Applying for a credit card can be very simple; these days, you can even fill out the form online and just wait for the card to arrive in the mail in a few days. But what happens when a credit card issuer acts in bad faith? Who provides checks and balances to ensure that consumers aren’t taken advantage of?
There are a number of different laws and government agencies that have been developed over the past several decades to provide oversight and regulation to companies that issue credit cards.
Before the federal government stepped in, consumers were plagued by hidden fees, undisclosed interest rates, and other predatory practices. But in the late 1960s, all of that changed.
Passed in 1968, TILA changed the financial landscape by mandating transparency in credit offerings. The goal is to empower you, the consumer, with the information you need to make an educated decision and protect you against unfair lending tactics. The TILA applies to most consumer credit types, excluding business and student loans.
Per the TILA:
• Lenders are required to disclose critical credit terms like the annual percentage rate and total loan costs.
• Lenders are prohibited from utilizing compensation structures that encourage steering consumers toward unfavorable loans.
• Consumers have a three-day window to cancel certain loans without penalties if the terms aren’t favorable.
The FCBA is a 1974 law designed to protect consumers from unfair credit billing practices regarding open-end credit accounts like credit cards and credit lines. Enforced by the Federal Trade Commission, it gives consumers the right to dispute billing errors, unauthorized charges, and charges where the product was not delivered.
It applies to:
• Charges not authorized by the consumer
• Charges with the wrong date or amount
• Charges for goods or services that weren't delivered
• Charges for goods or services that were received but were not as described
• Calculation errors
• Charges for which the consumer needs clarification
• Billing statements delivered to an incorrect address
Per the FCBA:
• Consumers have a 60-day window to report and challenge billing mistakes to their card lenders in writing.
• Consumers can ask their card issuer to withhold payment and help resolve merchant disputes.
• Credit issuers must respond to billing disputes within specific timeframes and cannot charge consumers interest on disputed charges during the investigation.
In 2009, Congress passed the CARD Act, which is designed to protect credit card users from abusive lending practices. Enforced by the Consumer Financial Protection Bureau (CFPB), in the first six years after its passage, the law led to an overall decrease in the cost of consumer credit, almost completely eliminated over-limit fees, and dropped the average late fee from $35 to $27. It also mandates consistency and clarity in terminology and language across credit card issuers.
Per the CARD Act:
• Issuers are limited in their ability to charge higher interest rates after a late payment and mandates greater advance warning of interest rate hikes.
• Issuers are required to inform consumers how long it will take to pay off an existing balance if they only pay the minimum each month.
• Issuers are prohibited from many forms of marketing targeted at young consumers – for example, merchandise giveaways on college campuses.
• Credit card companies are not permitted to allow an account to go over its limit and then charge the customer a fee for doing so.
• Issuers are required to mail or post online statements no later than three weeks before payment due date.
A few different government agencies and organizations provide levels of oversight to credit card issuers. Let’s break down a few of them:
The CFPB provides oversight for banks, credit unions, securities firms, payday lenders, mortgage issuers, foreclosure relief, debt collectors, and other financial companies in the U.S.
Per the CFPB website, some of the things they do include:
• Rooting out unfair, deceptive, or abusive acts or practices by writing rules, supervising companies, and enforcing the law
• Enforcing laws that outlaw discrimination in consumer finance
• Taking consumer complaints
• Enhancing financial education
• Researching the consumer experience of using financial products
• Monitoring financial markets for new risks to consumers
They have a number of different how-to guides, answers to questions like how to get a refund on something purchased with a credit card, and guidance on how to start a new complaint about a financial institution through the CFPB. As of December 2024, the CFPB has saved consumers over $21 billion in principal reductions, canceled debts, monetary compensation, and other consumer relief.
Before the CFPB was formed, the Federal Trade Commission (FTC) handled a lot of the promotion of consumer protection, as well as enforcing civil antitrust laws. Their Bureau of Consumer Protection fights unfair, deceptive, and fraudulent business practices by:
• Collecting consumer reports
• Conducting investigations
• Suing people and companies that break the law
• Developing rules to maintain a fair marketplace
• Educating consumers and businesses about their rights and responsibilities
You can fill out a report about a scammer or delinquent business on their site, as well as access guidance, guides and advice.
• The Office of the Comptroller of the Currency (OCC) is an independent bureau of the U.S. Department of the Treasury. The OCC charters, regulates, and supervises all national banks, federal savings associations, and federal branches and agencies of foreign banks. They ensure banks operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with laws and regulations.
• The Federal Reserve System is the central bank of the United States, charged with functions that promote the effective operation of the U.S. economy. This includes promoting consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
Consumers and credit card holders are, luckily, not without layers of protection in the financial industry. Thanks to multiple federal laws and the government agencies that enforce them, we have better clarity regarding the credit agreements we sign and more options available to us if the worst should happen.