3 important credit laws designed to protect consumers

Years ago, consumers didn’t have free access to credit scores, they had to pay for them. It wasn’t until lawmakers began to take steps in 2011 to ensure all consumers could freely gain easy access to their scores. This regulation, designed to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, paved the way for a smoother transition and helped empower consumers when they were denied or adversely approved when applying for credit or loans. It's a good idea to understand credit laws and how you can use them to maintain a healthy credit standing.

1. Fair Credit Reporting Act

The Fair Credit Reporting Act governs the way credit bureaus can collect and share your information. In 2003, Congress passed an amendment to this law called the Fair & Accurate Credit Transactions Act which provides you with further protection, including the right to place fraud alerts on your credit files. Under these laws, you have the ability to gain free access to your credit reports once a year from each of the three major bureaus so you can verify their accuracy. Under this set of regulations, you also have the right to limit access to your report, dispute any information you believe to be wrong or incomplete, opt out of prescreened offers, and require your written consent for employers to access your report.

2. Truth in Lending Act

The Truth in Lending Act protects consumers against predatory lenders. If you’re looking to take out a loan, this regulation requires lenders to disclose certain information to you in writing before you sign on the dotted line. Details they must divulge to you include annual percentage rate, amount borrowed, total amount of interest and fees, any terms associated with late fees, rules associated with early repayment, and the total number of payments to be made.

3. Fair Credit Billing Act

If you receive a charge for more than $50 on your credit card you didn’t authorize, you have recourse under the Fair Credit Billing Act. This is an important protection because as long as you report the charge within 60 days, you’ll only be liable for up to $50. In an age where credit and identity theft are widespread, this protection can limit damage to your credit standing and liability.

It’s important to understand credit laws so you can use them to protect yourself. Inaccuracies on traditional credit reports can have an adverse effect on your credit score or negatively impact the terms you're given when approved for credit or loans. Additionally, reports can drastically vary since the major credit scoring agencies use different algorithms. You won’t necessarily know which report creditors will be looking at.

The good news is you don’t have to solely rely on traditional credit reports to improve your credit standing. According to statistics, 65% of lenders currently look at alternative credit scores when determining a borrower’s ability to pay back a loan. PRBC can help. Our alternative credit score model enables you to strengthen your credit by paying your routine expenses on time. To learn more about how we can help you improve your credit standing, contact us today.

Want to learn more?