Credit and The Law

1. Credit and The Law Why is it important?

2. Key Words • Usury Law • Consumer Credit Protection Act • Truth-in-Lending Disclosure • Equal Credit Opportunity Act • Fair Credit Reporting Act • Fair Credit Billing Act • Collection Agent • Fair Debt Collection Practices Act • Credit Counselor • Consolation Loan • Bankruptcy

3. Protecting Your Rights • Both Federal and State governments control and regulate the credit industry. • Most states have a set maximum on the interest rates that may be charged for certain types of credit • Usury Law- law restricting the amount of interest that can be charged for credit. • Federal laws have been established to help inform consumers about the cost of credit, set rules and regulations concerning the credit application process, credit history information, privacy, and debt collection.

4. Consumer Credit Protection Act • Passed by congress to make comparing credit costs easier. • This is also known as the Truth in Lending Law • It requires creditors to inform consumers about the costs and terms f credit and protects consumers if their credit cards are lost or stolen.

5. Truth in Lending Disclosure This disclosure is the most important part of the protection act!!! It requires that all costs of borrowing be made known to the consumer. **Provides the costs that a creditor gives to a borrower. There are 2! *One is the dollar cost of credit, or the total finance charge. *The other is the annual percentage rate (APR) This disclosure shows the total finance charge so the consumer can determine if credit is actually worth while.

6. Truth in lending, cont… • Advertising Credit: The truth in lending act also requires that a credit advertisement must tell the number of payments, the amount, the period of payments if the amount of the down payment is given. • Example: if the ad offers credit at $10.00 down and $2.00 per week it must tell the number of weeks

7. FAIR CREDIT REPORTING ACT • For these and other reasons, the Fair credit reporting act, was passed! • This act gives you the “Right to Know” what is on your credit file. • If incorrect information is on your credit file after the situation is examined. If there is a disagreement b/w you and a company, you have the right to have your version of the situation placed in your file.

8. Truth in Lending, Cont…. • Protecting Card Owners: the law protects credit card consumers if your card is lost or stolen and is used by someone els, your payment for any unauthorized purchases is limited to $50.00. • Also, credit card companies aren’t allowed to send cards to consumers who didn’t request a credit card.

9. Equal Credit Opportunity Act • When you apply for credit there is certain information that you must give . This information is used to determine whether you/the person is good credit risk or not. • The Equal Credit Opportunity Act says that the application can be judged only on the basis of financial responsibility. No person can be denied credit on the basis of gender, age, ethnicity, or religion.

10. Equal opportunity Act, Cont… • It allows only three reasons for denying credit: • 1) Low Income • 2) Large Current Debts • 3) A poor record of making payments in the past. It also requires that all credit applicants be informed fo whether their application has been acce3pted or rejected within 30 days. Any person denied credit must be given a written statement listing the reasons why!

11. FAIR CREDIT REPORTING ACT • When you apply for and use credit, the information goes into a file at one or more credit bureaus. Lenders rely heavily on these credit reports before supplying you the debtor with credit! • A credit file contains personal, employment, and financial information. In the past there was a concern for accuracy of credit file information. Inaccurate or false information was often included in a file.

12. FAIR CREDIT REPORTING ACT, Continued… • Right to be notified!!! • The act also states that you have the right to be notified when an investigation is being conducted on your credit record. • If you are denied insurance, or a job because of a credit report, you must be given the name and address of the credit bureau that provided the report.

13. FAIR CREDIT REPORTING ACT, Continued… • RIGHT TO PRIVACY**** The privacy of the information in your credit file is impt. • ***According to the law, only authorized persons can see a copy of your credit report. People can legally obtain your credit report when you apply for additional credit, a job, or insurance.

14. FAIR CREDIT BILLING ACT • Every month millions receive their credit card bills / statements. Most of the time they are correct, but sometimes there is a billing error! • ** The FAIR CREDIT BILLING ACT requires creditors to correct billing mistakes brought to their attention. The law also requires that consumers be informed of the steps they need to take to get an error corrected.

15. FAIR CREDIT BILLING ACT, Cont… ***NOTIFY THE CREDITOR*** The first step in correcting the problem is to notify the creditor in writing. *The letter must include: your name, account number, an explanation of the error, and the amount of the error. If the mistake was made by the creditor you do not have to pay, however if there was not an error you may have late fees!

16. FAIR CREDIT BILLING ACT, Cont… ***STOP PAYMENT*** The bill permits consumers to stop a credit card payment for items that are damaged or defective. Before stop payment you must try to return the product! A creditor that fails to follow the rules will automatically give up the amount owed on the item in question and any finance chare on it up to a combined total of $50

17. FAIR DEBT COLLECTION PRACTICES ACT ***Collection Agent-is a person or business that has the job of collecting overdue bills. This agent might contract consumers who get behind in their credit payments. At one time an agent could use threats or force to make you pay bills, however this is now illegal due to the FAIR BEBT COLLECTION PRACTICES ACT (FDCPA)

18. FDCPA • Protects consumers from collection agents in several ways. • 1st – collection agents must identify themselves to the people whose bills they’re trying to collect. • 2nd- they can not tell others about the debt (would be a violation of the privacy) • 3rd- They can’t contact the person at work if the employer doesn’t permit it. • 4th- if they use a phone they can’t keep calling or pretend to be someone else • 5th- They can’t state the amount of a debt on a postcard that a neighbor or someone else might see.

19. ENFORCING THE LAW • FEDERAL TRADE COMMISSION (FTC)- in addition to protecting competition, the FTC is responsible for enforcing the laws on credit. The FTC also helps consumers with credit problems. It handles complaints about being denied credit unfairly, being overcharged on a bill, or being bothered by collection agents. Several other federal gov’t. agencies deal with specific credit matters.

20. ENFORCING THE LAWFTC continued… • On the state level, you can contact your state banking department about credit problems. A consumer protection division of your state attorney general’s office deals with complaints that other government agencies might not handle. Many city and local gov’t. also have consumer credit protection agencies.

21. ASSIGNMENT… • What does the usury law do? • In what two ways must he costs of credit be expressed in a truth-in-lending disclosure? • What are the only three reasons a person can be denied credit according to the Equal Credit Opportunity Act? • Name the three rights the Fair Credit Reporting Act Guarantees. • What does the Fair Debt Collection Practices Act prevent collection agents from doing?

22. Handling your credit problems • Credit Counseling- help consumers with their credit problems. They can help you revise your budget, contract creditors to arrange new payment plans, or help you find other sources of income. • Consolidation Loan-combines all your debts into one loan with lower payments

23. BANKRUPTCY • The LAST RESORT!!! • This is a legal process in which you’re relieved of your debts, buy your creditors can take some or all of your assets! LIKE YOUR CAR!!!