AFC Consumer Protection Laws and Identity Theft — Questions and Answers
Question 1: Under the Fair Credit Reporting Act (FCRA), how long can a Chapter 7 bankruptcy remain on a consumer's credit report?
- 10 years (Correct answer)
- 7 years
- 5 years
- Indefinitely
Correct answer: 10 years
Chapter 7 bankruptcies may remain on a credit report for up to 10 years from the filing date under the FCRA. Chapter 13 bankruptcies, where consumers repay a portion of debt, are removed after 7 years. Most other negative items (late payments, collections) are also limited to 7 years.
Question 2: A client is being harassed by a debt collector calling before 8 a.m. and after 9 p.m. Which federal law protects the client from this practice?
- Fair Debt Collection Practices Act (FDCPA) (Correct answer)
- Fair Credit Reporting Act (FCRA)
- Truth in Lending Act (TILA)
- Equal Credit Opportunity Act (ECOA)
Correct answer: Fair Debt Collection Practices Act (FDCPA)
The FDCPA prohibits third-party debt collectors from contacting consumers before 8 a.m. or after 9 p.m. in the consumer's time zone. It also bans harassment, false statements, and unfair practices. The FCRA governs credit reports, and TILA governs loan disclosures.
Question 3: A client discovers fraudulent accounts on their credit report. As their AFC counselor, what is the FIRST step you would recommend?
- Place a fraud alert or credit freeze with the credit bureaus (Correct answer)
- File a lawsuit against the creditor
- Pay the fraudulent balances to protect credit score
- Wait 7 years for the items to fall off automatically
Correct answer: Place a fraud alert or credit freeze with the credit bureaus
The first step in identity theft recovery is placing a fraud alert (free, lasts 1 year) or a security freeze (free under federal law since 2018) with all three major bureaus. This prevents new fraudulent accounts from being opened. Filing an FTC identity theft report and disputing inaccurate items follow this initial protective step.
Question 4: Under the Truth in Lending Act (TILA), what information must lenders disclose to borrowers before a loan is finalized?
- Annual percentage rate (APR), finance charges, and total payment amount (Correct answer)
- The borrower's credit score and debt-to-income ratio
- The lender's profit margin and overhead costs
- The borrower's income and asset verification details
Correct answer: Annual percentage rate (APR), finance charges, and total payment amount
TILA (Regulation Z) requires lenders to disclose the APR, total finance charges, payment schedule, and total amount repaid, enabling consumers to compare credit products accurately. It does not require disclosure of internal lender information or the borrower's own credit data.
Question 5: A client's credit card issuer has violated their rights under the FCRA by reporting inaccurate information. What right does the client have under this law?
- The right to dispute inaccurate information and have it investigated within 30 days (Correct answer)
- The right to have all negative information removed immediately
- The right to sue for $10,000 in damages without proof of harm
- The right to demand the creditor stop all collection activity
Correct answer: The right to dispute inaccurate information and have it investigated within 30 days
Under the FCRA, consumers can dispute inaccurate or incomplete information with the credit bureau, which must investigate and respond within 30 days (45 days if the dispute was triggered by a free annual credit report). If the information is inaccurate, it must be corrected or deleted.
Question 6: Which federal law prohibits creditors from discriminating against applicants based on race, color, religion, national origin, sex, marital status, or age?
- Equal Credit Opportunity Act (ECOA) (Correct answer)
- Fair Housing Act (FHA)
- Fair Debt Collection Practices Act (FDCPA)
- Gramm-Leach-Bliley Act (GLBA)
Correct answer: Equal Credit Opportunity Act (ECOA)
The ECOA (Regulation B) prohibits discrimination in any aspect of a credit transaction based on protected characteristics including race, sex, age, and marital status. The Fair Housing Act covers housing-specific discrimination, while FDCPA governs debt collectors and GLBA addresses financial privacy.
AFC Consumer Protection Laws and Identity Theft
Under the Fair Credit Reporting Act (FCRA), how long can a Chapter 7 bankruptcy remain on a consumer's credit report?