YOUR CREDIT RIGHTS
Credit is a valuable commodity. The significance of how much credit you
have and how you use it goes far beyond shopping. Whether you have good
or poor credit can affect where you live and even where you work, because
your credit record may be considered by prospective employers. That is
why it is important to understand how credit is awarded or denied, and
what recourse you have if you are treated unfairly. The major laws that
regulate credit are outlined in this brochure.
Fair Credit Reporting Act
The Fair Credit Reporting Act promotes the accuracy, and ensures the privacy,
of information in consumer credit reports. It requires consumer reporting
agencies to maintain correct and complete files.
You have the right to review your credit report and to have erroneous
information corrected. This is the essence of the Fair Credit Reporting
Act, which controls the use of credit reports and promotes accuracy, fairness,
and privacy of consumers' credit information.
Issuing Credit Reports
Consumer reporting agencies (also called credit bureaus), the institutions
that compile and issue credit reports, are required to assist you in interpreting
your report. Reports can be issued only to those with a legitimate business
reason, such as creditors, employers, insurers, government agencies reviewing
your status for licensing or benefit purposes, or any third party for
whom you request a report.
Credit Report Errors
If you find an error on your report, you should notify the consumer reporting
agency in writing immediately. The agency is responsible for investigating
and for modifying or removing any inaccurate data.
The source of the error must then notify all consumer reporting agencies
to which the information was sent. If you are not satisfied with the correction,
you have the right to add a brief statement about the nature of the dispute.
Denial of Credit
Should a credit application be turned down because of information contained
in your report, the lender is required to provide the name, address, and
telephone number of the credit bureau that issued the report. You then
have 60 days to request a free copy from the consumer reporting agency,
which must disclose to you all information in the report, its source,
and recipients of the report over the past year (two years if for employment
purposes).
You have the right to have the consumer reporting agency reissue corrected
reports to lenders who received an erroneous report within the last six
months, or to employers who received one in the past two years.
Disclosure
Consumer reporting agencies must provide you access to the information
in your credit report, as well as identify those who have requested the
information recently. There is no charge for obtaining your report if
you have been denied credit. Otherwise, there may or may not be a charge,
depending upon the state in which you live.
Limiting Access
You may exclude your name and address from consumer reporting agency lists
used by creditors and insurers to make unsolicited offers of credit and
insurance. Requests made by telephone are good for two years. For permanent
exclusion from such lists, you must complete a form available from the
consumer reporting agencies. To request exclusion from Equifax, Experian,
and TransUnion, call (888) 567-8688.
Consumers have the right to sue consumer reporting agencies, users, and
providers in state and federal court for violations of the Fair Credit
Reporting Act.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act (ECOA) ensures that individual creditors
apply credit standards in a fair manner so that all consumers are given
an equal chance to obtain credit. It does not require all creditors to
have the same standards, nor does it guarantee approval of loan applications.
In reviewing your credit application, lenders cannot discriminate on
the basis of sex, marital status, color, race, religion, national origin,
age, reliance on income from a public assistance program, or exercise
of rights under the Consumer Credit Protection Act. Your ability and intent
to repay funds borrowed are the only acceptable criteria.
Prohibited Information
Credit applications cannot ask about your sex, race or national origin,
marital status, or age unless you are applying for the purchase or refinance
of your principal residence. Even then, you are not required to answer
these questions. The information is required by the federal government
to help prevent discrimination, not for evaluation purposes.
You cannot be asked your marital status if you are applying for individual
unsecured credit, such as a credit card. Creditors are also prohibited
from asking about childbearing plans.
Credit for Couples
Spouses have the right to have their credit histories listed separately,
including the accounts they use jointly. Married women have the option
of using their birth name or married name. In the case of couples who
jointly established credit but whose credit appears in the name of only
one spouse, the other partner has the right to rely on that credit history
as well.
Divorced Individuals
You do not have to reveal income from alimony, child support, or separate
maintenance unless you want it considered by the creditor in the review
of your application.
Age
Creditors may ask how old you are, to be certain you have reached legal
age to enter into contracts, and may consider your age in estimating how
long you will continue to work. However, age may not be used to deny credit
to those 62 or older or because the applicant’s age exceeds that
required for credit insurance.
Changed Circumstances
The terms of your credit may not be changed simply because your life circumstances
do. That is, the length, interest, or other features of loans may not
be changed, you may not be forced to reapply, and you may not be terminated
because you change your name or marital status, reach a certain age, or
retire.
Applicant Notification
Lenders must notify credit applicants of their decision within 30 days
of receiving a completed application. If credit is denied, the creditor
must provide a written statement of the action taken, the reason for denial
(or how to request it), the applicant’s rights under the ECOA, the
name and address of the enforcing federal agency, and the name and address
of the creditor. If you believe that discrimination has taken place, you
have the right to file suit. Creditors found to have discriminated unfairly
can be held liable for actual damages and punitive damages up to $10,000.
Fair Credit Billing Act
The Fair Credit Billing Act provides for the prompt correction of errors
on open-end credit accounts (department store credit accounts, for example)
and protects consumers’ credit ratings while they are settling disputes.
Creditors are prohibited from reporting as delinquent consumers who dispute
a charge under this law, which applies to open-end credit instruments,
such as credit cards, revolving charge accounts, and overdraft checking.
Consumers who question an item are responsible for notifying the creditor
in writing within 60 days of receiving the bill. The creditor is then
obligated to mail or deliver written acknowledgment within 30 days and
may not do anything to damage the consumer’s credit rating while
the item is in dispute.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act promotes the fair treatment of
consumers by prohibiting debt collectors from engaging in unfair, deceptive,
or abusive practices.
This act applies to professional debt collectors who collect on loans
they have not originated. Though it technically does not apply to banks,
department stores, and other lenders who collect their own debts, no reputable
lender is permitted to engage in such practices.
Debt collectors are permitted to contact persons other than the debtor
only to locate the debtor, or make a reasonable effort to communicate
with the debtor about the debt.
Debt collectors are required to send written notice after making contact,
informing the debtor of the amount of the debt, the name of the creditor,
and the fact that the debt will be considered valid unless disputed within
30 days.
Debt collectors are prohibited from harassing, oppressing, or being abusive
in collecting a debt, using threats or obscene language, publicizing the
debt, and making annoying or anonymous telephone calls. Debt collectors
may not misrepresent the identity of the collector, the status of the
debt, and the consequences if it is not paid unless those consequences
are lawful and intended to be taken.
Consumers can sue for actual and punitive damages debt collectors who
violate the Fair Debt Collection Practices Act.
FOR MORE INFORMATION
The Federal Reserve Bank of Philadelphia has four other brochures on credit:
- Applying for Credit and Charge Cards
- How to Establish, Use and Protect Credit
- What Your Credit Report Says About You
- Your Credit Rating
To obtain copies of these brochures, or for additional copies of this
one, please contact:
Federal Reserve Bank of Philadelphia
Public Affairs – Publications
P.O. Box 66
Philadelphia, PA 19105-0066
(215) 574-6115
www.phil.frb.org
Questions and concerns about consumer reporting agencies can be directed
to:
Federal Trade Commission
Consumer Response Center – FCRA
6th & Pennsylvania Avenue, NW
Washington, D.C. 20580
(877) FTC-HELP (382-4357)
www.ftc.gov
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