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You may not even realize it, but one of your identities in the United States is that of a consumer. Businesses are constantly collecting your data as you make purchases of products and services. Competition is fierce and each company wants to gain your loyalty. To prevent this from getting out of hand, government regulations were put into place to protect you. There are so many laws to know, and they are all created for the purpose of protecting your financial and consumer rights.
After reading this article, you will understand the credit protection, debt collection, identify theft and bankruptcy and reorganization laws that are in place to protect you as a consumer. Specifically discussed are the Federal Truth in Lending Act, Fair Credit Billing Act, Fair Credit Reporting Act, Fair and Accurate Credit Transaction Act of 2003 (FACTA), Equal Credit Opportunity Act, The Credit Card Accountability Responsibility and Disclosure Act of 2009 under Credit Protection. Further, the Fair Debt Collection Practices Act is covered, as well as identity theft and bankruptcy and reorganization laws.
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What are Consumer Protection Laws?
A consumer is a person who obtains goods or services from companies for their own use. As a consumer, you have basic rights and this is what government regulation tries to preserve through consumer protection laws.
They prevent businesses from obtaining unfair advantages over competitors through fraudulent and unjust practices. The Federal Trade Commission and the Better Business Bureau are examples of consumer protection agencies and organizations that participate in this effort.
There are many laws that protect you against businesses as you utilize credit to make purchases. Here are six credit protection acts that you need to know.
Federal Truth-in-Lending Act
Federal Truth-in-Lending Act or the Consumer Credit Protection Act is a federal law that is designed to promote the informed use of consumer credit by requiring disclosures. It is administered by the Federal Reserve Board, and also known as Regulation Z.
The act applies when:
- A debtor is a natural person
- The creditor in the ordinary course of its business is a lender, seller, or provider of services
- The amount being financed is no more than $25,000 or is secured by real property or personal property used or expected to be used as the principal dwelling of the consumer
Information that must be disclosed includes annual percentage rate, finance charges, amount financed, number of payments, and any prepayment penalties.
Fair Credit Billing Act
Credit card holders are given limited rights to withhold their payment if there is a dispute about the goods that were purchased with their credit card. If a cardholder believes that an error has been made by the issuer, then the cardholder may suspend the payment. However, they must notify and give an explanation to the card issuer within 60 days of receipt of the bill in writing. The issuer of the credit card must acknowledge receipt of notification within 30 days and has to resolve the dispute within 90 days.
Fair Credit Reporting Act
Anyone that is refused credit or employment because of information in a credit bureau report must be supplied with a summary of the information in the report. It must include the sources and recipients of the information. The individual must also be given an opportunity to correct any errors.
Consumers have the right to be informed about the purpose and scope of a credit investigation, the kind of information that is being compiled, and the names of people who will receive a credit report. The provider of the credit report must use reasonable care in preparing the report. Data that is inaccurate or misleading must be removed from the credit report. The consumer also has the right to add a statement regarding a disputed matter.
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Fair and Accurate Credit Transaction Act of 2003 (FACTA)
Consumers who report suspected identity theft or fraud to a consumer reporting agency must be provided with a summary of their rights at no charge. The consumer may request that the agency block reporting of information that the consumer has identified as resulting from identity theft. The agency may decline the request if the consumer intentionally misrepresents the information or has received goods or services as a result of the blocked information, but the consumer must be notified of the refusal. Under this act, the consumer is entitled to receive a free copy of their credit report annually from each nationwide reporting agency. However, the consumer will have the opportunity to correct errors.
Equal Credit Opportunity Act
The act prohibits discrimination based on race, religion, national origin, color, sex, marital status, age or receipt of a certain type of income.
The Credit Card Accountability Responsibility and Disclosure Act of 2009
The act establishes fair practices and helps consumers to understand the credit transactions into which they enter. A credit card holder must be given 45 days notice of any interest rate increases, and credit cards will not be issued to an applicant under age 21 unless there is a cosigner.
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Debt Collection Protection
There are also laws in existence that protect you against unfair treatment by debt collectors. Here is what you need to know about your rights.
The Fair Debt Collection Practices Act
This act prohibits debt collectors from engaging in certain practices such as:
- Contacting a debtor at his place of employment if the employer objects
- Contacting a debtor at unusual or inconvenient times or, if the debtor is represented by an attorney, at any time
- Contacting third parties about the payment of the debt without court authorization
- Harassing or intimidating debtor or using false and misleading approaches
- Communicating with the debtor after a notice that the debtor is refusing to pay the debt except to advise the debtor of action to be taken by the collection agency
Despite these protections, though, debt collecting allows a state court to issue an order for garnishment. This is a legal process of obtaining a portion of a debtor’s wages in order to satisfy a legal judgment that was obtained by a creditor.
Identity Theft Protection
Primarily, the responsibility of protecting one’s identity falls into the hands of the specific individual. While there are resources and companies that can help you monitor the status of your personal information, here are a few steps that you can start taking today as a precaution.
- Shred papers with personal information before disposing of them.
- Don’t utilize links in emails.
- Review personal billing statements and other financial documents for any suspicious activity. If anything suspicious is found, report to the vendor immediately.
- Before giving out personal information to anyone online, make sure that you verify the identity of any website, telephone caller, and email.
- Use a virus protection and security software on personal computers, and never enter personal pieces of information on public computers.
- Register your home and cell phones with the National Do Not Call Registry to limit telephone scams against you. Elderly individuals are particularly susceptible to this.
Bankruptcy and Reorganization Protection
Even if you are facing bankruptcy, you still have rights as a consumer. Make sure that you understand the five types below in order to fully protect yourself.
Bankruptcy Reform Act of 1978
This act established Bankruptcy Courts and gave them jurisdiction over all controversies affecting the debtor or the debtor’s estate. The act provides procedures for the following:
- Voluntary and involuntary liquidation or bankruptcy of estates of natural persons, firms, partnerships, corporations, unincorporated companies, and associations
- Reorganization of persons, firms, and corporations
- Adjustment of debts of individuals with regular income
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Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005
This act made utilization of bankruptcy protection much more difficult for debtors who have the capacity to pay. It forces many consumers to file under adjustment of debts rather than the discharge of debts.
The law also increased creditor protection for retirement accounts that declare bankruptcy. With BAPCPA, most retirement accounts are now protected in bankruptcy proceedings. As of 2018, Roth and Traditional IRAs are protected up to $1,283,025. The number is updated every three years. SEP, SIMPLE, and rollover accounts are not subject to this exemption amount. Instead, they have unlimited protection.
Discharge of Debts
There are two types of discharge of debts involved in any bankruptcy situations.
- Voluntary liquidation - Voluntary liquidation is completed by any natural person, firm, association, or corporation. Under the voluntary liquidation, the petitioning debtor does not need to be insolvent unless it is a partnership. The debtor can be granted an order for relief if the petition is proper, and if the debtor has not been discharged in bankruptcy within the past six years.
- Involuntary liquidation - Involuntary liquidation is completed against any debtor, except for railroad, banking, insurance, municipal corporations, building or savings and loan associations, credit unions, non- profit organizations, and farmers. If a creditor has a noncontingent unsecured claim that is $5,000 or more, they may file a petition with the bankruptcy court. If there are 12 or more creditors, then three of them must join in the petition. However, if there are fewer than 12 creditors, one must file the petition. If a party requests it, they may appoint a temporary trustee to take possessions of a debtor's property to prevent a loss.
However, there are certain types of debts that cannot be discharged:
- Back taxes (up to three years)
- Debts that are associated with fraudulent activities, embezzlement, or misappropriation
- Alimony and child support
- Debt due to intentional tort claims
- Student loans
- Consumer debts of more than $650 for luxury goods or services owed to a single creditor within 90 days of the order for relief
Any individual, business firm, or corporate debtor that are eligible for liquidation except for stockbrokers, commodities brokers, and railroads are also eligible for reorganization. The voluntary or involuntary petition can be filed, but the automatic stay and entry or order for relief provisions still apply. The debtor can still remain in possession, and continue to operate the debtor’s business.
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Adjustment of debts of an individual with regular income
If an individual debtor is a wage earner or engaged in a business, they may voluntarily file a petition for the adjustment of debts. A reasonable plan that provides timely payments will be confirmed by the court. In most circumstances, the plan has to be approved by all secured creditors. Most plans need to have payments of all or portion of future income to be made to a trustee for a five year period. An adjustment can be converted to liquidation or reorganization.
Know Your Consumer Rights
Consumer protection laws work to protect you against improper business practices. They provide credit protection, debt collection protection, identity theft protection, and bankruptcy and reorganization protection. Do your due diligence in research so that you know when you are being treated unfairly.