Your credit has a lot of influence over your financial well-being.
With good credit, you have better odds of qualifying for loans, credit cards and many other things. The better your credit, the less you will typically pay in interest fees and deposits as well.
On the other hand, bad credit can make your life a lot harder. When you struggle with credit problems, it can be difficult to qualify for financing, find a place to live or even land a job. Bad credit also makes it tough to get ahead financially because the cost of many things — from auto insurance premiums to interest rates on mortgages, loans and other financing — tends to be much more expensive.
Because of the huge influence that credit has on your life, it’s really important that the credit reporting agencies and the data furnishers who supply information to them get your information correct. It’s bad enough when a legitimate mistake hurts your credit, but it can be maddeningly frustrating when your credit is damaged through no fault of your own.
Thankfully, there have been many laws written to protect you from unfair practices and abuse when it comes to consumer credit and debt. There are so many federal and state statutes that it can be difficult for the average person to keep them all straight and understand how they come together to work in your favor.
Although you’ll probably never memorize all of the protections you’re entitled to concerning your credit, you can familiarize yourself with your rights under two of the most important federal consumer protection laws — the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.
Here are a few highlights of how each law works to protect you.
The Fair Credit Reporting Act (FCRA)
The FCRA was originally passed in 1970 to help ensure that the information on your credit reports is accurate, fair and private. Anyone who creates reports about consumers (like credit reporting agencies, tenant screening companies, LexisNexis, etc.) and anyone who furnishes information to a consumer reporting agency (e.g. lenders, creditors, collection agencies, etc.) has to follow the rules that are laid out in the FCRA.
According to the FCRA, you’re entitled to the following rights:
- Anytime information in a consumer report is used against you — to deny an application for credit, employment or insurance or to charge you higher fees or premiums — you have to be told. This is called an adverse action notice.
- You can request a copy of all of the information a consumer reporting agency has on file about you (often free of charge).
- You’re entitled to request a free copy of your credit report once every 12 months from each of the credit reporting agencies and each special consumer reporting agency.
- You’re allowed to request your credit score, but you might have to pay for it.
- If you find incomplete or incorrect information on a credit report or consumer report, you can dispute it and the consumer reporting agency has to investigate your claim.
- Any incorrect, incomplete or unverifiable information has to be fixed or erased from your consumer report (credit reports included) if you dispute an item and it’s not verified — typically within 30 days.
- Negative information usually can’t stay on your credit report for more than seven to 10 years, depending upon the item.
- Only someone with “permissible purpose” is allowed to access your credit file — such as a company reviewing your credit application, an insurance provider, a landlord or an employer to whom you gave written permission.
- The credit bureaus can sell your credit information to card issuers and insurance providers for “prescreened” marketing purposes, unless you opt out.
- You can sue a consumer reporting agency, the credit bureaus or data furnishers if they violate any of your rights.
The Fair Debt Collection Practices Act (FDCPA)
The FDCPA was originally passed in 1977 to prevent debt collectors from being unfair, abusive or deceptive when they try to collect debts from consumers. The law, enforced by the Federal Trade Commission, applies to third-party debt collectors, like collection agencies or debt buyers, but typically not to original creditors.
According to the FDCPA, you’re entitled to the following rights:
- Debt collectors can only call you between 8 a.m. and 9 p.m. — based on your local time zone, not where the debt collector is located.
- If you tell a debt collector you aren’t allowed to get calls at work, they can’t call you there.
- You can mail a letter (certified with a “return receipt” is best) to ask a debt collector to stop contacting you. Be aware, this could trigger a debt collection lawsuit if that’s the only way you leave a collection agency to collect the debt.
- Debt collectors aren’t allowed to talk about your debt with anyone other than you, your spouse or your attorney. But a debt collector can contact other people, typically just one time, to ask for your contact information.
- You have to receive a written notice from a debt collector that says how much you owe, the name of the creditor you owe and instructions on what you can do if you don’t think a debt belongs to you.
- If you’re contacted about a debt and you don’t think you owe it, you can ask for the debt to be verified.
- Debt collectors cannot:
- Threaten you
- Curse or use obscene language
- Harass you with repeated phone calls
- Lie about how much you owe
- Falsely claim to be an attorney or to work for the government
- Say you’ll be arrested if you don’t pay
- Threaten legal action (unless they really intend to sue you)
- Charge interest or fees unless the original contract and/or state law allows it
- Deposit a post-dated check early
- Threaten to take (or take) your property without legal permission to do so
- Take money from your paycheck without a court order (aka garnishment)
- Seize money from your bank account without a court order
- You can sue a debt collector if it violates any of your rights.
What Can You Do If You Think Your Rights Have Been Violated?
Both the FCRA and the FDCPA give you the right to file a lawsuit against companies who you believe are violating your rights. This may include the credit bureaus themselves, your creditors and third-party debt collectors.
But just how common is it for people to sue debt collectors or the credit bureaus? It may happen more often than you think. According to WebRecon, over 4,400 FCRA and FDCPA lawsuits have been filed from January thru April 2019 alone. In 2018, a total of 13,539 lawsuits were filed in the U.S. alleging FCRA or FDCPA violations.
If you’re having trouble with incorrect credit reporting or an abusive debt collector and you can’t seem to fix the situation on your own, you might consider reaching out to a consumer protection attorney for advice. Depending upon your situation, an FCRA or FDCPA attorney may be willing to represent you and help you sue a creditor or credit reporting agency if the company appears to be breaking the law.
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