The Consumer Credit Protection Act is legislation done at federal level that was passed by congress in 1968 to regulate the consumer credit industry.
- To maintain transparency, the act enforces that the creditors must disclose the credit terms to consumers which may also include the total cost of the loan or credit product, the way interest is calculated, and the fees involved in the process.
- The Act ensures that the total price of a credit product or a loan be divulged, such as interest breakdown and other fees involved.
- The Act protects the consumer in several ways like from loan sharks, restrictions in garnish of wages, and also established the National Commission.
- The CCPA removes discrimination based on sex or marital status in extending credit and also bans misleading advertising practices.
- The Act also works to regulate certain debt collectors, credit card companies, and credit reporting agencies.
- The Act protects the consumer from harm that may be done by creditors, banks, and credit card companies, and other lenders that may be involved in real estate laws.
- The consumer lenders and the auto-leasing firms have to follow the disclosure requirements mandated by the Act.
- It makes the lending and borrowing process more transparent and easier to be understood by people who are not well-versed in the area and the terms.
Provisions of Consumer Credit Protection Act:
- Title III: The creditors, for collection of outstanding debt from an individual in certain circumstances can garnish the person’s wages. However, Title III limits the amounts of earnings that could be furnished down to 25% of weekly disposable income and that too after being taxed obligatory deductions. Title III also allows for between 50% and 60% extra for all the past due taxes and potential child support pay.
- (Truth In Lending Act): It works to ensure that the credit terms are disclosed to the consumers who are likely to be borrowing via a loan or any other credit product from the lender or maybe the creditor. This will help the consumer to compare the credit terms and avoid anything that is not valid.
The creditors will have to disclose the information related to the transaction (terms and length of the loan, annual percentage rate, charges of interest, and the fees) that may be required to calculate the cost of borrowing for the borrower and the consumer will be able to compare the cost of credit and make the best decision in respect of the use of credit. This is very important when dealing with real estate laws.
TILA ensures that the consumers are informed of the annual percentage rate, special or previous hidden loan terms, and the total cost of the borrower: that means the true cost of the loan and credit facility and also information related to the periodic billing statements must be disclosed in the document that is presented to the consumer for signing. The TILA aims to maintain transparency so that the consumers can easily understand and compare the offers.
Under the TILA the consumer can have the option to back out of a loan with a three-day window (even after signing the documents).
- Fair Credit Reporting Act (FCRA): The act deals with the collection, sharing, and storing of consumer’s credit and financial information. It gives the right to the consumer to verify their files and protect their personal information. The act was passed to ensure the accuracy and privacy of the personal information that is contained in the files of the credit reporting agencies.
The consumer credit reports contain information like creditworthiness, credit standing, capacity, general reputation, mode of living, etc. This information is then used by the creditors, landlords, employers, to know whether the individual is responsible and creditworthy or not and the numerical value of creditworthiness is called a credit score.
- Equal Credit Opportunity Act (ECOA): This Act prohibits discrimination based on sex, race, color, religion when evaluating a loan application by the creditors and the lenders
- Fair Debt Collection Practices Act (FDCPA): The act works to limit the actions that a third party that is the debt can take while trying to collect an outstanding debt from a consumer of an entity like the credit card company. Under the Act, the debt collectors cannot threaten or harass the debtor and there is also a restriction on contact with the debtor.
- Electronic Fund Transfer Act (EFTA): It protects a consumer when they are engaged in an electronic transaction for the transfer of funds that may include ATMs (automated teller machine), debit cards, and automatic withdrawals from banks. It limits the liability of the consumer in cases when the card is lost or stolen.
The Consumer Credit Protection Act is a United State Law that was passed to protect the rights of the consumers and to regulate the consumer credit industry. It works to maintain transparency in the credit process so that consumers are aware of the processes.
Learn more about the consumer credit protection act and its titles at Getlegal.