Federal laws protect consumers' savings and loans

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July 24, 2006

Associated Press Associated Press Mon Jul 24, 2006, 12:01 PM EDT

NEW YORK (AP) - Consumers have a legion of federal protections, whether they're opening savings accounts, taking out loans or trying to build a good credit record.

"There's a broad array of consumer protection laws that relate to financial activities," said Bob Mooney, deputy director of the Federal Deposit Insurance Corp.'s division of supervision and consumer protection. "Some have been around for a while and we've come to take them for granted."

Take the Truth in Lending Act. Originally enacted by Congress in 1968, this law is designed to make sure lenders disclose all costs in their loan agreements.

It's the reason consumers get information about annual percentage rates, or APRs, which cover interest and certain fees, when they borrow money or sign up for credit cards, he said. The disclosure is required before credit is extended and, in some cases, it also must be included in periodic billing statements.

"Consumers can use this information to compare credit products to determine which is the most cost-effective for them," Mooney said. "This is particularly important with credit cards, pay day loans and other types of credit."

He added that "most reputable institutions use the APR in their advertising as well."

Another agency, the Federal Trade Commission, is responsible for enforcing many of the nation's consumer protection laws, including:

- The Fair Debt Collection Practices Act, which prohibits deceptive or abusive practices by debt collectors

- The Consumer Leasing Act, which regulates personal property leases of four months or more

- The Telemarketing and Consumer Fraud and Abuse Prevention Act, which defines and prohibits deceptive telemarketing practices

Among the most important laws is the Fair Credit Reporting Act, which protects the information collected by credit bureaus and other consumer reporting agencies. The FTC also enforces the most recent amendment to the act, The Fair and Accurate Credit Transactions Act of 2003, known as the FACT Act.

Attorney Joel Winston, an associate director in the FTC's bureau of consumer protection, said the acts are important to consumers because they deal with credit reports, which track how much debt consumers have and how promptly they pay their bills. The better the report, the better terms a consumer is likely to get from a creditor.

"More and more, your ability to get a loan or a job or rent an apartment or get insurance - and the terms you get - depend on your credit report," he said. "So it's a critical document, and that's governed by the Fair Credit Reporting Act and the FACT Act."

Credit reports also are important when it comes to detecting identity theft, which is the No. 1 consumer complaint received by the FTC, Winston said.

"Often the first place that signs of ID theft show up is on your credit report," he said.

That's one of the reasons Congress included a provision in the FACT Act that allows consumers to get a free copy of their credit report every year from each of the three main credit bureaus - Equifax, Experian and TransUnion, he said.

Before the act was passed, consumers could get free reports only if they were turned down for credit, or if they were unemployed or faced other financial hardship.

The law limits who has access to a consumer's credit report and sets out procedures for consumers to dispute information they believe is incorrect. Under the FACT Act, consumers also can place fraud alerts on their credit files if they fear they've become a victim of identity thieves.

Paul Richard, executive director of the Institute of Consumer Financial Education in San Diego and an expert on credit reports, said he believes many consumers still haven't ordered their free reports despite all the publicity surrounding the FACT Act.

"People don't change when they see the light, they change when they feel the heat," he said. "Getting turned down for credit is the heat, and a lot of people feel that if they're not turned down for credit they don't have a problem."

But, he said, a small and seemingly innocuous error on a credit report could put a consumer into a higher risk bracket for a loan, including a mortgage, and cost the consumer thousands of dollars in extra interest over the life of a loan.

"People should take advantage of the laws," Richard said. "That's what they're there for."

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