Consumer credit law, plainly

This page is general education and general information, kept by the institute for anyone who wants it. It is written for the public at large rather than for any one person, and it says what the law provides rather than what any particular reader should do.

Nothing here is advice about your own situation, and nothing here is the institute's opinion about your credit, your money or your circumstances. It is a plain account of what the federal consumer credit statutes say, and of what the companies that work in this field may and may not do under them.

Every state has its own laws on top of the federal ones, and they differ. Where a state's rule is stricter than the federal rule, the state's rule is the one that applies to a company working in that state. Anyone reading this should check their own state's requirements, or ask a lawyer licensed in their state.

This page is kept current as the institute reads and revises it. It is not a substitute for the statute, and the statute is public: every law named below can be read in full at the source, free of charge.

The Credit Repair Organizations Act, at 15 U.S.C. §§ 1679–1679j, governs companies that sell credit repair services to consumers. It is the statute that most directly shapes how this field may be conducted.

Among the things it provides: a credit repair organization may not charge or receive money for services before those services are fully performed. It may not make any statement that is untrue or misleading to a consumer who is buying its services. It may not advise a consumer to make an untrue or misleading statement to a consumer reporting agency. And it may not alter a consumer's identification to prevent the display of the consumer's credit history — the practice sometimes called file segregation.

The Act also requires a written contract between the organization and the consumer, and it gives the consumer three business days to cancel that contract without penalty. The contract must state the terms and conditions of payment and must describe the services to be performed. The consumer has a right to sue for violations, and waivers of the Act's protections are not effective.

The Act covers organizations that sell, provide or perform credit repair services in return for money. It does not cover a nonprofit that provides credit repair services without charge, or a bank, credit union or similar institution, or a lawyer acting in the practice of law.

The Fair Credit Reporting Act, at 15 U.S.C. § 1681 et seq., governs consumer reporting agencies — the companies that assemble and sell credit reports — and the businesses that furnish information to them.

It gives a consumer the right to see the information in their file at a consumer reporting agency, and to receive a free report in specified circumstances. It gives the consumer the right to dispute information that is inaccurate or incomplete, and it requires the agency to conduct a reinvestigation and to correct or delete information that cannot be verified.

It places duties on furnishers of information, including a duty to investigate a dispute forwarded by an agency and to correct information found to be inaccurate.

It limits who may obtain a consumer report and for what purpose, and it sets out what may remain on a report and for how long — with the general limits on most adverse information and the longer or unlimited periods that apply to certain items such as bankruptcies and criminal convictions, depending on the item.

A consumer may bring an action for a willful or negligent violation, and the statute provides for actual damages, statutory damages in some cases, costs and attorney's fees.

The Fair and Accurate Credit Transactions Act of 2003 amended the Fair Credit Reporting Act. It is usually read as part of the FCRA rather than apart from it.

Among the things it added: the right of a consumer to one free disclosure of their file from each nationwide consumer reporting agency every twelve months, through the centralized source the agencies maintain. It also added provisions on fraud alerts and on identity theft, including the extended fraud alert a consumer may place after filing an identity theft report.

It added the requirement that a consumer reporting agency block information resulting from identity theft in specified circumstances, and it added duties on users of consumer reports and on furnishers in connection with identity theft.

It also added the rules on the truncation of card numbers on receipts, on the disposal of consumer report information, and on risk-based pricing notices.

The Fair Debt Collection Practices Act, at 15 U.S.C. § 1692 et seq., governs the conduct of debt collectors — a term the statute defines, and which generally covers third parties who regularly collect debts owed to another.

It prohibits a range of conduct: harassing or abusive collection, the use of obscene or profane language, repeated telephone calls made with intent to annoy, and the publication of a consumer's debt. It prohibits false or misleading representations, including misrepresenting the amount owed, the identity of the collector, or the consequences of non-payment.

It places limits on the times and places a collector may contact a consumer, and it requires a collector to send a written notice of the debt within a set period after first contact, and to verify the debt if the consumer disputes it in writing within the statutory window.

It also provides that a consumer may, in writing, require a collector to cease further communication, with limited exceptions. A consumer may bring an action for violations and may recover actual damages, statutory damages, costs and attorney's fees.

The Telemarketing Sales Rule, at 16 C.F.R. Part 310, is a rule of the Federal Trade Commission made under the Telemarketing and Consumer Fraud and Abuse Prevention Act. It governs telemarketing calls and, importantly for this field, it applies to the sale of credit repair services.

Among the things it provides: a seller or telemarketer may not request or receive payment in advance of the delivery of credit repair services — the advance fee prohibition is stated here as well as in the Credit Repair Organizations Act. A telemarketer must disclose specified information before a consumer pays. It may not make a false or misleading statement to induce a consumer to buy.

It also establishes the National Do Not Call Registry and the rules around calling numbers on it, restrictions on the hours a call may be made, and requirements for caller identification and for record-keeping. The Rule is enforced by the FTC and, for telemarketing that crosses state lines, by the states as well.

Every state has its own consumer credit and consumer protection laws, and many states regulate credit services businesses directly, often by requiring registration, a bond, or both.

Where a state's requirement is stricter than a federal one, the stricter rule generally governs a company operating in that state. A company may therefore be lawful in one state and not in another, and the difference is usually the state's registration and bonding scheme.

A consumer reading this should check their own state's rules. Most are published by the state's attorney general or its department of financial institutions or consumer affairs, and the requirements are usually stated in plain terms.

This part of the page is kept for the institute's own material. It will be written and added to over time, and each block is added as its own entry.