The Laws that Govern Credit

There are three laws that concern all the different areas of credit in the US:

Fair Debt Collection Practices Act (FDCPA)

This is the most important law to be familiar with if you are being contacted by third party collection agencies. It sadly seems that more often than not, the representatives of collection agencies use extreme rudeness and overbearing behavior as a means of collecting debts – and so very often, they slip past rude and overbearing into illegal.

The FDCPA provides standards of behavior for debt collectors and requires them to provide certain information to debtors.

If you are being repeatedly called by a collection agency, ask for an address where you can send them mail. They must provide it to you. You can then sent a “cease and desist” letter requesting that they do not communicate with you by telephone and that all dealings be by mail.

Not only is this a tremendous stress relief, but it’s also an excellent way of documenting all of your communication with the collection agency. Telephone conversations are too difficult to track. But with a pile of letters, you can show a judge anything they’ve sent to you or you’ve sent to them.

You’re also not immediately at the mercy of anyone who calls you and says you owe them a debt. Unfortunately, even if you know that you owe $5,000 to State Bank, you simply cannot trust that the person calling you on the phone claiming to collect on that $5,000 is actually legitamately licensed to do so. Never just hand over your credit card or checking account number over the phone to a debt collector. It could be a scam. Always ask for an address, then send a letter requesting proof that you owe the alleged debt, and that this collection agency is authorized to collect this debt.

Fair Debt Collection Practices Act (FDCPA)

Fair Credit Reporting Act (FCRA)

The FCRA ensures that all of us have access to our own credit reports. It regulates who has “permissable purpose” to acquire copies of our credit reports and limits how long information can be reported. Additionally, the FCRA describes how a Credit Reporting Agency must handle disputes.

Fair and Accurate Credit Transactions Amendment (FACTA)

FACTA is an amendment to the FCRA passed in 2006 which gives all of us the right to free credit reports from each of the credit reporting agencies each year. Please see my post about free credit reports for more information.

Fair Credit Reporting Act (FCRA)

Fair and Accurate Credit Transactions Amendment (FACTA)

Fair Credit Billing Act (FCBA)

The FCBA required creditors to bill correctly and completely and is overseen by the Federal Trade Commission (FTC).

The law prohibits unauthorized charges against your accounts, charges that list the wrong date or the wrong amount, charges for goods and services that you either did not accept or did not receive as agreed. It also protects you against math errors, and the failure of the creditor to properly record payments or credits for returned items.

Additionally, as long as you notify a creditor of a new or changed address at least 20 days before the end of the billing period, the creditor must send all bills to your correct mailing address.

You’re also protected from having to pay for charges you are disputing. You dispute a charge by asking for an explanation or proof of purchase and claiming an error or requesting clarification of the charge. If the dispute is resolved in the creditor’s favor, you are still required to pay in full.

Fair Credit Billing Act (FCBA)

Also important: Health Insurance Portability and Accountability Act (HIPAA)

If you have debt resulting from medical bills, then you also need to know about HIPAA.

Health Insurance Portability and Accountability Act (HIPAA)

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