The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) provides for the most sweeping changes made to the federal bankruptcy laws since the enactment of the Bankruptcy Code in 1978.
The intent of the act is to increase fiscal responsibility for those individuals and businesses filing bankruptcy, and to ensure that there is adequate substantiation behind the filings. Provisions of the legislation are:
- The implementation of a means test to determine whether a debtor is eligible to file Chapter 7 (liquidation) bankruptcy or Chapter 13 (wage-earner repayment plan) bankruptcy. Under the new law, those who have the ability to pay are required to pay back at least a portion of their debts. Those who fall behind their state’s median income will not be required to pay back their debts.
- Random and targeted auditing will be implemented to determine the accuracy of documents provided in a Chapter 7 bankruptcy filing.
- Individuals filing bankruptcy must have the required credit counseling before filing bankruptcy, and the counseling must be provided by an approved credit counseling agency (approved by the Bankruptcy Court).
- Individuals must also undergo a mandatory financial management course (otherwise known as debtors’ education) after they have filed, but before their debts can be discharged.
- Chapter 7 bankruptcy may only be filed once every eight years. The timeline for Chapter 13 filings varies, depending on what the prior filing was and when it occurred.
- There are now dollar limits to assets that can be protected.
- Credit card companies will be required to let card holders know up front what they are expected to pay, as well as what the penalties will be if they are late making payments.
- Automatic Stay (the provision that stops creditors from continuing to collect from debtors) may not be effective. This is relevant if a consumer had a bankruptcy case dismissed or pending within a one- to two-year period. If a case was filed within a two-year period, a current case may not stop foreclosure or other collection activities.
- It has been made virtually impossible to have a student loan discharged
- Pension and profit sharing plans receive favorable treatment.
- Payments for domestic support are given first priority—to be paid before taxes, and any other unsecured consumer debts.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Card Act) was intended to force card issuers to give customers more notice about interest-rate increases and restricts certain controversial billing practices such as inactivity fees. Some of the key provisions of the Card Act are:
- Late payment fees should not be triggered on a Sunday or holiday when there is no mail delivery.
- Issuers cannot increase rates on existing balances unless a cardholder is at least 60 days late
- There must be at least 21 days between the date the bill is mailed and the date the payment is due.
- Fees on Low-Limit cards cannot be greater than 25% of the credit line however this does not include up-front processing fees.
- Fees for account inactivity can no longer be charged but this clause does not cover conditional annual fees.
- Foreign Transaction fees may be charged on purchases made over the Internet.
- Balance Transfer fees may be charged.
- This Act does not apply to “Professional Card” otherwise known as small-business or corporate credit cards.
The Credit Repair Organizations Act (CROA) was designed to protect consumers from unfair or deceptive advertising and business practices by credit repair organizations. It also serves to ensure that consumers are provided with all the information needed to make informed decisions about using services provided by these organizations.
Major provisions of the Credit Repair Organizations Act are:
- CROs may not receive payment in advance of performing promised services,
- The services provided to the consumer must be detailed in a written contract which needs to include a description of services, rights and contract performance time,
- No services may be provided by a credit repair organization for a consumer unless a written and dated contract has been signed by the consumer,
- A consumer may cancel a contract with a credit repair organization without penalty or obligation by notifying the credit repair organization of their intention before midnight of the 3 business day,
- Consumers can sue to recover the greater of the amount paid or actual damages for any violations of the CROA,
- A consumer may not be counseled or advised to make any false or misleading statements regarding credit worthiness, credit standing, or credit capacity to anyone, or any agency.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 covers a plethora of areas designed to protect consumers of credit, savings,
payment products, and other consumer financial products and services. The sections of the Act which will have the greatest impact on consumers are:
- Consumer Protection Bureau: An independent Bureau of Consumer Financial Protection has been created. Its role is to protect consumer rights and ensure that appropriate financial regulations are in place. The Consumer Protection Bureau will oversee everything from credit cards to mortgages, student loans, and bank accounts.
- Consumer Complaint Hotline: A national consumer complaint hotline will be put in place so that consumers can report problems.
- Mortgage Assistance: The new legislation sets aside $1 billion for bridge loans to jobless qualified homeowners. The funds offer help with mortgage payments until homeowners find employment.
· Deposit Insurance: There will be a permanent increase in deposit insurance for banks, credit unions, and thrifts to $250,000.
· Credit Reporting Agencies: The new consumer protection bureau will have the authority to regularly examine the major credit bureaus to ensure their compliance with federal law.
· Credit Scores: Consumers will be able to receive their credit scores of charge if they are refused credit or charged a higher price for credit than most consumers because of their score.
· Credit Cards: The bureau will enforce existing laws governing consumer credit, including the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, which will be enforced by the Consumer Financial Protection Bureau and Fair Credit Reporting Act. Terms of credit card agreements, such as interest rates, will be clearly disclosed.
· Insurance: The new bill will create an office focused on insurance called Federal Insurance Office which will monitor the insurance industry.
· Overdraft Fees: All account holders must opt in or out of banking overdraft fees. If you don’t opt in for overdraft coverage and a purchase pushes you over your limit, your purchase will be declined. If you do opt in for overdraft protection, you’ll be charged a fee if you go over your limit.
The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against applicants on the basis of sex, race, marital status, religion, nationality, age, or the receipt of public assistance. Creditors are required to notify applicants of any action taken on their applications.
The law protects consumers when dealing with creditors who regularly extend credit (this includes banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions). Anyone involved in granting credit, such as real estate brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law.
The ECOA ensures that:
- Credit is not to be denied based on sex, race, marital status, religion, nationality, age, the receipt of public assistance.
- If credit is denied, a consumer has the right to be informed of the reason(s) for denial.
- Public assistance is to be considered in the same manner as any other form of income in the credit application review process.
The ECOA also covers consumers’ rights if discrimination is suspected. Consumers are advised to:
- Inform the creditor that you know the law,
- Check with the attorney general to see if the creditor has violated any other laws;
- File a class action suit,
- Bring the case to federal district court,
- Report violations to the appropriate government agency.
The Fair and Accurate Credit Transactions Act (FACT Act) is an amendment to the Fair Credit Reporting Act, enacted with the intent to help combat and reduce identity theft, to protect the privacy of consumer financial information, and to maintain existing credit- reporting protections.
Some of the provisions of the FACT Act are:
- The requirement that the three major credit reporting agencies provide consumers with a copy of their credit report every 12 months.
- The implementation of the National Fraud Alert System, which enables consumers who have reason to suspect they have been victims of identity theft, or military personnel on active duty away from home, to place alerts on their credit files.
- Account numbers on credit card receipts are required to be shortened omitting consumers’ names and full credit card account numbers.
Also outlined are measures that will help consumers gain back their good credit reputations after they have been victims of identity theft. These provisions include:
- Requiring credit reporting agencies to stop reporting alleged fraudulent account information once a consumer has established that he/she has been a victim of identity theft,
- Requiring creditors/businesses to provide copies of records of fraudulent activity as it relates to the individual consumer,
- Allowing consumers to report fraudulent activity directly to creditors, as well as to the credit reporting agencies.
The Fair Credit Billing Act established procedures for resolving mistakes on credit card transactions and on the transfer of electronic funds.
The Fair Credit Billing Act details examples of billing error disputes:
- Unauthorized charges or electronic fund transfers,
- Charges or transfers that list the wrong date or amount,
- Charges or transfers for goods and services you didn’t accept or weren’t delivered as agreed,
- Math errors,
- Failure to post payments and other credits or transfers,
- Failure to send bills to your current address—provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends, and
- Charges or fund transfers for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification.
The act also details procedures for consumers to follow when requesting corrections:
- Write to the creditor at the address given for “billing inquiries,” not the address for sending your payments, and include your name, address, account number and a description of the billing error.
- Send your letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to you.
The Fair Credit Reporting Act (FCRA) ensures the accuracy, fairness, and privacy of information kept by credit bureaus and consumer agencies. It gives consumers the right to know what information credit bureaus and consumer agencies are distributing about them to creditors, insurance companies, employers, or anyone with a legally recognized reason for requesting the information.
Under the FCRA:
- Consumers must be informed if their file has been used against them (e.g., denial of employment).
- Consumers have the right to know what is in their files.
- Consumers have the right to a free copy of their credit reports each year. This can be obtained at www.annualcreditreport.com.
- Consumers have the right to ask for their credit scores.
- Consumers have the right to dispute incomplete or inaccurate information, and if the dispute is not resolved, they can add a summary explanation to their credit report.
- Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information, usually within 30 days.
- Outdated, negative information may not be reported by credit reporting agencies after seven years for tradelines, civil judgments and paid tax liens, or Chapter 13 bankruptcies; or after 10 years for Chapter 7 bankruptcies.
- A consumer’s written consent is required for reports to be provided to employers;
- It is possible to limit “prescreened” offers of credit and insurance based on information taken from a consumer’s credit reports.
- Consumers may seek damages from violators of the FCRA.
- Victims of identity theft and military personnel are granted additional rights.
- Consumers have the right to prevent access to their credit reports with a "freeze" at no charge.
The Fair Debt Collection Practices Act applies to personal, family, and household debts. Examples of this include money owed for the purchase of a car, medical bills, or charge accounts. Debt collectors are prohibited from engaging in unfair, deceptive, or abusive practices.
The act details:
- Ways a debt collector may contact a consumer, including by mail, in person, by telephone (whereby they must identify themselves), telegram or fax, only between the hours of 8 a.m. and 9 p.m.
- A debt collector may not contact a consumer at work if they know the employer disapproves.
- A debt collector may not harass, abuse, or oppress a consumer; the debt collector must stop contact if asked to do so in writing.
- A debt collector may not lie when collecting debts.
- Procedures to follow if you believe that a debt collector has violated the law (e.g., to file a report with the FTC and with the Attorney General’s office).
The Servicemembers Civil Relief Act of 2003 serves as a complete revision to, and a renaming of, the old Soldiers’ and Sailors’ Relief Act of 1940. This act is provided for by federal law and it gives all military members important rights as they enter active duty. It offers short-term financial relief by placing specific requirements on both the financial services industry and the legal system.
The major legal protections granted under this act relate to:
- Residential Leases — A lease can be terminated early if theservicemember entered into it prior to being activated or if the individual is already on active duty but becomes deployed for more than 90 days. This applies to security deposits, prepaid rent, and eviction notices.
- Automobile Leases — Similar protection as granted under the residential leases clause, although the deployment time is 180 days. Early termination fees are prohibited.
- Installment Contracts — If the contract was entered into prior to the individual being on active duty, and at least one payment was made, the creditor cannot repossess the property while the member is on active duty.
- 6 Percent Interest Rate — If military obligations affect aservicemember’s ability to meet his/her financial obligations (payments on credit cards, loans, mortgages), theservicemember can request a 6 percent interest rate cap for the duration of his/her military obligation. Qualifying debts are those incurred by the member, or jointly by the member and spouse, prior to the service member going on active duty.
- Income taxes — Provides protection from double taxation for a spouse working in a state other than where legal residency has been declared. Also provides for stays of enforcement.
The Telephone Consumer Protection Act is the primary law in the United States governing telephone solicitations (i.e.: Telemarketing). The Federal Communication Commission (FCC) revised the TCPA in 2003 to coordinate with the Do-Not-Call registry, which is administered by the Federal Trade Commission (FTC). Unless the consumer has granted prior consent, solicitors:
- Cannot call residences before 8 a.m. and after 9 p.m.,
- Must keep a “Do Not Call” list, which must be honored for 5 years,
- Must provide their name, and the name of the entity on whose behalf they are calling, as well as a contact phone number and/or address,
- May not make calls using artificial voices or recordings to residences, cell phones, or phone services where the recipient is charged for the call,
- May not send unsolicited faxes,
- May not send prerecorded or autodialed calls engaging two or more lines of a multi- line business, or to emergency numbers.
In the event of violations of the TCPA, individuals are entitled to collect damages from a solicitor for $500-$ 1,500 per violation, or recover actual monetary loss, whichever is greater.
The Truth in Lending Act was designed to assist consumers as they comparison shop for credit. In order to protect consumers who have entered into credit transactions, the terms and costs associated with obtaining and using credit must be clearly disclosed. In general, this regulation applies to each individual/business that offers or extends credit when four conditions are met:
- Credit is offered or extended to consumers;
- The offering/extension of credit is done on a regular basis;
- The credit is subject to a finance charge, or is payable by written agreement in more than four installments; and
- The credit is primarily for personal, family, or household purposes.
Some provisions of the act are:
- Consumers have the right to cancel certain credit transactions that involve a lien on their principal dwelling.
- The act provides a means for fair and timely resolution of credit billing disputes.
- The regulation does not govern charges for consumer credit.
- The regulation requires that a maximum interest rate be stated regarding variable-rate contracts which are secured by the consumer’s home (adjustable rate mortgages).
- Once an adjustable rate mortgage has been obtained, the loan holder must be given a copy of the Consumer Handbook on Adjustable Rate Mortgages, or a suitable substitute.
The Uniform Debt-Management Services Act (UDMSA) was introduced by the National Conference of Commissioners on Uniform State Laws (NCCUSL) to deal with the issues that have cropped up in the credit counseling industry. The act provides for regulation in both the credit counseling and debt settlement industries. It is up to individual states to enact the UDMSA. The law will provide a uniform regulatory scheme for the credit counseling industry.
The UDMSA can be divided into three parts:
Registration of Services
Consumer debt management services companies must...
- Be registered in the state in which they are doing business,
- Have an insurance policy for fraud, as well as a security bond, Provide education to their clients,
- Submit detailed information about their services, and their history.
- There must be disclosure as to fees, services offered, risks, and benefits,
- Counselors providing counseling services must be certified,
- Payments that a counseling agency may receive from a creditor for that creditor’s debtors must be kept in a trust account, and funds may not be commingled.
- Misappropriation of funds in trust,
- Settlement for more than 50 percent of a debt with a creditor without the debtor’s consent,
- Acceptance of gifts or premiums to enter into agreements,
- Representation that settlement of debt has occurred without documentation from the creditor,
- Enforcement can occur at both the administrative and individual level.