Five financial regulations that help protect your wallet

Regulations seem impersonal, only having an affect on businesses. These five regulations are personal and help protect your wallet directly.

Dieu Nalio Chery/AP/File
In this Oct. 17, 2015 photo, a campaign photo of presidential candidate Moise Jean Charles, of the Platform Pitit Dessalines political party, sits in a man's wallet in Port-au-Prince, Haiti.

You can take out a mortgage loan no matter your race, gender, religious preference, or sexual orientation. Credit card companies can’t suddenly send your interest rate soaring from 8% to 19%. Debt collectors can’t call you 15 times a day or threaten to throw you in prison. The reason? Financial regulations put in place by the federal government.

The government has a well-deserved reputation for red tape, dysfunction, and Congressional bickering. But government bodies have also passed several regulations that protect the money in your wallet. Here is a look at some of the most important regulations protecting the financial health of consumers today.

1. Credit CARD Act of 2009

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, better known as the Credit CARD Act, rolled out a series of regulations designed to protect consumers from the sometimes shady practices of credit card providers.

A key component of this act? It forbids credit card providers from randomly jacking up the interest rates of its cardholders. Under the act, card providers can usually only raise rates on consumers’ existing purchases if cardholders have missed two consecutive payments. Providers must then reinstate the lower initial rate if cardholders make six consecutive months of on-time payments.

In the past, card providers could keep the higher penalty interest rates — often as high as 29% — in effect permanently. Some card providers included clauses in their contracts stating that they could raise interest rates for any reason at any time. Those clauses are no longer allowed.

If banks want to boost the interest rate on new credit card purchases, they must first notify cardholders in writing at least 45 days before the rate change is scheduled to go into effect. Consumers must be allowed to cancel their accounts during this 45-day period.

The act also states that card providers must send their billing statements at least 21 days before payments are due. Before this change, card providers needed only to send their statements 14 days before payments were due.

2. Equal Credit Opportunity Act

Having access to credit, mortgage loans, auto loans, and other forms of debt is a necessity for most consumers. Imagine trying to save up enough money to buy a car or home with cash.

The Equal Credit Opportunity Act ensures that all U.S. adults are judged only on their financial health when applying for credit cards, student loans, mortgages, auto loans, and other forms of credit. The act states that financial institutions can’t deny credit to consumers based on applicants’ race, color, age, sex, religion, national origin, or marital status.

The act also forbids financial institutions from automatically rejecting applicants because they receive public assistance. This doesn’t mean that lenders and banks can’t reject your application for a home loan. It just means that they have to base their decision on financial or credit reasons.

3. Fair Debt Collection Practices Act

This act, enforced by the Federal Trade Commission, regulates the way debt collectors can pursue the money you owe and are late in paying back. The act basically establishes the rights that consumers have even when they legitimately owe money.

Under the act, debt collectors are forbidden from threatening to throw debtors in jail, using profane language, pretending to be attorneys, or threatening physical violence against consumers who owe money. They also can’t call at unreasonable times of day, such as before 8:00 a.m. or after 9:00 p.m., and are forbidden from calling debtors several times a day.

Debt collectors can call the friends, family members, and employers of debtors. But they can only do so to find these consumers’ addresses, phone numbers, and places of employment. They can’t talk to other people about how much debtors owe or what kind of debt they owe.

Under the act, consumers can, in writing, request that collection agencies and debt collectors stop contacting them, even if they do owe the money in question. After consumers submit such a letter, collection agencies can only contact them for two reasons — to tell consumers that they are stopping contact, or to report that creditors are taking an action such as filing a lawsuit.

4. Magnuson-Moss Warranty Act

You might not have heard of the Magnuson-Moss Warranty Act, but every time you’ve taken a malfunctioning computer or car back to the manufacturer for free repairs or a refund, you’ve benefited from it.

This act states that when companies offer a warranty on their products, they must provide a written warranty that is clear and easy to understand. They must also make copies of the warranty available at the locations in which they are selling their products.

It also forbids companies from creating deceptive warranties. The FTC provides this example: A warranty would be deceptive if it covered only moving parts on an electronic product that features no moving parts.

The act does not require companies to provide warranties. But it does require them to follow its provisions if they do decide to offer them.

5. Home Equity Ownership and Equity Protection Act

This regulation protects homeowners who, because of income or credit issues, can only qualify for what is known as a high-cost mortgage, more commonly known as a subprime mortgage loan.

A high-cost mortgage is one in which a lender is charging an annual percentage rate that is more than 6.5 percentage points higher than the rate that the average borrower with good credit would pay for a similar loan.

Under this act, lenders must provide written information in advance stating that consumers are getting a higher-cost loan. This notice must list the terms, costs, and fees associated with the loan.

The act also forbids lenders from charging late fees on high-cost mortgages that are larger than 4% of a consumer’s past-due mortgage payment.

This article first appeared at Wise Bread.

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