What is the Consumer Credit Protection Act

The Consumer Credit Reporting Act (CCPA) is arguably one of the most important and impactful laws when it comes to financial transactions, consumer lending, debt collection, and other aspects of financial services. The CCPA, which was signed into law in 1968, instituted a number of regulatory restrictions on banking institutions, credit card issuers, debt collectors and so forth.

In addition, the CCPA introduced an array of regulatory and legal safeguards that consumers in the United States continue to utilize and access to this day.

For example, the CCPA serves as the bedrock legislation for a series of incredibly significant laws that govern and regulate the financial sector, including the Fair Credit Reporting Act, Equal Credit Opportunity Act and Fair Debt Collection Practices Act.

Financial institutions took advantage of consumers before the CCPA

Prior to the CCPA’s enactment, U.S. consumers were forced to work within the confines of requirements and stipulations set forth by banks, credit card companies, and so forth. Consumer rights were downright lacking when it came to lending, debt collection and the practices utilized for credit reporting.

Before 1968, financial institutions routinely took advantage of consumers. For example, financial institutions had zero legal obligation to disclose the terms of loans (including the costs associated with securing the loan), there were no legal limits for interest rates, and they were allowed to garnish a significant percentage of wages if a consumer fell behind on servicing a loan. All of this changed when the CCPA was signed into law.

The Truth in Lending Act added to the CCPA

The Truth in Lending Act (TILA) was a key component of the original CCPA and set forth the goal of ensuring “informed use” by consumers when accessing and utilizing credit. The TILA obligated lenders and credit card issuers to be more transparent by disclosing the terms of credit when someone applied to borrow money from a financial institution. For example, the TILA requires lenders and credit card issuers to disclose the following information in a clear and understandable manner:

• Annual Percentage Rate (APR)
• Finance Charges
• Amount Financed
• Payment Due Date
• Late Fees
• Prepayment Penalties
• Total Number of Payments
• Total Sale Price

The TILA also provided consumers with a 3-day “right of rescission” which afforded the chance to back out of a loan without incurring a financial penalty.

The CCPA established federal wage garnishment law

In addition to the TILA, the CCPA established the Federal Wage Garnishment Law. This component of the law was part of the original 1968 legislation, placing limits on lenders and other creditors in their efforts to access and garnish wages from a borrower who fell into default on a loan. As a result of the federal wage garnishment law, consumers are entitled to the following legal protections, even if a consumer is unable to repay the full amount of a loan:

• Employers are not allowed to fire you as a result of your wages being garnished. Though, an exception to this prohibition is triggered if your wages are being garnished for more than one delinquent debt.
• In most instances, no more than 25 percent of your after-tax wages may be subject to garnishment. Though, please be advised that there are exceptions to the 25 percent limitation. Specifically, child support, alimony and past-due taxes are not subject to the 25 percent cap.

The CCPA created the Fair Credit Reporting Act (FCRA)

Along with the TILA and federal wage garnishment law, the CCPA also served to establish one of the most important federal laws governing financial transactions—the Fair Credit Reporting Act (FCRA). The FCRA was added to the CCPA in 1970 and has been amended numerous times since its passage.

The FCRA provides U.S. consumers with an array of legal rights and protections when it comes to the information consumer reporting agencies are able to collect about them. For example, the FCRA obligates consumer reporting agencies (including Equifax, TransUnion and Experian) to make sure the information they collect and share about consumers is kept private, examined fairly, and is accurate. In addition, the FCRA provides the following legal rights and protections to U.S. consumers:

• You have the legal right to access your own credit reports.
• You have the legal right to challenge and dispute incorrect or incomplete information on a credit report, or reports.
• Consumer reporting agencies must delete or correct inaccurate, incomplete or unverifiable items in your report. These corrections and/or deletions must typically be done within 30 days after submission of a dispute.
• Different types of negative information related to past financial transactions and loans can only remain on your credit report for a finite period of time (usually between 7 and 10 years).
• Only individuals and entities with a “permissible purpose” are allowed to access your credit information.
• Employers can only access your credit report with your written permission.
• You have the legal right to opt out and halt credit reporting agencies from sharing your information with lenders, insurance providers and others who might use that information for marketing purposes to send you prescreened offers.

If you feel like your rights, protected by the FCRA, have been violated, you can file a complaint with the CFPB here.

Key takeaways

Ultimately, the CCPA paved the way for a series of laws protecting consumers. Here are some key takeaways on the CCPA and its importance:

• The Consumer Credit Protection Act (CCPA) provides notable protections for consumers to mitigate potential harm that may be inflicted by financial institutions, creditors, debt collectors, credit card companies, and so forth.
• The 1968 law sets forth multiple disclosure requirements that must be followed by consumer lenders and other financial entities.
• The CCPA obligates lenders to disclose the total cost of a loan or credit product, including how interest is calculated and what fees must be paid to obtain the loan.
• The CCPA is a piece of bedrock federal legislation that included the enactment of other significant laws governing the financial sector, including the Truth in Lending Act, federal wage garnishment law, Fair Credit Reporting Act and so forth.

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