With the struggling economy, many people are finding themselves deep in credit card debt. Therefore, consumers are forced to turn to debt consolidation in order to get control of their finances. However, before a person decides to consolidate their credit card debt, they need to be aware of the credit card laws.

Fair Debt Collection Practices Act

Congress passed Fair Debt Collection Practices Act (FDCPA) in the 1970s and amended it again in 1996 to help consumers deal with threats, harassment, and intimidation tactics from debt collectors.  It is important to note that although this law applies to credit card debt in collections, it does not apply to the credit card companies themselves.

In general, the law forbids debt collectors from engaging in:

Harrassment – calling you repeatedly, using threats of violence, or using profane language

False statements – claiming to be affiliated with the government, claiming that you committed a crime, or making threats that they do not intend to follow

Unfair practices – charging interest beyond what is allowed in your original contract or according to state law

Some of the key components of the law are:

-Debt collectors cannot call you before 8am or after 9pm.

-Debt collectors cannot call you at work if your employer prohibits such calls

-Debt collectors cannot call you if you instruct them in writing to stop

-Debt collectors cannot call you if you are being represented by a third-party for the debt

-Debt collectors cannot contact third-parties, such as family members, to discuss your debt, although they can contact them to obtain updated contact information

If you think a collector has violated any of your rights under the FDCPA, you can file a lawsuit and win damages of up to $1,000 per violation, plus reimbursed attorney fees and court costs.

The Credit Card Accountability and Responsibility Act

In 2010, President Obama’s Credit Card Accountability and Responsibility Act (CARD) went into effect to uphold “basic standards of fairness, transparency, and accountability” in the credit card industry.

Some key components of this legislation include:

Interest Rates

-Credit card companies are only permitted to charge interest on current balances if the consumer is 60 days past due on a payment. If the customer makes six consecutive timely payments, the interest rate must return to the same as it was previously.

-If a credit card company does decide to increase the interest rate, they must give the cardholder a 45-day notice.

Late Fees

-Credit card bills must be due on the same day of the month

-Payments received within 21 days of the due date cannot be assessed late fees

-Late fees charged must be reasonable and proportional.  Currently late fees cannot exceed $25 for the first violation and $35 for a second violation within 6 months.

Over-The-Limit Fees

-Credit card companies must get approval from a cardholder to process transactions if they are about to exceed their credit limit

-Over-the-limit fees must be reasonable and proportional.

Greater Transparency of the Costs

-Each monthly statement must show how long it will take to pay a debt and the total cost if only minimum payments are made

-Each monthly statement must reflect how much a consumer should pay in order to get out of debt in 3 years or less.  It should also note how much savings they will realize by doing this instead of making minimum payments.

For more information on CARD Act, visit the CARD ACT Fact Sheet page

Fair Credit Reporting Act

In order to make sure that consumers have privacy and accuracy in their credit report, The Fair Credit Reporting Act (FCRA) has specific laws that credit bureaus must follow.

1. You have the right to know if information in your credit report was used against you – if you were denied credit, for example, you must be informed of this by the entity that denied you.

2. You have the right to know what is in your file –you can obtain your credit report for free if you have been denied credit based on your report or if you have not obtained a free credit report in the past year

3. You have the right to dispute inaccurate information and the credit bureaus must delete any inaccurate information within 30 days of your dispute

4. Credit bureaus cannot report information for longer than 7 years or 10 years in the case of Chapter 7 bankruptcy

5. Your credit report will only be furnished to entities with a legitimate need such as a creditor, employer, insurance company, landlord or other business

6. Your consent is mandatory for your credit report to be furnished to your employer

7. You can limit the number of “pre-screened” credit offers you receive based on information from your credit report

8. You can seek damages from violators

For more information, visit Yale Law’s summary of your rights under the FCRA (PDF)

Statute of Limitations

Every state has a specific statute of limitations that impact how long a credit card company has to pursue a debt you owe in court.  If they do not take action before this deadline expires, they lose their right to collect the debt from you legally.  If the statute of limitation expires, they may be able to continue to report the debt on your credit report if it is less than 7 years old, but they cannot sue you to win a judgment.

The statute of limitation begins running when you become officially past due.  If you make a payment, the statute of limitation begins again.  In other words, if you miss payments for 2 years beginning in October 2009, but then you make a payment in October 2011, the statute of limitation would not begin until November 2011 when you missed your next payment.

Source: CardHub.com