Every time you buy something with a credit card, you are taking out a small loan that you must pay back at the end of the month. If you use credit irresponsibly, running up huge amounts of debt that you cannot afford to pay back or ignoring the bill when it comes, you can seriously hurt your credit. However, the Federal Trade Commission has safeguards in place to stop credit card companies and debt collectors from taking advantage of you if you cannot pay your bill in full on time.
Debt Collection Laws
The Fair Credit Reporting Act prevents debt collectors from engaging in collection activities that are unfair or harmful to you. Debt collectors must discuss the debt only with you; if they contact your friends or relatives, they may only ask for the address or phone number where you currently may be reached. Debt collectors may not use abusive language, may not contact you before 8 a.m. or after 9 p.m., and may not threaten you with physical harm or with legal action that they are not authorized to carry out.
Late Fees
As of April 2011, the federal government limits penalty fees on most credit cards to protect consumers from falling more deeply into debt because of an inability to pay their balance on time.. If you are late making the minimum payment on your credit account, the creditor may not charge you more than $25 unless you have been late in the past six months, and your creditor cannot charge you a fee that is higher than your balance. For example, if you only owe $15 on a credit card, your creditor cannot charge you more than $15 as a late fee.
Rate Increases
Credit card companies have the right to raise your rates if you are consistently late with your payments, carry too much debt or otherwise present an extra risk to the creditor of defaulting on your debt. However, the creditor must give you 45 day notice prior to raising your rates for any reason. In addition, the credit card company must re-evaluate your rate increase after six months, and if you no longer provide a high risk, it must lower the rate within 45 days of completing the re-evaluation.
Annual Free Credit Report
You have the right to request a free credit report from each of the three major credit bureaus (Experian, Equifax and Transunion) every 12 months. Requesting your free credit report will not harm your credit score. You may request your credit report from each of the three bureaus at once or stagger your reports (for example, order one credit report every four months). Obtaining your credit report allows you to check for errors or potential fraud. If you disagree with any information in your report, you may contact the credit bureau to dispute it.
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