How Does the Consumer Credit Protection Act Work?

consumer credit protection act

Enacted on May 29, 1968, the Consumer Credit Protection Act (CCPA) was created to protect American consumers when accessing credit.

This federal legislation requires lenders, such as credit card companies, banks, and auto-leasing firms, to adhere to specific disclosure requirements. Ideally, they have to inform consumers about annual percentage rates, and not just the stand-alone interest rate.

Also, they are expected to inform borrowers about any hidden or special terms and the total costs of accessing credit. This has helped to standardized credit practices to ensure all lenders follow the same regulations.

The CCPA now contains several acts, and this post is going to explore all of them.

Keep on reading to learn more.

1. Truth in Lending Act

The government instituted the Truth in Lending Act (TILA) in 1969 to ensure consumer rights and improve the economy.

It protects consumers from misleading advertising by lenders and unfair billing practices. TILA requires lenders to provide the total loan cost to allow borrowers to compare options when shopping for loans.

Over the years, the act has been amended to include other acts, such as:

  • Fair Credit Billing Act
  • Home Equity Loan Consumer Protection Act
  • Home Ownership and Equity Protection Act
  • Fair Credit and Charge Card Disclosure Act

TILA also offers the privilege of rescission. In this case, buyers are given three days to reexamine an advance and withdraw without any costs. In 2010, the government granted the Consumer Financial Protection Bureau (CFPB) the rulemaking authority.

2. Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) was enacted in 1970. Its purpose was to regulate how lenders use the personal information of consumers.

As such, consumer reporting agencies are expected to follow certain standards to protect your credit. Consequently, all consumers are eligible for a free credit report every year. The report must be accurate and protected. You can get your report from Experian, Equifax, and Transunion.

If there are any issues with the report, the report must fix them promptly. You can also sue them for damages and seek compensation. FCRA contains other acts, including the Fair and Accurate Credit Transactions Act, the Dodd-Frank Act and the Credit CARD Act.

3. Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit access based on sex, religion, race, nationality or marital status. It was enacted in 1976 to protect consumers from unfairness when applying for credit.

Also, creditors can’t discriminate consumers when they’re accessing public assistance and government aid. Plus, they can’t discourage borrowers from applying for credit because of any reason. If an application is rejected, consumers have the right to know why.

4. Electronic Fund Transfer Act

Passed in 1978, the Electronic Funds Transfer Act (EFTA) protects consumers when they’re transferring money electronically.

This act applies whenever consumers are using point-of-sale (POS) terminals, automated teller machines (ATM), and telephone to pay bills. It covers all transactions that can withdraw money from a consumer’s bank account.

However, it’s doesn’t cover credit card transactions. EFTA requires all cards to be unique, and banks must impose withdrawal limits.

5. Fair Debt Collection Practices Act

This is another critical act of the Consumer Credit Protection Act. The government passed the Fair Debt Collection Practices Act (FDCPA) in 1977. It regulates how debt collectors treat and contact consumers.

FDCPA helps to ensure borrowers are safe from false statements, unfair practices, and harassment. For example, the law allows debt collectors only to contact you between 8 am and 9 pm. Also, they can’t contact you at work if your employer doesn’t approve.

6. Title III

The Consumer Credit Protection Act also protects employees from possible wage garnishment by employers. This is through a provision known as Title III.

This law restricts the amount of earnings that employers can garnish which is 25 percent of disposable weekly earnings. Ideally, wage garnishment refers to the withholding of wages by an employer to pay a debt or other legal reasons.

Title III protects employees from job dismissals due to garnishment for a single debt. However, the CCPA doesn’t protect employees if their earnings are subject to garnishment due to two or more debts.

Keep in mind that only a jury can pass wage garnishment.

Also, keep in mind that the 25 percent rule doesn’t apply to all cases. For example, bankruptcy payments, child support, and state and federal payments can garnish up to 50 percent of your earnings following a court order.

Title III is also not available in all states. Or, it can be limited. For example, South Carolina prohibits Title III. In Texas, only child support can garnish wages. Pennsylvania only accepts garnishment for taxes and child support.

Understand Your Rights

As a consumer, it’s important to understand your credit rights to prevent harassment, false or inaccurate information, safety, privacy, and discrimination.

The first step is to understand all the acts provided under the Consumer Credit Protection Act. If any company or lender violates your rights, it’s your obligation to complain to the Consumer Financial Protection Bureau.

The bureau will review your complaint together with others and penalize the company. It may also require the company to make full or partial refunds.

Also, you can complain to your state Attorney General, the Federal Trade Commission, and other government entities. If you believe there are any damages or serious offenses, you can consult a professional lawyer.

Consumer Credit Protection Act – Final Thoughts

As much as you have credit rights, it helps to understand they don’t guarantee approval for your credit application. Today, lenders and creditors use your credit score to determine your creditworthiness. In this case, they have every right to reject your application if your score doesn’t meet their minimum requirement(s).

Generally, a credit score of 700 or above is considered good. At Credit Lynx, we’d love to assist you with your credit goals. Our team features experts with a vast understanding of credit protection laws, credit repair, lending, and mortgage underwriting. Together, we help you to take control of your financial future.

If you want to learn more or have any questions, feel free to reach out to us anytime.

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