Credit and Your Consumer Rights

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. Based on your credit payment history, businesses can choose to grant or deny you credit provided you receive fair and equal treatment. Sometimes, things happen that can cause credit problems: a temporary loss of income, an illness, even a computer error. Solving credit problems may take time and patience, but it doesn’t have to be an ordeal.

The Federal Trade Commission (FTC) enforces credit laws that protect your right to obtain, use, and maintain credit. These laws do not guarantee that everyone will receive credit. Instead, the credit laws protect your rights by requiring businesses to give all consumers a fair and equal opportunity to receive credit and to resolve disputes over credit errors. This brochure explains your rights under these laws and offers practical tips to help you solve credit problems.

Your Credit Report
Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

* You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
* You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
* Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.
* You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
* If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.
* You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Your Credit Application
When creditors evaluate a credit application, they cannot lawfully engage in discriminatory practices.

The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant you credit.

The ECOA protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit also are protected by this law.

Your rights under the Equal Credit Opportunity Act:

* You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.
* You have the right to have reliable public assistance considered in the same manner as other income.
* If you are denied credit, you have a legal right to know why.

Your Credit Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic fund transfer account statements regularly. These documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and contest the error immediately. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:

* charges or electronic fund transfers that you — or anyone you have authorized to use your account — have not made;
* charges or electronic fund transfers that are incorrectly identified or show the wrong amount or date;
* computation or similar errors;
* failure to reflect payments, credits, or electronic fund transfers properly;
* not mailing or delivering credit billing statements to your current address, as long as that address was received by the creditor in writing at least 20 days before the billing period ended;
* charges or electronic fund transfers for which you request an explanation or documentation, due to a possible error.

The FCBA generally applies only to "open end" credit accounts — credit cards, revolving charge accounts (such as department store accounts), and overdraft checking accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, such as an automobile loan. The EFTA applies to electronic fund transfers, such as those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Your Debts and Debt Collectors
You are responsible for your debts. If you fall behind in paying your creditors or an error is made on your account, you may be contacted by a "debt collector." A debt collector is any person, other than the creditor, who regularly collects debts owed to others. This includes lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money owed for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts.

Your rights under the Fair Debt Collection Practices Act:

* Debt collectors may contact you only between 8 a.m. and 9 p.m.
* Debt collectors may not contact you at work if they know your employer disapproves.
* Debt collectors may not harass, oppress, or abuse you.
* Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
* Debt collectors must identify themselves to you on the phone.
* Debt collectors must stop contacting you if you ask them to in writing.

Solving Your Credit Problems
Your credit report influences your purchasing power, as well as your chances to get a job, rent or buy an apartment or a house, and buy insurance. A history of timely credit payments helps you get additional credit. Accurate negative information can stay on your report for seven years. A bankruptcy can stay on your report for 10 years. If you are having problems paying your bills, contact your creditors at once. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don't wait until your account has been turned over to a debt collector.

Here are some additional tips for solving credit problems:

* If you want to contest a credit report, bill or credit denial, contact the appropriate company in writing and send it "return receipt requested."
* When you contest a billing error, include your name, account number, the dollar amount in question, and the reason you believe the bill is wrong.
* If in doubt, request written verification of a debt.
* Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct problems.
* Be skeptical of businesses that offer instant solutions to credit problems.
* Be persistent. Resolving credit problems can take time and effort.
* There is nothing that a credit repair company can do for you — for a fee — that you cannot do for yourself for little or no cost.

If you can't resolve your credit problems yourself or if you need help, you may want to contact a credit counseling service. Nonprofit organizations in every state counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These services usually are offered at little or no cost.

Universities, military bases, credit unions, and housing authorities also may offer low- or no-cost credit counseling programs. Check the white pages of your telephone directory for a service near you.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Defective Products: Products Liability Law Overview

Products containing defects that cause harm to a consumer are the subjects of products liability law. Consumers injured as a result of a defective product may be able to bring suit again the product’s manufacturer, wholesaler, store or salesperson, depending on the particulars of the individual action.

Products liability claims are usually based on negligence or strict liability. Many states have enacted comprehensive products liability statutes. There is no federal products liability law. In any jurisdiction, the liability of a defendant in a products liability case is determined when it is shown that the product is defective.

There are three types of product defects that incur liability:

* design defects exist before the product is manufactured.
* manufacturing defects occur during construction and production phases of a product. A product may be also considered defective if it fails to meet minimum legal standards for that type product. However, the fact that a product meets minimum legal standards does not necessarily protect a manufacturer or seller from liability.
* defects in marketing exist when improper details have been given to warn consumer of dangers involved in the use the product. The number of warning labels mandated for use with consumer products today is a testament to the success of failure-to-warn claims.

Products liability law is derived mainly from Torts Law, but is found mainly in common law (state judge-made law) and in the Uniform Commercial Code. Article 2 of the UCC deals with the sales of goods and it has been adopted by most states.

FTC Releases Consumer Fraud Survey

More Than One-In-10 Americans Fell Victim to Fraud

The Federal Trade Commission today released a statistical survey of fraud in the United States that shows that nearly 25 million adults – 11.2 percent of the adult population – were victims of fraud during the year studied. Certain racial and ethnic minorities were much more likely to be victims of fraud then non-Hispanic whites. American Indians and Alaska Natives were the ethnic group most likely to be victims: nearly 34 percent had experienced one or more frauds in the preceding year. Seventeen percent of African Americans were victims; over 14 percent of Hispanics were victims; and over 6 percent of Non-Hispanic whites were victims.

“We found that American Indians and Alaska Natives, African Americans, and Hispanics are more likely to be victims of fraud than non-Hispanic whites,” said Howard Beales, Director of the FTC Bureau of Consumer Protection. "These findings will help us fine-tune our Hispanic Law Enforcement and Outreach Initiative, and explore additional opportunities to target frauds aimed at communities which are at risk."

The survey of 2,500 randomly chosen consumers shows that consumers with high levels of debt were more likely to be victims of fraud. Three of the top four categories of fraud related to credit, including credit-repair scams often targeted at those carrying high debt loads or having bad credit.

The most frequently reported type of consumer fraud was advance-fee loan scams, in which consumers pay a fee for a “guaranteed” loan or credit card. Four and a half million consumers – 2.1 percent of the U.S. adult population – paid advance fees but did not receive the promised loan or card. In fact, some consumers reported that more than once during the last year they paid fees to get loans or credit cards they did not get.

Buyers’ club memberships or bills for unordered publications was the second most commonly reported fraud category in the survey. Some four million consumers – 1.9 percent of the U.S. adult population – were unwittingly billed for memberships they did not authorize or publications they did not order.

Credit card insurance scams and credit repair were the third and fourth most common frauds identified in the survey. While federal law limits consumers’ credit card fraud liability to $50, fraudsters sell credit card insurance by falsely claiming that card holders face significant financial risk if their credit cards are misused. An estimated 3.3 million consumers bought unnecessary insurance against the unauthorized use of their credit cards.

Some fraudsters convince consumers that they can help them remove truthful, negative information from their credit report, or establish a new credit record. They can’t, and credit repair schemes are illegal, but two million consumers paid for “credit repair” services the year prior to the survey.

“The results of our survey indicate that fraud in the U.S. is a serious problem,” said Beales. “We have brought many enforcement actions against these types of scams in the past, and we will bring more in the future.”

The survey reveals that 33 percent of fraud victims first learned about a fraudulent offer or product from print advertising in newspapers, magazines, direct mail, catalogs, or posters. Telemarketing was the first source of contact in 17 percent of the frauds. Only 14 percent of fraudulent offers were promoted using Internet and e-mail; television or radio advertising account for only 10.6 percent of fraudulent offers.

Women and younger consumers are more likely to complain if they have been victims of fraud, the survey found. An estimated 74.5 percent of female victims complained. For males, the complaint rate was 10 percentage points lower. Similarly, almost 75 percent of consumers under the age of 35 complained, compared to only 55.4 percent of consumers between 55 and 64.

According to the survey, consumers between the ages of 25 and 44 are most likely to be fraud victims. Eleven percent of them were victims, compared to 8.7 percent in the 45 to 54 year bracket, 6.1 percent of consumers aged 55 to 64, and only 4.7 of consumers 65 years and older.

The top 10 frauds listed in the report include:

* Advance-fee loan scams – 4.55 million victims;
* Buyers clubs – 4.05 million victims;
* Credit card insurance – 3.35 million victims;
* Credit repair – 2 million victims;
* Prize promotions – 1.8 million victims;
* Internet services – 1.75 million victims;
* Pyramid schemes – 1.55 million victims;
* Information services – .8 million victims;
* Government job offers – .65 million victims; and
* Business opportunities – .45 million victims.

In addition to the fraud categories, the survey found that an estimated 13.9 million consumers were victims of telephone “slamming” – unauthorized and illegal changes in long distance telephone service.

The Commission vote to release to survey was 4-0, with Commissioner Orson Swindle not participating.

The FTC has publications to help consumers spot and avoid scams. They include:
Just When You Thought It Was Safe ... Advance-Fee Loan “Sharks” Alert, Credit Card Loss Protection Offers: They’re the Real Steal, and, Credit Repair: Self-Help May Be Best.

Copies of the survey are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.