Credit Protection Laws

Learning Goals/Objectives:

Explain ways consumers are protected from unfair credit practices.

Explain ways consumers are protected from abusive credit collection practices.

Explain the obligations of consumers when using credit.

Overview:

Consumers who use credit are protected by a variety of federal laws designed to protect their rights when they interact with credit card companies. He most recent major legislation, the Credit CARD Act, enacted in 2009, provides many new consumer credit protections and strengthens other existing laws. For example, your credit card company generally cannot increase the rate on your existing balance and must tell you forty-five days before increasing the rate for new transactions. The Act also places new limits on fees and rate increases and requires consistency in payment dates and times.

This lesson focuses on the major consumer credit protection laws, as summarized in the Board of Governors of the Federal Reserve online publication, “Consumer Protection Laws,” http://www.federalreserve.gov/creditcard/regs.html.

Grouping of Students:

Class discussion

Methods:

Class discussion

Access Internet-based resources

Activities:

1. Ask: When you purchase something and something goes wrong or you are not treated fairly, what do you expect? Do you have rights? What are they?

Elicit some discussion of the ways consumers are protected by federal, state and local laws. Right to return goods, safety, advertised prices, no hidden costs, etc.

2. Explain: When you use a credit card or sign a credit agreement, you are also protected by a variety of laws.

Ask: Why do we need laws to protect the rights of people who use credit?

Discuss possible things that sales people or creditors might do that are not fair or abusive to consumers? Suggest: misleading credit costs, hidden costs, unfair rules, abusive collections practices, etc. For some ideas for this discussion, see the article at this “Consumer Union” web site: http://www.consumersunion.org/pub/core_financial_services/004040.html

3. Explain: The federal government is the primary level of government involved in protecting consumer credit. Most of this activity crosses state lines and, thus, is under federal jurisdiction. Also, federal government agencies are the primary regulators of the financial institutions involved in credit.

Use Handout 1 or go to: http://www.federalreserve.gov/creditcard/regs.html

Quickly review the major consumer credit protection laws. Be sure to specifically review the newest laws that were passed in response to the 2008-2009 credit crisis.

"What You Need to Know: New Credit Card Rules Effective Feb. 22" (2010)

"What You Need to Know: New Credit Card Rules Effective Aug. 22" (2010)

4. Assign one law to each small group of students. Students can review the information about the law and summarize it for the other students. Use Handout 2 for the summaries.

Students will report on:

Name of the law____________

Year enacted______________

What problem(s) does the law intend to prevent?

How does the law protect credit users?

What are the consumers’ responsibilities?

5. Conclude: Review some of the reasons why credit providers and collectors should be regulated.

Discuss some strategies consumer can take to protect themselves from credit problems. For discussion ideas, go to this site: “Getting the Most from Your Credit Card,” http://www.federalreserve.gov/consumerinfo/fivetips_creditcard.htm.

Other credit card and consumer credit protection links (Federal Reserve System):

Credit Glossary: http://www.federalreserve.gov/creditcard/glossary.html

Interest Rates: http://www.federalreserve.gov/creditcard/rates.html

Credit Card Option: http://www.federalreserve.gov/creditcard/rates.html

Credit Card Fees: http://www.federalreserve.gov/creditcard/fees.html

Lost or Stolen Cards: http://www.federalreserve.gov/creditcard/lost.html

Billing Errors: http://www.federalreserve.gov/creditcard/errors.html

Credit Card Complaints: http://www.federalreserve.gov/creditcard/complaints.html

Managing Your Credit: http://www.federalreserve.gov/creditcard/manage.html

Materials:

Online: Credit Protection Laws, http://www.federalreserve.gov/creditcard/regs.html

Online: Credit Cards: Interactive Tools and Features, http://www.federalreserve.gov/creditcard/