In 1974, if you wanted to watch a television show, you’d better make sure you were near a TV when it aired, because chances are you didn’t have any way to record it. Grocery store employees put price tags manually on every item in the store, and then manually entered them into the cash register when you made a purchase, because items didn’t have bar codes. The first one was used that year to purchase a pack of gum.
Things were a lot different 40 years ago, including credit.
- If you were a woman applying for credit, you may have experienced a lender asking you to get your husband, father or even your brother to co-sign for you.
- Shopping for a credit card? You probably had no clue what the cost would be until you applied and received the card in the mail.
- And forget about getting a free credit report. Not only did you have to pay to see your credit data, you probably had to take off work and visit the local credit bureau to purchase it.
This month marks the 40th anniversary of some landmark legislation in consumer rights. Here are four consumer credit rights you didn’t have 40 years ago, and the legislation that came along and changed it all.
1. The Right to a Loan No Matter Your Race, Gender or Religion
This federal law, enacted in 1974, made it illegal for creditors to discriminate against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant had the capacity to enter into a contract). Before this legislation was enacted, women often had a difficult time establishing credit on their own. It was not unusual for a creditor to ask questions about things like their marital status or whether they planned to have children (when a creditor assumed they would drop out of the workforce).
ECOA also made it unlawful for creditors to discriminate against applicants because all or part of their income came from a public assistance program such as welfare, from retirement income such as Social Security or a pension, or from child support or alimony (as long as it’s regularly paid and likely to continue).
It may be a little hard to understand the impact of this legislation now, at a time when credit decisions are often automated, making credit largely colorblind as well as gender neutral. But imagine yourself in the early 1970s as a divorced working mother who can’t get credit because she doesn’t have a husband or other male family member to apply with her. Or imagine yourself as a person of color can’t get credit due solely to the color of your skin. In a recent speech at Michigan State University, the director of the Consumer Financial Protection Bureau Richard Cordray said, “This statute expressly prohibits discrimination in all manner of financial credit transactions, thus affirming that economic rights are civil rights.”
That’s not to say the system is perfect now. In fact, the CFPB recently took action against a major auto lender, fining them more than $80 million for charging African-American, Hispanic, and Pacific Islander customers higher interest rates. It was because of this law, though, that the agency was able to recover the settlement for borrowers – and send a message to other lenders to follow the law.
2. The Right to Understand Your Credit Card Terms Before You Apply
Shopping for a credit card? Hopefully you’ve taken a look at the basic interest charges and fees the card issuer has presented in table format. This disclosure of the basic cost of a credit card is often credited to Charles Schumer (then a U.S. representative from New York, now a senator) who championed legislation to disclose the cost of credit cards to consumers upfront. It was enacted in 1989 and the box that lists the basic information is known as the “Schumer Box.”
It requires credit card issuers to disclose basic costs including the:
- interest rate (APR) for purchases, transfers and cash advances
- annual fee (if applicable)
- other fees
- grace period
Before this legislation, it was not uncommon for a credit card solicitation to tout the features and benefits of the card in advertisements, but fail to mention the cost. Consumers would apply for a card and receive it before they actually found out the fees and interest they would have to pay.
Again, this law isn’t perfect. With the rise in risk-based pricing, a lender may disclose a range of interest rates and you don’t know the rate you’ll get until the issuer checks your credit and your application is approved.
3. The Right to Dispute Your Credit Card Bill
If you have ever refused to pay for a credit card charge, you have the federal Fair Credit Billing Act to thank for your right to dispute it. That law, enacted in 1974, gives you the right to dispute certain credit card purchases and withhold payment on them while the issuer investigates.
Under the FCBA, you can dispute a charge for a purchase under several scenarios, including:
- You didn’t make it.
- It is for the wrong amount.
- You did not receive the goods or services.
- Goods were not delivered as agreed or were damaged upon delivery.
You can also dispute credit card bill if you find an error in the lender’s calculation or if a statement wasn’t sent to you and you provided a change of address far enough in advance.
You generally have 60 days to dispute a billing error, and once you do, you can withhold payment on the disputed amount. The issuer must investigate and get back to you within roughly two billing cycles.
The “less-than-perfect” part? Many consumers don’t realize that you maintain your rights under this law only by putting your dispute in writing. Calling your issuer may be an easier way to lodge a complaint, but it doesn’t protect your rights. Your best bet is to make sure you send your dispute by certified mail following the instructions on your billing statement, and keep a paper trail.
4. The Right to Free Credit Reports
Sometimes referred to as the FACT Act, or FACTA, this law in 2003 gave consumers the right to a free credit report once per year from any national consumer reporting agency. As a result, AnnualCreditReport.com was developed as a central place to request it. Prior to that, consumers paid to get their reports. (There were several states that already required credit reporting agencies provide citizens with free copies of their credit reports.)
This law also provided consumers with a variety of other protections including fraud alerts and credit freezes if they were victims of identity theft and improved dispute procedures. But it is the free report that really changed the game for consumers. Before FACTA, lenders who obtained credit reports often couldn’t even show them to the consumers who were the subjects of the credit reports. In other words, a car dealer could be sitting across the desk from a consumer telling him about a problem in his report, but under its contract with the credit bureaus, couldn’t share that report with the consumer.
FACTA gave consumers the right to free credit reports, but not to free credit scores. You can, however, see your credit scores for free on sites like Credit.com.
More on Credit Reports and Credit Scores:
- How to Get Your Free Annual Credit Report
- How Do I Dispute an Error on My Credit Report?
- How Credit Impacts Your Day-to-Day Life