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Credit and Your Consumer Rights
A good credit
rating is very important. Businesses inspect your credit history
when they evaluate your applications for credit, insurance,
employment and leases. Based on your credit payment history,
businesses may choose to grant or deny credit, provided you
receive fair and equal treatment. Sometimes, things happen that
can cause credit problems: a temporary loss of income, an
illness, even a computer error. Solving credit problems may take
time and patience, but it doesn't have to be an ordeal.
The Federal Trade Commission (FTC) enforces credit laws that
protect your right to obtain, use, and maintain credit. These
laws do not guarantee that everyone will receive credit.
Instead, the credit laws protect your rights by requiring
businesses to give all consumers a fair and equal opportunity to
receive credit and to resolve disputes over credit errors. This
document explains your rights under these laws and offers
practical tips to help you solve credit problems.
Your Credit Report
Your credit payment history is recorded in a file or report.
These files or reports are maintained and sold by consumer
reporting agencies (CRAs). One type of CRA is commonly known as
a credit bureau. You have a credit record on file at a credit
bureau if you have ever applied for a credit or charge account,
a personal loan, insurance, or a job. Your credit record
contains information about your income, debts, and credit
payment history. It also indicates whether you have been sued,
arrested, or have filed for bankruptcy.
The Fair Credit Reporting Act (FCRA) is designed to help
ensure that CRAs furnish correct and complete information to
businesses to use when evaluating your application.
Your rights under the Fair Credit Reporting Act:
You have the
right to receive a copy of your credit report. The copy of your
report must contain all of the information in your file at the
time of your request.
You have the
right to know the name of anyone who received your credit report
in the last year for most purposes or in the last two years for
employment purposes.
Any company
that denies your application must supply the name and address of
the CRA they contacted, provided the denial was based on
information given by the CRA.
You have the
right to a free copy of your credit report when your application
is denied because of information supplied by the CRA. Your
request must be made within 60 days of receiving your denial
notice.
If you
contest the completeness or accuracy of information in your
report, you should file a dispute with the CRA and with the
company that furnished the information to the CRA. Both the CRA
and the furnisher of information are legally obligated to
investigate your dispute.
You have a
right to add a summary explanation to your credit report if your
dispute is not resolved to your satisfaction.
Your
Credit Application
When creditors evaluate a credit application, they cannot
lawfully engage in discriminatory practices.
The Equal Credit Opportunity Act (ECOA) prohibits credit
discrimination on the basis of sex, race, marital status,
religion, national origin, age, or receipt of public assistance.
Creditors may ask for this information (except religion) in
certain situations, but may not use it to discriminate when
deciding whether to grant you credit.
The ECOA protects consumers who deal with companies that
regularly extend credit, including banks, small loan and finance
companies, retail and department stores, credit card companies,
and credit unions. Everyone who participates in the decision to
grant credit, including real estate brokers who arrange
financing, must follow this law. Businesses applying for credit
also are protected by this law.
Your rights
under the Equal Credit Opportunity Act:
You cannot be
denied credit based on your race, sex, marital status, religion,
age, national origin, or receipt of public assistance.
You have the
right to have reliable public assistance considered in the same
manner as other income.
If you are
denied credit, you have a legal right to know why.
Your
Credit Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic fund
transfer account statements regularly. These documents may
contain mistakes that could damage your credit status or reflect
improper charges or transfers. If you find an error or
discrepancy, notify the company and contest the error
immediately. The Fair Credit Billing Act (FCBA) and Electronic
Fund Transfer Act (EFTA) establish procedures for resolving
mistakes on credit billing and electronic fund transfer account
statements, including:
charges or
electronic fund transfers that you, or anyone you have
authorized to use your account have not made;
charges or
electronic fund transfers that are incorrectly identified or
show the wrong amount or date;
computation
or similar errors;
failure to
reflect payments, credits, or electronic fund transfers
properly;
not mailing
or delivering credit billing statements to your current address,
as long as that address was received by the creditor in writing
at least twenty days before the billing period ended;
charges or
electronic fund transfers for which you request an explanation
or documentation, due to a possible error.
The FCBA
generally applies only to "open end" credit accounts, credit
cards, revolving charge accounts (such as department store
accounts), and overdraft checking accounts. It does not apply to
loans or credit sales that are paid according to a fixed
schedule until the entire amount is paid back, such as an
automobile loan. The EFTA applies to electronic fund transfers,
such as those involving automatic teller machines (ATMs),
point-of-sale debit transactions, and other electronic banking
transactions.
Your Debts and Debt Collectors
You are responsible for your debts. If you fall behind in
paying your creditors or an error is made on your account, you
may be contacted by a "debt collector." A debt collector is any
person, other than the creditor, who regularly collects debts
owed to others. This includes lawyers who collect debts on a
regular basis. You have the right to be treated fairly by debt
collectors.
The Fair Debt Collection Practices Act (FDCPA) applies to
personal, family, and household debts. This includes money owed
for the purchase of a car, for medical care, or for charge
accounts. The FDCPA prohibits debt collectors from engaging in
unfair, deceptive, or abusive practices while collecting these
debts.
Your rights under the Fair Debt Collection Practices Act:
Debt
collectors may contact you only between 8 a.m. and 9 p.m.
Debt
collectors may not contact you at work if they know your
employer disapproves.
Debt
collectors may not harass, oppress, or abuse you.
Debt
collectors may not lie when collecting debts, such as falsely
implying that you have committed a crime.
Debt
collectors must identify themselves to you on the phone.
Debt
collectors must stop contacting you if you ask them to in
writing.
Solving
Your Credit Problems
Your credit report influences your purchasing power, as well
as your chances to get a job, rent or buy an apartment or a
house, and buy insurance. A history of timely credit payments
helps you get additional credit. Accurate negative information
can stay on your report for seven years. A bankruptcy can stay
on your report for 10 years. If you are having problems paying
your bills, contact your creditors at once. Try to work out a
modified payment plan with them that reduces your payments to a
more manageable level. Don't wait until your account has been
turned over to a debt collector.
Here are some additional tips for solving credit problems:
- If you want to
contest a credit report, bill or credit denial, contact
the appropriate company in writing and send it "return
receipt requested."
- When you contest
a billing error, include your name, account number, the
dollar amount in question, and the reason you believe
the bill is wrong.
- If in doubt, request written verification of a debt.
- Keep all your
original documents, especially receipts, sales slips,
and billing statements. You will need them if you
dispute a credit bill or report. Send copies only. It
may take more than one letter to correct problems.
- Be skeptical of businesses that offer instant solutions to credit
problems.
- Be persistent.
Resolving credit problems can take time and effort.
- There is nothing
a credit repair company can do for you for a fee, that
you cannot do for yourself for little or no cost.
If you can't
resolve your credit problems yourself or if you need help, you
may want to contact a credit counseling service. Nonprofit
organizations in every state counsel consumers in debt.
Counselors try to arrange repayment plans that are acceptable to
you and your creditors. They also can help you set up a
realistic budget. These services usually are offered at little
or no cost.
Universities, military bases, credit unions, and housing
authorities also may offer low- or no-cost credit counseling
programs. Check the white pages of your telephone directory for
a service near you.
For More Information
You can file a complaint with the FTC by contacting the Consumer
Response Center by phone: toll-free 1-877-FTC-HELP (382-4357);
TDD: 202-326-2502; by mail: Consumer Response Center, Federal
Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC
20580; or through the Internet, using the online complaint form.
Although the Commission cannot resolve individual problems for
consumers, it can act against a company if it sees a pattern of
possible law violations.
This document was written in January 1998 by the FTC.
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