LO 7.2.2: Discuss the legislation that has been enacted to provide credit protection to consumers.

Question 1

What are the 2 most important pieces of legislation enacted to provide credit protection to the customer?

Answer 1

• Consumer Credit Protection Act

* Fair Credit Reporting Act (FCRA)

Question 2

Consumer Credit Protection Act | Purpose and provisions

Answer 2

• AKA. Truth in Lending Act
• Passed in 1968, updated 1996.
• Purpose: have lenders make uniform disclosures, enabling consumer to evaluate credit terms
• Provisions: establishment of Annual Percentage Rate (APR) as standard method of calculating and reporting interest, and Regulation Z disclosures.

Question 3

Consumer Credit Protection Act | Regulation Z

Answer 3

• Requires several important credit term disclosures:
  
  • APR
  • When payments begin
  • Charges for late payments
  • Prepayment information
  • Amount financed
  • Right of rescission

Question 4

Consumer Credit Protection Act | Does the act regulate advertisement of credit terms?

Answer 4

Yes.

Question 5

Consumer Credit Protection Act | What does the act say about the ability to rescind consumer contracts?

Answer 5

The borrower must be given 3 days to rescind the contract under this act.

Question 6

Consumer Credit Protection Act | Does the act require the issuer of installment credit to provide written disclosures in easy-to-understand language?

Answer 6

Yes.

Question 7

Consumer Credit Protection Act | Does the act prohibit credit card companies from issuing cards that the consumer has not requested?

Answer 7

Yes.

Question 8

Consumer Credit Protection Act | Does the act protect the consumer from unauthorized credit card use?

Answer 8

• Yes.
• Credit card holder is only liable for $50 of unauthorized hcarges if they report to the issuer that the credit card has been lost or stolen.
• In practice CC companies often reduce this to $0, but law states they can hold the holder liable for up to $50 for unauthorized charges.

Question 9

Fair Credit Reporting Act (FCRA) | When was it enacted?

Answer 9

1971.

Question 10

Fair Credit Reporting Act (FCRA) | What is one major update since it was enacted in 1971?

Answer 10

• Access to information: consumers who have been denied credit must be notified about which credit reporting agency provided info to the potential creditor
• The consumer than has 30 days to request a free copy of credit file

Question 11

Fair Credit Reporting Act (FCRA) | How long is adverse info entered into a credit maintained for?

Answer 11

• 7 years.

* Bankruptcy info: 10 years.

Question 12

Fair Credit Reporting Act (FCRA) | Can clients challenge credit card charges?

Answer 12

Yes.

Question 13

Fair Credit Reporting Act (FCRA) | During an investigation of charge that is being challenged, does the credit card company have to suspend the charge?

Answer 13

Yes.

Question 14

Fair Credit Reporting Act (FCRA) | How do clients protect themselves against identify theft?

Answer 14

By reviewing their charge card statements routinely and be ready to act and challenge charges in a timely manner.

Question 15

Fair Credit Reporting Act (FCRA) | Can individuals request the credit bureau send a corrected credit report be sent to any potential creditors who received an erroneous report?

Answer 15

Yes, and to any potential creditor who received an erroneous report in the last 6 months.

Question 16

Fair Credit Reporting Act (FCRA) | Can individuals request the credit bureau send a corrected credit report be sent to any potential employer who received an erroneous report?

Answer 16

Yes, and to any potential employer who received an erroneous report in the last 2 years.

Question 17

Fair Credit Reporting Act (FCRA) | What happens if the individual and the reporting agency and the consumer do not agree on what information is correct?

Answer 17

• The consumer has the right to include their written version of the facts on file, which must also be shown to prospective creditors requesting a report.
• However, this is often not needed because under the amended act, erroneous info on a report tends to be corrected quicker than previously, so additional written info on the disputed facts is often not necessary.

Question 18

Fair Credit Reporting Act (FCRA) | Can individuals request a review of their credit report even if they haven’t been denied credit?

Answer 18

Yes, but a nominal fee is charged for this service.

Question 19

Fair Credit Reporting Act (FCRA) | Who can receive a credit report on a consumer?

Answer 19

Under the law, only those individuals who have a legitimate need are authorized reason to receive the credit reports on a given customer.

Question 20

Fair Credit Billing Act

Answer 20

• Requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement.
• Creditors have 30 days to respond to consumer, and 90 days to resolve the complaint.

Question 21

Equal Credit Opportunity Act

Answer 21

• Prohibits credit discrimination on the basis of:
  
  • Race, color, religion, national origin, gender, marital status, age, or sexual orientation;
  • the fact that all or part of the applicant’s income derives from public assistance programs; or
  • the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

Question 22

Electronic Fund Transfer Act

Answer 22

Provides for recovery by those who suffer losses due to a financial institution failing to follow provisions of the act.

Question 23

Consumer Credit Reporting Reform Act

Answer 23

• AKA. Consumer Credit Reporting Act
• Requires credit bureau reports to include accurate, relevant, and recent info about the financial situation of credit applicants.
• Restricts access to credit files only to bona fide users of financial info.
• Requires that applicants denied credit must be advised why and must be given the name and address of the reporting credit agency.

Question 24

Fair Debt Collection Practices Act

Answer 24

• Prohibits debt collectors from
  
  • contacting a debtor at place of employment if employer objects,
  • harassing or intimidating the debtor, or
  • using false and misleading practices.
• A state court may issue an order for garnishment of a portion of a debtor’s wages in order to satisfy a legal judgment that was obtained by a creditor.

Question 25

Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)

Answer 25

Enacted to establish fair practices and enable consumers to better understand their credit transactions.

Question 26

Privacy Policies | What does the CFP Board say about confidentiality of client information?

Answer 26

Standard A.9, Confidentiality and Privacy of the Standards of Conduct states CFP professionals must keep confidential and may not disclose any NPI about any prospective, current, or former client (unless due to ordinary course of business or for legal/enforcement purposes).

Question 27

Privacy Policies | Why is client confidentiality important?

Answer 27

A relationship of trust and confidence must exist between clients and their planners.

Question 28

Privacy Policies | Privacy Act of 1974

Answer 28

Established a code of fair info practices that regulates the type of personal info the federal gov’t can collect and how this info can be used.

Question 29

Consumer Credit Reporting Reform Act | Privacy measures in the act

Answer 29

• Credit reporting agencies must follow reasonable procedures to protect the confidentiality, accuracy, and relevance of credit info
• The act’s Fair Information Practices outlines customers’ rights to access and correct info, data security, and the limitations of the info’s use.

Question 30

Fair And Accurate Credit Transaction Act of 2003 (FACTA)

Answer 30

• Added new sections to the federal FCRA that gives consumers greater protection against identity theft
• Consumers can obtain a free credit report every 12 months from one of the 3 national credit agencies—Equifax, TransUnion, and Experian
• Requires consumer info be disposed of in a secure manner
• Individuals can place alerts on their credit histories if id theft is suspected or if deploying overseas in the military

Question 31

Phishing

Answer 31

• One of the predominant ways thieves can learn confidential personal information
• Posing as a financial institution or company and sending spam over the internet to entice an individual to provide personal info

Question 32

Skimming

Answer 32

Stealing of credit or debit card info by using a special storage device when processing these types of cards

Question 33

Ways to protect against identity theft

Answer 33

• Safeguard personal confidential information— especially SSN
• Suspicious activity should be detected by routine monitoring of statements and reports
• Any financial account w/suspected tampering should be closed immediately, place a fraud alert on a credit file if believe fraud has occurred.

Question 34

What to do if fraud has occurred

Answer 34

• Close the accounts.
• Place a fraud alert on credit file.
• File a police report.
• Report to the FTC.