avoids interest, and boosts credit.
That’s in a perfect world. Unfortunately, life circumstances often get in the way, leaving everyone susceptible to delayed or even missed payments periodically.
There could be downsizing on the job, a health concern, a family situation, or unexpected expenses that make you choose between the credit card bill and an emergent repair.
If you want to prevent these situations from harming your credit, it’s critical to reach out to the issuer to explain the extenuating circumstances. Often, creditors will negotiate the debt when you’re transparent and show a desire to make the payments.
It would be best to try to avoid getting out of the debt altogether and being sent to collections. When you continue to ignore debt, the agency can issue a lawsuit, ultimately garnishing your wages to recover the loss.
The goal should be to pay at least the minimum and then start to pay down the balance once your life situation improves.