Did you know that banks, credit card companies and debt collectors have something in common? It’s that they are all regulated by the federal government. Some of these regulations have to do with your rights as a consumer. You need to understand these rights so that you can avoid being scammed or become the victim of greedy credit card companies.
It’s in the CARD(s)
The first federal law you should know about is the CARD (Credit Card Accountability, Responsibility, and Disclosure) Act that was signed into law in May of 2009. The reason it was passed is because many credit card companies were engaged in activities that weren’t illegal but were definitely on the shady side. In fact, it was quite common for credit card issuers to raise their customers’ interest rates on their existing balances and often with little or no advance notice. You could have a credit card with a perfectly reasonable interest rate of 10% only to open your statement one month and find it had been hiked to 19%. If you were carrying a balance of, say, $10,000 that increase would cost you $156 more to pay of your debt in 12 months and $516 more to pay it off in 24 months.
High late fees
Another way the credit card companies were abusing cardholders was with very high fees for late payments and what are called “overlimit” fees or fees charged if you exceeded your credit card’s limit. For example, if you had a card with a $3000 limit and your balance grew to $3300, you could be slapped with a very high fee.
Prior to the CARD Act, some credit card companies had TOCs (terms and conditions) that were written in such a way that some consumers either could not understand them or actually misunderstood them. As a result many people signed up for credit cards and were then shocked when their statements began arriving complete with fees, charges and interest rates they hadn’t expected.
What CARD did
The CARD act was responsible for four important changes that helped consumers considerably.
First, it dramatically reduced the practice of increasing the interest rates of existing cardholders. Second, it substantially reduced the size of late fees being charged them. And, third, CARD forced the credit card issuers to rewrite their TOCs so their costs would be easier to understand – though some confusion still remains in this area.
Provisions about interest rates
The CARD Act also contains two provisions designed to reduce credit card interest rates. They are:
1. Credit card companies are generally barred from increasing the interest rate on existing balances unless and until you’ve missed two consecutive payments.
2. They are generally permitted to increase your interest rate on new purchases but must give you an advance notice of 45 days during which time you are allowed to cancel your account with no penalty.
What’s happened with late fees?
The CARD Act also protects you from unfair or excessive late charges. It does this two ways. First, your credit card bill must be due the same day each month and if your payment is received by 5:00 PM that day, it must be treated as timely. In other words, you are to be given at least 21 days to pay your bill before you can be charged a late fee. Second, any late fee you’re charged must be “reasonable,” which is usually defined as $25 the first time you’re late and $35 the second time you’re late within the following six months.
Its effect on overlimit fees
The CARD Act has also had a dramatic effect on overlimit fees as they have all but disappeared. This is because the credit card companies can no longer charge an overlimit fee unless you expressly opt in and permit the card issuer to process overlimit transactions. Plus, the credit card companies cannot charge more than one overlimit fee on any one billing statement. To put this another way, if you were to go overlimit three times in one billing period, you could be charged only for the first one.
The second act you should be familiar with is the FDCPA or Fair Debt Collection Practices Act that was passed by Congress in 2011. This is a particularly important act if you’re being harassed by a debt collection agency as it spells out what debt collectors can and cannot do and how you can stop any harassment.
For example, the FDCPA bans collectors from:
- Contacting you before 8:00AM and after 9:00PM local time
- Contacting you at your place of employment after the collector has been told that this is prohibited or unacceptable
- Threatening arrest or some legal action that is either not permitted or not actually contemplated
- Causing your phone to ring or engaging you in telephone conversation repeatedly or continuously with the intent to abuse you
- Communicating with third parties to reveal or discuss your debts – other than your spouse or attorney
- Failing to cease communicating with you after you had requested this
- Misrepresenting your debt or using deceit to collect the debt such as the debt collector representing himself as an attorney or law enforcement officer
- Publishing your name on a “bad debt list”
- Seeking an unjustified amount of money, which would include demanding any amount of money not permitted under the applicable contract or as under applicable law
- Reporting false information to the credit reporting bureaus or threatening to do this
- Contact by media that would embarrass you such as mailing you a postcard or using an envelope that includes the debt collection agency’s name.
What else you should know about the FDCPA
There are other things that debt collectors cannot do. If you’re having a problem with one, you should go to the Wikipedia page on the FDCPA to learn all of your rights.
As you can see, debt collectors are prohibited from harassing you. Unfortunately, there are those who will hassle and threaten you regardless of the FDCPA. In this case, there are other things you can do. You could send a “cease and desist” letter to the debt collection agency notifying it to stop contacting you. If you go to this site, you will find a sample cease and desist letter you could send the collection agency. Most experts say that you should send it registered and return receipt requested so that you can prove you sent it and that the collection agency received it.
Once the collection agency receives your cease and desist letter it is allowed to contact you only once more – to either tell you that it won’t contact you again or to advise you as to what step it will take next such as filing suit.
If this doesn’t work
There are definitely some really bad apples in the debt collection business and no cease and desist letter will stop them from continuing to harass you. But there are things you can do beyond just sending a letter. For example, you could report the collection agency to your state’s attorney general’s office. You could also hire an attorney and file suit against the agency. If you are successful, you could collect up to $1000 in statutory damages, plus your attorneys’ fees and reimbursement for any other expenses you incurred as a result of the collection agency’s behavior. If you would like more information about suing a debt collection agency, go to this website.
The Fair Credit Reporting Act
The third of the three federal acts you should be familiar with is the Fair Credit Reporting Act
(FCRA). Among other things, it regulates how your credit information can be treated and requires the three credit bureaus to provide you with free copy of your report once a year. The FCRA also regulates how long negative information can stay in your credit report – typically seven years from the date of your delinquency with the exception of a bankruptcy that will stay in your reports for 10 years and tax liens that will remain there for seven years from the time you paid them.
Finally, and perhaps most importantly the FCRA provides a means for you to get erroneous information deleted from your credit reports. The short version of how this works is that if you find an item on one of your credit reports that you believe is an error, you can write the appropriate credit reporting bureau and dispute it. When you do this, the credit bureau must have the institution that provided the information verify it or it must remove the item from your report.