Understanding Your Rights

We’ve talked about how to manage your debt and get out-of-debt. Next, we’ll deal with understanding your rights as a debtor. Yes, you do have rights. There are two laws that protect you, the revised 1977 Federal Fair Debt Collections Practices Act and The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, also known as Credit Card Act.

The first act requires a credit bureau to remove any and all inaccuracies within thirty days of notification. You must notify the bureau in writing. You identify the account that has a problem and you don’t have to identify the problem. The credit bureau has the responsibility of correcting it. They’ll have to go to Visa, MasterCard, or whoever is reporting the issue. If they are unable to sort it out within thirty days, or if the lender fails to reply to the credit bureau for thirty days, then by law, the entire item has to be removed from your report. The responsibility to make it happen is yours.

When you mail the letter to the bureau, send it return receipt requested. This give you an actual paper trail and you are able prove that they received the letter on a certain date. This starts the clock. If you fail to have proof of receipt, they can say they never received your notice. The law is on your side and credit bureau has to abide by it. Don’t let them ignore you or try to bully you.

Remember, once they are in receipt to your letter, they have thirty days to fix the problem. If they don’t fix it by then, you need to make them fulfill their legal obligation to fix the inaccuracy. If for some reason they don’t do what they’re supposed to, your best course of action is to lodge a complaint with the Federal Trade Commission and your state’s Consumer Affairs Division.

If you have the dubious pleasure of receiving collector’s call, you have rights under the law. The act states:

  1. Collection calls can only be made between the hours of 8:00 a.m. and 9:00 p.m. local time. “Local time” refers to your time zone, not theirs. If they are calling before 8:00 a.m. or after 9:00 p.m., they are violating the law.
  2. You may demand that a creditor stop calling you at work.
  3. You have the right to demand that a creditor stop all contact except to notify you of lawsuit proceedings, by sending a cease-and-desist letter.
  4. A collector or creditor cannot access a bank account or garnish wages without proper court action. The only exceptions to this rule are delinquent IRS and federally insured student loan debts.

The second act, Credit Card Act, provides for the following:

  1. Limits the circumstance under which credit card companies may raise interest rates on existing cardholders. The rates cannot go up in the first year, with a few exceptions, such as if the card has an introductory rate (say 0% for 6 months), the rate can increase. It can also increase if you are at least 60 days late with a payment.
  2. You must receive at least 45 days’ notice before the card issuer makes some major changes to credit card, including hiking interest rates. However, if you are at least 60 days late with a payment, the issuer doesn’t have to wait 45 days to raise the rate.
  3. For a card with multiple interest rates, all payments above the minimum payment must go toward paying off the highest rate first, such as, a card with a standard APR of 15.99% and a balance transfer APR of 6.99%. If you’re minimum payment is $20 and you pay $70, the extra $50 must be applied on the balance with the higher APR, here it’d be the 15.99%.
  4. Grace periods must be at least 21 days. Keep in mind that the issuer is not required to provide a grace period. However, if one is given, it must be at least 21 days long.
  5. The monthly statement must include information on how long it will take to pay off your balance if you only make the minimum payment. Let’s say, a bill might show the following: “If you owe $5,000 in credit card debt, your APR is 15%, and you make the $200 minimum payment, it will take you 105 months to pay off your balance.”
  6. It will be more difficult for people under age 21 to open a credit card account. They must either have a co-signer on the account, or provide evidence that they have enough income to make monthly payments. These restrictions were not around before the act.
  7. Over-the-limit fees (or overdraft fees) are curbed. These are charges that popped up when you spent more than your credit limit In order to be charged an overdraft fee, you must have opted into the arrangement. You cannot be automatically enrolled in such a program without giving your consent. If you don’t consent, a credit card company must turn down the transaction altogether.

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