Consumer credit protections: Know your rights

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The credit card industry is relatively new, and although charge cards have been around since the 1940s, the first revolving credit card wasn’t issued until Bank of America introduced the BankAmericard in 1966.

As credit became a larger part of the modern economy over the past several decades, the federal government began to pass legislation designed to protect consumers and ensure they were treated fairly. Consumer credit protection legislation sets boundaries for everything from credit card fees to interest rate hikes — and these laws even specify what goes into our credit report. In times of economic uncertainty, consumer credit protections prevent lenders from taking advantage of consumers who might be experiencing financial difficulty.

Here’s a quick overview of major credit card legislation, a summary of your rights under each act and some tips on what you can do if you are having trouble making your credit card payments during times of financial hardship.

CARES Act

The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, was passed in 2020 in response to the COVID-19 pandemic. The CARES Act includes many protections designed to aid consumers during today’s extreme uncertainty and evolving economic hardship, including one important consumer credit protection: the ability to take advantage of coronavirus-related hardship programs such as credit card forbearance without taking a hit to your credit history or credit score.

If you participate in an assistance program, your lender is required to report your account to the three credit bureaus as “current” or “in good standing” even if you are not currently making payments on your debt. This allows you to maintain your credit while recovering financially from the pandemic. Keep in mind, though, that this leniency does not apply for accounts that were already in delinquency.

Credit CARD Act

The Credit Card Accountability Responsibility and Disclosure Act, commonly referred to as the Credit CARD Act, is one of the biggest credit reform bills in recent history. Passed in 2009, the Credit CARD Act provides a number of consumer credit protections, including:

  • Interest rate protections: Creditors must provide consumers with 45 days’ notification before increasing interest rates and can only increase interest rates on existing balances in certain situations (such as when a zero percent intro APR ends).
  • Fee protections: Creditors can only charge one over-limit fee per billing cycle and are limited in the number and amount of late fees they can charge.
  • Billing protections: Creditors must give consumers a 21-day grace period between billing and payment and cannot set arbitrary payment cut-off times (such as early morning payment deadlines).
  • Payment allocation protections: Creditors must apply payments to the highest interest-rate balance
  • Opt-out protections: Consumers have the right to opt-out if they do not like the changes a creditor is making to their accounts. If they choose to opt-out, the account is closed and they have at least five years to pay off the remaining balance under the original terms.

The Credit CARD Act also limits the ways in which credit card companies could issue credit to people under 21, requires lenders to inform cardholders how long it would take to pay off their balance if they only made the minimum payment and states that gift card rewards cannot expire for at least five years. For more information on the Credit CARD Act, including how it benefits most cardholders, read Bankrate’s in-depth explainer.

The Truth In Lending Act

The Truth in Lending Act (TILA) was passed in 1968 as a way to help consumers more effectively comparison-shop between loans. Prior to TILA, lenders could use various deceptive techniques to hide the amount of interest they were actually charging consumers (or to steer consumers towards higher-interest products). Now, lenders are required to present loan information in clear, easy-to-understand terms. TILA also gives consumers the right to back out of certain types of loans within a three-day window.

Because of TILA, all credit card issuers are required to provide information about interest rates, fees, penalty APRs and other charges. This is displayed as a Schumer Box, or the grid of information that often appears under the heading “Rates and Fees” or “Pricing and Terms,” and it includes all applicable APRs (including the primary APR, the balance transfer APR, cash advance APRs and penalty APRs), billing cycle information, all applicable fees and more.

Fair Credit Billing Act

The Fair Credit Billing Act (FCBA) is a 1974 amendment to the Truth in Lending Act. This amendment allows consumers to dispute credit card billing errors or inaccurate charges. It also requires lenders to provide credit card statements at least 14 days before payments are due, to give you the opportunity to review your credit card statement and dispute any errors.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) limits the actions that third-party debt collectors and agencies can take in order to pursue unpaid debts that are sent to collections. The FDCPA requires debt collectors to call between the hours of 8 a.m. and 9 p.m., for example, and allows consumers to request that debt collectors stop contacting them at work.

Collection agencies are also required to send a written validation notice within five days of contacting an individual about a debt. This notice must include the name of the original creditor, the amount owed and the individual’s rights under the FDCPA — including the right to dispute the debt or to ask the debt collector to prove that statute of limitations on the debt has not expired.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA), initially passed in 1970 and amended many times since, is designed to regulate all credit information collected on consumers and to give consumers the opportunity to access and dispute that information. In other words: the FCRA controls what goes into your credit report.

The FCRA also controls which organizations have the right to make credit inquiries and gives you the right to be notified if the information in your credit report causes you to be denied credit, insurance or employment.

Since your credit report is an essential part of your overall financial health, it’s important to review your credit report regularly, dispute any errors and do your best to maintain a positive credit history.

The first step towards good credit? Making on-time payments on all of your credit cards, loans and bills every month.

What to do if you can’t pay your credit card bills

If you are having trouble making your monthly credit card payments, your first step should be to contact your credit card issuer.

If you can negotiate a lower interest rate or a lower minimum payment, for example, you might be able to stay on top of your credit card debt. Many credit card companies offer hardship programs for people experiencing financial difficulty, and several lenders and banks have created special assistance programs for people affected by the coronavirus pandemic.

You can also look into debt forgiveness options, such as paying off a portion of your debt in a lump sum, or debt consolidation options, such as putting your existing credit card debt on a balance transfer card.

What you shouldn’t do is try to get out of your debt without paying it. If you miss too many credit card payments, your lender could send your debt to collections — and if you continue to ignore your debts, the debt collection company could issue a lawsuit against you for non-payment. If you lose the lawsuit, your wages could be garnished to pay for your old debts.

Ultimately, your goal is to try to find a way to continue making at least the minimum payments on your debts. Once your finances improve, you can begin to pay down your balances in full. Learn more about how to manage and pay off credit card debt with Bankrate’s credit card debt resource page.