DEFINITION of Consumer Credit Protection Act of 1968
Consumer Credit Protection Act Of 1968 is Federal legislation that created disclosure requirements that must be followed by consumer lenders such as banks, credit card companies and auto-leasing firms. Pursuant to the Act, consumer lenders are required to inform consumers about annual percentage rates (as opposed to the stand-alone interest rate), special or previously hidden loan terms and the total potential costs to the borrower.
BREAKING DOWN Consumer Credit Protection Act of 1968
The consumer credit protection act of 1968 was important in that it made the terms of loans more transparent to borrowers who may not be well-versed in finance. For example, showing a borrower the annual percentage rate (APR) of interest will bring to light that if the loan stipulates a 10% interest rate (annual percentage yield (APY)) paid monthly, the borrower will actually be paying closer to 10.5% on the loan over the year.
Expansion of Consumer Law
The CCPA formed the basis for a variety of consumer protection laws that were enacted in the years since 1968. Among these laws are the Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, and the Electronic Fund Transfer Act.
One key provision of the CCPA was called Title III, which restricts the amount of earnings that may be garnished to 25% of disposable weekly income after mandatory deductions for taxes or the amount by which disposable earnings are greater than 30 times the minimum wage. This ended the practice of creditors snatching a high percentage of wages to pay outstanding debt.
The Fair Credit Reporting Act (FCRA) is the act that regulates the collection of credit information and the access to credit reports. It was passed in 1970 to ensure fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies. The Fair Credit Reporting Act is the primary legislation that governs all activities pertaining to the reporting of credit information for consumers. Two key areas of focus for the Act include the protection of credit reporting information and the standards for how credit information is recorded.
The Truth in Lending Act (TILA) was a federal law enacted in 1968 to protect consumers in their dealings with lenders and creditors. The TILA was implemented by the Federal Reserve Board through a series of regulations. The most important aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), the term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements.