Consumer Credit Protection Laws

Federal Statutes Governing the Rights of Consumers Who Seek Credit

It seems like every time you turn around, there’s a new offer for consumer credit, where some lender wants to extend you credit or provide you with a loan. The number and differences of such offers can be dizzying, and it can be difficult, if not impossible, to protect yourself from unscrupulous or predatory lenders. Fortunately, there are a number of federal laws to help protect your rights.

In addition to federal protection, some states have passed statutes regulating consumer credit. The UCCC (Uniform Consumer Credit Code) is a model law designed to protect consumers obtaining credit and govern the credit industry in general. As of 2023, its provisions have been fully or partially adopted in 11 states. The remainder of this page, however, focuses on federal laws that apply in all 50 states.

The Consumer Credit Protection Act (CCPA)

Congress enacted the CCPA in 1968 in part to regulate the consumer-credit industry, including credit card companies and credit-reporting agencies. The Act requires creditors to disclose credit terms to consumers. It also protects consumers from loan sharks and restricts the garnishing of wages. The CCPA prohibits discrimination based on sex or marital status in the extending of credit and also regulates certain debt collectors. The protections of the CCPA have been expanded and fleshed out over the years by various amendments and other consumer credit protection laws.

The Fair Credit Reporting Act

Enacted in 1970, the Fair Credit Reporting Act (FCRA) ensures maximum fairness, accuracy, and privacy for consumers when their personal credit information is collected and disclosed to potential lenders:

• The FCRA establishes rules and regulations for credit bureaus and agencies who collect and share information regarding a person’s creditworthiness.
• The Act sets forth the rights of consumers with respect to their credit records, including the right of free access to credit reports.
• The law identifies sanctions for violation of consumer rights regarding credit reporting.

Under the FCRA, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are charged with monitoring and enforcing consumer rights. The FCRA identifies how a credit bureau or agency may collect credit information, how long it may keep and report that information, and to whom that information may be provided. The law specifically lists the types of data a credit bureau may collect and disclose, including:

• Bill payment history
• Current financial obligations
• Prior loans
• All known addresses
• Employment information
• Bankruptcy filings
• Child support obligations or arrearages
• Arrest records

The statute also identifies who may obtain access to a credit report and the situations where access may be obtained. As a general rule, a consumer must initiate a financial transaction or agree in writing to the disclosure of credit information before a credit bureau can provide a credit report.

Consumer Rights Under the FCRA

The Fair Credit Reporting Act allows every consumer the right to a free credit report every 12 months. A consumer may obtain a free credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion. Those free reports are available online at AnnualCreditReport.com. Additionally, consumers have the right under the FCRA to:

• Receive written notice when information from their credit file is used to deny them credit;
• Confirm the accuracy of a credit report that will be reviewed by a potential employer;
• Dispute any inaccuracies in their credit report and have those errors corrected; and
• Have outdated information removed from their credit report—after seven years, for most transactions, and 10 years for a bankruptcy.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) enacted in 1978, governs the actions of debt or bill collectors, ensuring that they don’t engage in unscrupulous, intimidating, fraudulent, or other inappropriate behavior when attempting to collect a debt. Among other things, the FDCPA sets limits on when and how often debt collectors may contact debtors, whom debt collectors may contact when attempting to locate a debtor, and what collectors may say to a debtor.

The Real Estate Settlement Procedures Act (RESPA)

Signed into law in 1975, the Real Estate Settlement Procedures Act ensures that buyers and sellers of residential real estate receive full disclosure of all potential costs related to the transaction. The federal law was promulgated to curtail abusive practices in real estate settlements, including the prevalence of kickbacks, and to restrict the use of escrow accounts as a means of overcharging or deceiving consumers. It covers most home loans, refinancing agreements, property improvement financing, and home equity lines of credit.

RESPA provides consumers with a number of rights:

• Brokers, lenders, and servicers of residential mortgage loans must fully disclose all potential costs related to or arising out of the sale or purchase of residential property.
• Companies that service residential mortgage loans may not require excessive escrow payments.
• Sellers may not require purchasers to obtain title insurance.
• Brokers, lenders, and servicers may not accept kickbacks, referral fees, or any other unearned fees.
• A borrower has up to one year to file a private lawsuit alleging behavior or actions in violation of the law, including kickbacks.
• CFPB may bring a lawsuit against a loan servicer up to three years after any wrongdoing.

The Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (1974) prohibits discrimination in consumer lending for any reason other than the applicant’s ability to pay. The act identifies race, color, religion, gender, national origin, marital status, age, and eligibility for public assistance as specific criteria that may not be the basis for a denial of credit. The statute gives the U.S. Department of Justice the authority to bring legal action where a pattern of wrongful discrimination has been identified. The rights afforded under the ECOA are also enforced by CFPB. The ECOA applies to a wide range of credit applications, including personal loans, small business loans, student loans, mortgages, automobile loans, and credit cards. It also covers loan modifications.

The Truth in Lending Act

Under the Truth in Lending Act, lenders covered by its provisions must disclose annual percentage rates, finance charges, the amount financed, and the total number of payments to be made. The law applies only to lenders who offer or extend credit on a regular basis.