Have you ever had a financial transaction handled in a way that made you think, That has to be illegal?
As many great companies as there are out there, there’s always a bad apple that can make you feel as though your rights have been violated. You might wonder how the company gets away with such practices, but without a law degree or financial expertise, you just can’t be sure.
Here’s how you can be sure next time. Read about the key laws below to learn concrete ways to understand if a company you’re dealing with is stepping over the line and breaking the law.
6 laws you need to know about that affect your finances
You can find the full text of the laws mentioned below online, but these brief summaries will walk you through what you need to know to protect yourself in the financial jungle.
1. Truth in Lending Act, a.k.a. ‘Regulation Z’
You might come across this act referred to by a few different nicknames, including the Truth in Lending Act (TILA) and Regulation Z. Its purpose is to help you see what you’re in for when taking on new credit.
The Consumer Financial Protection Bureau (CFPB) says Regulation Z enables you to easily compare credit offers by making all lenders use the same terminology and the same format when stating interest rates. Before the law, the agency says, “consumers were faced with a bewildering array of credit terms and rates.”
The act also serves to protect consumers from “inaccurate and unfair credit billing and credit card practices,” among many other things. Here’s what the founding partner of Wealth Management Group, Craig Bolanos, has to say about it:
“The Truth in Lending Act is mission critical for consumers of loans, as it provides a platform for fair comparison across multiple offers. Essentially, TILA provides a consumer with the real information they need, such as the total cost of borrowing. Hence, it cuts through the red tape of marketing ploys etc., because we all know the devil can be in the details.”
But this act isn’t just about seeing the information you need to know. It’s also about helping you understand what that information means to your pocketbook.
As attorney and Bentley University professor Steven J.J. Weisman explains: “The most important aspect of this law is the required written disclosure of all the finance charges when someone borrows money. … The finance charges must be conspicuously and clearly indicated, along with the total that the borrower must pay if he or she takes the entire term of the loan to pay it back.”
There is a downside though, particularly when it comes to buying a home, according to attorney Eric N. Klein, since the law can result in epically long financial disclosures.
“The average home buyer is flooded with information as a result of the Truth in Lending Act. A borrower receives so much information that the notices and disclosures go unread.”
(The CFPB has the full text of the law here.)
2. Credit Card Accountability Responsibility and Disclosure Act
When it comes to financial disclosures, TILA was just the beginning. The Credit Card Accountability Responsibility and Disclosure Act (also known as the CARD Act) came about in 2009 to amend this law.
The text of the law explains its goal as setting “fair and transparent practices” for credit cards and similar products.
So, what does this mean to you? Like TILA, this law is complex and detailed, and includes far more than can be explained in a simple paragraph. Here’s a breakdown from Weisman of what the new rules do:
- Gives you the right to be notified of interest rate increases.
- Prohibits retroactive interest rate increases.
- Prohibits fees for mail, telephone, or electronic payments.
- Limits late payment fees and other penalty fees.
- Provides consumer protection regarding inactivity fees for gift cards.
If you’re interested in reading more about the changes which these regulations brought about, you can read the full text of the CARD Act via the Federal Trade Commission (FTC).
3. Fair Credit Reporting Act
Financial disclosures are one thing, but what about the information being disclosed about you, the consumer? Thanks to the Fair Credit Reporting Act (FCRA), you can see exactly what’s being said in your credit report.
The FCRA is the reason you can review your credit report each year for free at AnnualCreditReport.com. Actually, you can read three credit reports, since each of the three credit reporting bureaus generates its own version. It’s important to view all three because there could be differences between the reports depending on who your lenders send information to.
But this law does a lot more than give you free access to your credit report. Attorney Randall R. Saxton explains:
“The Fair Credit Reporting Act is designed to help consumers by giving rights such as the ability to dispute, correct, or delete inaccurate information in a credit file. Credit agencies must promptly investigate and correct or delete inaccurate information or information that cannot be verified.”
This is important if, say, a transposed social security number ends up putting someone else’s bad borrowing behavior on your report, or a lender incorrectly reports your own borrowing information.
And if you’re not in the market for new credit, these reports can still impact you in big ways. As Weisman explains:
“Because credit reports are so important not just in applying for credit, but in getting a job, renting an apartment, applying for insurance, and many other areas of our lives where our credit reports are used, this law is critically important today.”
And if you spot anything that shouldn’t be there, dispute those errors with the bureau reporting them as soon as possible.
4. Fair Debt Collection Practices Act
This next law regulates the way debt collectors must treat consumers. The Fair Debt Collection Practices Act (FDCPA) serves as a protection for consumers against predatory collectors who might try to step over the line to convince you to pay them.
In the words of Bolanos, “no longer can a collector threaten, intimidate, deceive, or engage in other unethical actions when trying to collect a debt.”
Klein says the FDCPA “has strong teeth” when it comes to suing a predatory debt collector, since it keeps attorney costs at a “reasonable” level and sets statutory damages at $1,000 for each violation the collector makes.
In other words, you might be able to sue and get your money back for the costs you pay upfront to do it. However, remember that a lawsuit is still a risk.
You can also use the FDCPA to help you if you’re being called about a debt you’re not sure you owe. Saxton explains that, “debt collectors must send a validation notice in writing within five days of contacting you that clarifies how much and to whom you owe the debt.”
From there, Saxton says, you have 30 days of receiving the notice to dispute or verify the debt, during which time the collector can’t contact you until they’ve sent you written verification of what you owe, such as the bill.
It’s important to remember that stopping abuse doesn’t mean you don’t owe the debt. According to Weisman, “this law protects people from unfair, abusive, and deceptive tactics being used by debt collectors… although that does not stop collection efforts.”
That said, if you’re being contacted about a debt that’s several years old, the next law might be of use to you. You can find the full text of the FDCPA law at the CFPB.
5. Statute of Limitations on Debt
It’s a little-known fact that a clock starts on your debt if it goes into default. From that time on, there is a certain number of years before the debt becomes “time-barred.”
This is the statute of limitations on debt, and although you technically still owe the debt (the only way to get rid of debt besides paying it is through bankruptcy), you might be able to use this law in your defense if a collector tries to sue you.
The statute of limitations on debt varies by state and by debt type, often being broken into the categories of “open” and “closed” debt. Open would include things such as your credit cards or revolving lines of credit, while closed would mean things like an installment loan.
It’s not always that clear-cut, though. For example, there is a statute of limitations on debt for private student loans, but federal loans are exempt from this law.
To find out more details on this law where you live, use this state-by-state guide to the statute of limitations on debt. And if you need additional help, the CFPB has sample letters to write to debt collectors to find out more information on the debt they’re trying to collect (such as its age), as well as advice to help you find an attorney if it comes to that.
6. Telemarketing Sales Rule
Bring the word “telemarketer” up in conversation, and it’s sure to be met with derision. Telemarketers are infamous for cold-calling you to sell you products you never expressed interest in and usually at an inopportune time.
But the Telemarketing Sales Rule (TSR) aims to change that. This law led to the creation of the National Do Not Call Registry. (If you haven’t registered, you can do so online at donotcall.gov or over the phone via 1-888-382-1222).
Besides the fact that this rule can decrease unwanted phone calls, it also regulates the way telemarketers can ask you for money. For example, it’s illegal to ask for your bank account information to create what’s called a “remotely created payment order.” If you get this kind of request over the phone, it could be a scam.
It also makes it illegal for telemarketers to engage in abusive acts, such as charging upfront for debt relief services, or speaking to you in a threatening way.
Likewise, telemarketers can only call you at certain times of day, and they can’t misrepresent their products.
Other aspects of TSR can be found on the FTC website here.
How to use these laws to protect your rights
Now that you know about all of these laws, what can you do if they’ve been violated?
The CFPB and FTC both use such complaints to understand which companies need further investigation for consumer rights violations. When empowered consumers like yourself complain, it’s that much easier for government agencies like these to take action against companies that break the rules.
And if you think the effort might be pointless, think again. In March, the CFPB fined credit scoring bureau Experian $3 million for selling misleading credit scores.
Besides fighting against unfair practices, the CFPB also releases reports to keep you in the know. An example of this is a recent report on student loan borrowers who are missing out on affordable repayment plans. Whether you’re filing a complaint or just staying up to date on your rights, the CFPB and FTC can help.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.36% APR (with Auto Pay) to 7.82% APR (with Auto Pay). Variable rate loan rates range from 2.41% APR (with Auto Pay) to 6.99% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.45% effective May 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.41% – 6.99%1||Undergrad & Graduate|
|2.41% – 7.89%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.38% – 6.81%4||Undergrad & Graduate|
|2.41% – 7.95%5||Undergrad & Graduate|
|2.60% – 9.60%6||Undergrad & Graduate|