When you enter into a credit agreement with a lender for a loan or credit card, you are entering into a contract. With that comes legal rights and responsibilities for both you and the lender.
As a borrower, you have certain responsibilities to the companies issuing you credit. Upholding these responsibilities is your obligation to your creditors and also helps you maintain a good credit score. Be familiar with your basic responsibilities when using credit:
- Understand the terms of the agreement. It is your responsibility to understand what you are signing up for when it comes to borrowing. Read the fine print regarding interest, fees and other charges.
- Check your statements. Ensure the information on your statement is correct. If not, notify your creditor immediately. Keep your receipts and reconcile to your monthly statements.
- Pay on time. The creditor has loaned you money so you can “buy now pay later.” You are obligated to pay that money back on the scheduled time frame to which you have agreed. Missing payments or continually paying late will damage your credit rating.
- Update your contact information. If you move or temporarily change your address, notify your lender(s). Sometimes lenders will give you a break if the bill doesn’t reach you in time, but this latitude won’t last long.
- Repay the full debt. When you borrow, you are borrowing a set amount and you are agreeing to pay interest on the outstanding balance. In the long run, you have to pay the full amount borrowed (principal) plus interest to satisfy the debt. This also includes any associated fees.
- Notify creditors if cards are lost or stolen. Always notify your credit card issuer if your cards are lost or stolen. Your liability is limited to $50, but the creditor has a right to know if someone else is using your card(s) to make fraudulent purchases.
The Federal Trade Commission (FTC) enforces many rules. If there are any violations of these rules, they need to be reported immediately. You can report violations to the FTC by visiting their website or calling them at 202-326-2222.
Truth in Lending Act (TILA):
In banking , this is referred to as Regulation Z. This regulation was put into place to help consumers compare interest rates when shopping for rates and fees. TILA requires lenders to do the following:
- Disclose the finance charge, annual interest rate, and any late or penalty fees that may be imposed.
- When looking at savings and CD rates, lenders are required to disclose the annual percentage yield.
- Disclose written itemization of the amount borrowed and the total amount of the loan, including interest and fees, and the number, amount, and due dates of all payments necessary to repay the loan.
Fair Credit Reporting Act (FCRA):
The FCRA gives you certain rights with respect to your credit report, including the following:
- The right to know what your file contains.
- The right to ask for a credit report.
- The right to dispute information in your credit report.
- The right to have inaccurate information corrected or removed.
- The right to have older, negative information excluded from your credit report.
- The right to have access to your credit report limited.
- The right to have your credit report given to your employer (only with your consent).
The Federal Trade Commission offers more information, including additional rights for military personnel and victims of fraud.
Fair Credit Billing Act (FCBA):
The FCBA offers the following protections under the law:
- Liability for lost or stolen credit cards is limited to $50 if you notify the lender within 30 days.
- If you purchase a defective or sub-standard product, the payment can be withheld if the seller refuses to replace, repair, or otherwise correct the problem.
- If there is an error in a credit card bill, the lender must correct it, or explain why the amount is believed correct, within 90 days of being notified.
When you file a dispute with the credit bureau, and they send out a request to have the information researched, the lender has 30 days to respond. If they do not respond within 30 days, the information is removed from the credit report. However, the lender can add it back on, so be sure you are checking your credit information.
While your first instinct is to be upset at the lenders for making mistakes, realize tmistakes do happen. You have a responsibility tfor your own credit. You have to inform the correct people when there is an error so that it may be fixed. Keep all of your documentation for your loans and credit cards so that you have it ready for reference.
Fair Debt Collections Practices Act (FDCPA:)
This act regulates collection agencie’s conduct, and specifically prohibits the following:
- Calling before 8 am or after 9 pm
- Calling you at work if you have informed them that the calls are jeopardizing your job
- Discussing your debt with a third party without your permission, except to say that they are trying to reach you
- Using profanity
- Misrepresenting themselves, for example, saying they are an attorney when they are not
- Making false threats to scare you into paying
Be aware of the laws regarding debt in your state. Some states do not allow enforcing of paying one’s debt. You may choose not to pay the debt, so long as you understand that your credit and ability to borrow in the future will be hindered. In addition, a creditor or debt collector cannot garnish your wages until they have taken you to court and won a lawsuit.
Knowing your rights and responsibilities can vastly help you improve your credit. Following your statements and credit reports in a timely manner can help if you have to dispute them. Be sure to keep all documentation pertaining to your credit because you may need it in the future.