Consumer Protection Laws Regarding Debt

No matter what your money troubles may be, take comfort in the fact that there are laws in place to protect you and your finances. Read on for a brief overview of the different consumer protection laws that outline rights and regulations for consumers struggling with debt.

Fair Credit Reporting Act of 1970

The Fair Credit Reporting Act extends rights to consumers with mistakes on their credit reports. Consumers may request copies of their credit reports and scores. If they find an error, such as if a negative mark is incorrect or if a negative mark is outdated, then they have the right to dispute such errors in writing.

Within 30 to 45 days of a dispute, the credit bureau in question must delete or correct the disputed entry if no evidence can be found to the contrary. If proof is found for the mark, however, then the consumer may place a consumer statement about the dispute on his or her report if he or she chooses.

FCRA also protects consumers’ privacy by restricting access to credit reports by unauthorized persons. Consumers additionally have the right to forgo getting unsolicited credit and insurance offers through the mail.

Fair Debt Collection Practices Act of 1977

The Fair Debt Collection Practices Act, or FDCPA as it is commonly referred, protects consumers against unfair treatment from debt collectors. It specifies lawful v. unlawful behavior, encompassing a wide range of debt collections procedures.

Most generally, FDCPA makes it against the law for collectors to harass, abuse, or threaten debtors. This includes a prohibition on using profane language, on calling the debtor outside the hours of 8am to 9pm local time without prior permission, and on calling an excessive number of times within a short period of time with the attention to annoy.

In addition, a collector may not call a debtor at work if he or she has been told that the employer disapproves. Collectors may contact other third parties to find how out how to get in contact with the debtor, but may do so only once. If the debtor has an attorney, then the collector is required to direct all contacts through him or her instead of directly to the debtor.


FDCPA further prohibits collectors from misrepresentation and lying in their dealings with debtors. Collectors may not purposefully lead debtors to believe that they are attorneys, government officials, representatives from a credit bureau, or anyone other than their true identity. They also may not lie about the actions they plan to take, should a debtor fail to pay as requested.

This law also outlines the procedures for appropriate initial contact and for disputing charges. Within five days of contacting a debtor initially, the collector must send written notice of his or her purposes. If the debtor does not believe that he or she owes the debt, then he or she must express this in writing within 30 days of that first contact. In this case, collectors may not initiate further contact without first obtaining proof that the debt in question is accurate.

Fair and Accurate Credit Transaction Act of 2003

Commonly known as the FACT Act, the Fair and Accurate Credit Transaction Act of 2003 outlines consumer rights regarding access to credit reports and credit scores, as well as in handling fraud.

Under the FACT Act, consumers may obtain one free copy of their credit report from each of the three main consumer credit reporting agencies – Experian, Equifax, and TransUnion -- once per year. This is an important tool for individuals to be able to monitor their credit reports successfully. They also have access to credit scores, but not free of charge.

Consumers additionally may receive a free copy of their credit reports if they are receiving public assistance, if they have been victimized by fraud, or if they have been denied credit or insurance within the past 60 days.

If an individual suspects fraud, this act additionally allows him or her to place a free fraud alert on each credit report.

Truth in Lending Act of 1968

The Truth in Lending Act protects consumers from being misled in situations involving credit. Most notably, it requires that all fees and costs be provided to the borrower clearly up front. This is so consumers can compare credit offers before committing to one.

In a credit transaction, the lender must both disclose and define all of the following: APR, finance charges, grace period, credit line, minimum payments, all annual fees, and all other applicable fees.

Additionally, this act provides consumers with a 3-day “cooling off” period after signing on to certain real estate loans, such as mortgages, during which an individual may change his or her mind without penalty.


Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

The Bankruptcy Abuse Prevention and Consumer Protection Act amended the Truth in Lending Act to encompass disclosure rules of bankruptcy and debt counseling. This legislation stipulates lawful procedures on a wide variety of topics, and includes the following:

• Money that is part of a retirement plan or of a child’s savings account is not counted among assets in bankruptcy cases.

• Child support and/or spousal support payments cannot be discharged in bankruptcy.

• Creditors must cease all collections efforts on a debt once the debtor files bankruptcy.

• There must be full disclosure of the repayment schedule for individuals who choose to utilize this route through bankruptcy.

• Individuals are given the opportunity to rethink their decisions before following through with bankruptcies.

• Petition preparers, lawyers, and debt relief agencies are liable for fraud in bankruptcy proceedings.

• Petition prepares cannot give legal advise to filers.

• If a debt relief agency extends an offer to a debtor, it must follow through if requested.

• A debt relief agency cannot purposefully misrepresent itself.

Fair Credit Billing Act of 1974

The Fair Credit Billing Act also amended the Truth in Lending Act. It protects consumers from liability for billing errors on credit accounts. Borrowers have the right to dispute mistakes that are out of their control, including payments made but not credited, unauthorized charges, and simple computational errors.

The dispute must be made within 60 days of the error. Within two billing cycles of the dispute (and 90 days), the lender must resolve the dispute.

In addition, the Fair Credit Billing Act gives individuals the right to deny payment for services or products that are unacceptable.