Your Rights as a Credit Card Holder

The Truth in Lending Act (TILA), originally passed in 1968, with its numerous amendments, forms the cornerstone to federal legislation defining how lenders, including credit card issuers, extend credit to consumers. TILA, implemented through Regulation Z, dictates that card issuers accurately disclose credit card terms at specified times, often in a standardized format. The purpose behind TILA's requirements is to give you the ability to more easily understand your credit card terms, including the various fees and interest rates charged on your card balance. TILA makes it easier to read card agreements, applications and offers, and to compare credit cards.

You've probably received promotional offers from credit card issuers. Some offers include gotcha language in the fine print that consumers fail to notice. Here are a few ways gotcha language can surprise consumers:

• Accept a zero-percent balance transfer credit card promotional offer of one year, only to lose the zero percent rate after three months because you used the card to make additional purchases during the promotional period.
• Accept a credit card offer with no annual fee, only to incur a $100 annual fee charged after the first year.

You may end up paying extra fees or more interest from higher rates. Unclear presentation of information or convoluted language relating to the applicable interest rates or other fees for your credit card may result in unanticipated fees or an increase in the interest you pay on a balance. Information about additional fees and rate increases is not sufficiently prominent but rather buried in a billing statement.

An area of recent concern is the loss of promotional or teaser rates for balance transfer credit cards resulting from making purchases with the card during the promotional period. Consumers end up losing the teaser rate and incurring much higher interest charges.

Your card company must make the terms, rate and costs of a credit card account available in writing before you agree to the card. The information must be in plain language. If you believe your card company failed to clearly disclose or present information about fees or rate increases, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

The Credit CARD Act of 2009 is the most recent legislation expanding consumer credit card rights. Often referred to as the Credit Cardholders' Bill of Rights but officially known as the Credit Card Accountability, Responsibility, and Disclosure Act, the CARD Act enhances two consumer protections:

• Transparency. Create more transparency of credit card fees and rates so that you can more easily understand the costs of your card and compare the terms of different cards.
• Fairness. Prevent card companies from practicing certain unfair practices, such as increasing the rate on balances that are over the credit limit while also imposing an over-limit fee.

• Pay an over-limit fee and also incur interest rate increase for going over credit limit in a single billing cycle (prohibited by CARD Act).
• Charged interest for two full billing cycles of balances, called double-cycle billing (prohibited by CARD Act).
• Receive notice of rate increase 21 days before the rate becomes effective (CARD Act requires 45 days' notice).
• Receive 45 days' notice of interest rate increase in a billing statement but notice is not prominent.

You may unknowingly pay additional fees or interest specifically prohibited by the CARD Act. Although the CFPB continues to enforce prohibitions on double-cycle billing and excessive over-limit penalties and fees, some issuers continue to get away with these practices or bury terms in their cardholder agreements and catch you off guard when you discover additional charges on your billing statement.

Continue to do your homework and thoroughly review cardholder agreements for additional charges and rate increases. Figure out the precise card activity that will trigger a rate increase or fee. If you believe your card issuer has acted unfairly in disclosing or presenting information, or has charged additional interest or fees prohibited by the CARD Act, you can file a complaint with the CFPB.

What if you purchase a customized set of coffee mugs online and still haven't received them after five weeks? The purchase appears on your billing statement. You contact the online retailer, which insists it delivered the mugs. The Fair Credit Billing Act of 1975 (FCBA) gives you rights in transactions gone bad. It outlines procedures for you and your card issuer to follow in billing disputes. As long as you follow those step-by-step rules, your credit card company must investigate the billing dispute and help you resolve it.

• Amount charged by a merchant is incorrect.
• Merchant charges twice for a single purchase of merchandise.
• Merchant charges for merchandise you never received.
• Merchant charges you for merchandise you returned.

Your maximum liability for an unauthorized charge is $50, provided you report it within two business days of realizing it.

Closely follow the FCBA's procedural steps in disputing your billing statement. To dispute a charge, you must send a written letter to your card issuer's billing inquiry address within 60 days after your card company mailed the billing statement. Your letter must contain the following information about you:

• Name
• Address
• Account number
• Description of the billing error in your statement

To best ensure your protections, follow these additional procedures:

• Mail the letter by certified mail, with return receipt requested.
• Include a copy of the sales receipts and other supporting documentation.
• Retain a copy of your letter disputing the charge.

What happens if you lose your credit card or someone steals it to make purchases? By immediately reporting your lost or stolen credit card, you can save yourself a lot of headaches and money. TILA and FCBA outline the procedural steps you should take if you experience a lost and stolen credit card. As long as you follow these requirements, you'll limit your liability.

• You lose your credit card.
• Someone steals your credit card or obtains your credit card account information and makes unauthorized purchases.
• Unauthorized charge on billing statement that you didn't initiate.

You don't have to pay for any unauthorized charges made to your card after you report the lost or stolen card to your card issuer. But if an unauthorized charge is made on your credit card before you report the stolen or lost card to your card issuer, you are liable up to $50. If your card is never lost or stolen but someone gains access to your card account to make an unauthorized charge over the phone or Internet, you are not liable for any amount.

• Report a lost or stolen credit card immediately. The longer you wait, the higher your liability can run.
• Scrutinize your billing statement. Your credit card may be tucked away in your wallet, but someone has taken your card information to make unauthorized charges. Your first line of defense is timely scrutiny. Closely examine each billing statement, confirming the validity of every transaction. Immediately report unauthorized transactions. Make a phone call to the card issuer's toll-free number.
• Create a paper trail. Always confirm that you contacted your card issuer about the unauthorized charge, or stolen or lost card, by sending a letter by certified mail with return receipt requested to your card issuer's billing errors address.

Among the protections included in the Fair Debt Collection Practices Act (FDCPA) are consumer protections relating to your failure to make card payments according to the cardholder agreement. The FDCPA protects your rights in the unfortunate event a card issuer directs a collection agency to go after you for a delinquent payment. The FDCPA is designed to prevent abusive, unfair or deceptive collection practices — including harassment, false statements, and threats.

• Receive multiple collection agency phone calls a day, sometimes before 8 a.m. and after 9 p.m.
• Receive calls from collection agency representatives who make false statements and threats.
• Receive calls from collection agency representatives who refuse to identify themselves and the company they represent.
• Receive calls from collection agency representatives at your work, and you agree to pay the amount out of fear of losing your job.

A collection agency may file a lawsuit against you to recover the disputed amount. If it successfully obtains a judgment in its favor, it can recover the disputed amount by seizing your assets, such as funds in a bank account, or garnishing your wages.

• You can file a complaint with the CFPB if you believe the collection agency or card issuer has violated the FDCPA.
• Fight a lawsuit. If the agency has already filed a lawsuit against you, you may find that hiring an attorney is necessary. In any case, never ignore the lawsuit. If you do not appear in court, you may forfeit your right to fight the charges. The court may enter a default judgment in the creditor's favor even if the supporting documentation it has provided is weak. Showing up for court gives you a better chance of having the lawsuit dismissed. You can refer to the National Association of Consumer Advocates to locate a suitable attorney.
• File a lawsuit against the creditor. Go on the offensive. Hire an attorney to sue the agency you believe has violated the FDCPA. The court may award you court costs, attorney's fees, damages for physical and emotional distress and other damages relating to the agency's FDCPA violations.

The Equal Credit Opportunity Act (ECOA) prohibits credit card issuers from discriminating against you and basing a credit card denial on your race, color, religion, national origin, sex, marital status or age, or receipt of public assistance funds. Although a credit card company may ask you questions about these personal qualities, it must ultimately base its credit card approval and the terms of your cardholder agreement on other relevant factors, like your income, expenses, debt level and credit.

• Card issuer asks about your plans to have or raise children and uses the information to deny your card approval.
• Card issuer asks whether you're widowed or divorced and uses your marital status to deny a credit card.
• Card issuer asks whether you receive alimony or child support without telling you that you do not have to answer if you aren't relying on those payments to obtain card approval.

A lender in violation of anti-discriminatory consumer credit laws may be required to pay you:

• Actual damages
• Punitive damages up to $10,000 (more for class-action lawsuits)
• Attorney's fees
• Court costs

• Complain to the card issuer. Simply approach the issuer and present your complaint. The company may realize its error, backtrack on its discriminatory actions and approve your application based on your credit, income and debt levels.
• Take it to the state. You can take your complaint a step further by contacting your state attorney general's office to confirm whether the credit card issuer violated state equal credit laws.
• File a complaint with the CFPB or report the violation to another government agency. The card issuer that denied your card approval must provide the appropriate agency and its contact information. The agency you report to varies depending on the card issuer's asset size and financial institution classification.
• Go to court. Hire an attorney to represent you in a lawsuit against the card issuer. If you successfully win a judgment, you can receive damages, attorney's fees and court costs. The court may also award punitive damages if the discriminatory conduct was willful.

Many consumers use debit cards for their convenience. With debit card purchases, funds are immediately withdrawn from your checking or savings account. Debit cards, unlike credit cards, don't involve extensions of credit but rather upfront payments from your account. Consumer protection laws for debit cards are also different from the ones for credit cards. For debit cards, the Electronic Funds Transfer Act (EFTA) limits your liability for a lost or stolen card. The tables below compare your liability depending on the card type.

*The bank must extend the notification period if you show that extenuating circumstances, such as prolonged illness or travel, kept you from reporting a missing debit card.

**Some states have set the maximum liability to $50.

Source: FTC

Source: FTC

Failing to keep up with minimum payments means you've broken your promise to repay your card issuer. Your card issuer (or a debt collection agency that purchases your debt) may sue you for the overdue amount. Here's what you can expect to happen.

• National Association of Consumer Advocates: Nonprofit organization made up of attorneys and consumer advocates that work to promote consumers' interests, including credit card consumer protections. Consumers can identify attorneys through NACA to represent them in a credit card claim or defense.
• Consumer Financial Protection Bureau's Complaint Form: Consumers can submit complaints through the CFPB's website. Complaints include credit card billing disputes, changes to your interest rate, fees, and other credit card management issues. The CFPB assists consumers by contacting the card issuer and soliciting a response from the company.
• TILA (Regulation Z): Look-up of rules issued by the CFPB relating to consumer credit protections, including those relating to credit card companies and the disclosure laws they must follow. Regulation Z is the practical implementation of TILA. Various legislation — for example, the FCBA and CARD Act — have amended or added to TILA over the decades. Regulation Z requires credit card companies to disclose the credit terms of a card account in a specified format and in a uniform way, to disclose the "true cost" of the credit extension and allow consumers to compare credit cards or other loan types.
• Credit CARD Act of 2009: Text of federal legislation passed in 2009 that instituted additional, significant consumer credit card protections.
• Fair Credit Billing Act: Text of federal legislation passed in 1974 that establishes procedures that consumers and credit card companies and collections agencies must strictly follow in settling billing disputes with credit accounts.
• Fair Debt Collection Practices Act: Text of federal legislation passed in 1978 that restricts debt collectors in their actions and practices as they attempt to retrieve payment from debtors. For example, with credit card debts, the collector cannot contact a consumer at certain times of the day and may be restricted from contacting a consumer at a workplace. The FDCPA doesn't apply to installment contracts, those loans or credit extensions with fixed repayment schedules.
• Equal Credit Opportunity Act: Text of federal legislation passed in 1974 prohibiting creditors, including credit card companies, from denying credit approval based on a consumer's race, color, religion, national origin, sex, marital status or age. The ECOA also prohibits discrimination based on a consumer's receipt of public assistance funds or exercise of consumer protection rights. Creditors must provide consumers who are denied credit with the reason for the denial.
• Electronic Fund Transfer Act: Text of federal legislation passed in 1978 that instituted consumer protections governing electronic fund transfers, including those relating to debit cards.