27 Chapter Your Credit and the Law

Protecting Your Credit Rights To protect consumers the federal and state governments regulate the credit industry. A law restricting the amount of interest that can be charged for credit is called a usury law. Introduction to Business

Introduction to Business Enforcing the Laws The Federal Trade Commission (FTC) is responsible for enforcing the laws on credit. The FTC also helps consumers with credit problems such as Identity Theft. Introduction to Business

Consumer Credit Protection Act To make comparing credit costs easier, Congress passed the: Consumer Credit Protection Act, also known as the Truth in Lending Law. Introduction to Business

Truth-in-Lending Disclosure All costs of borrowing must be made known to the consumer. These costs are provided in the truth-in-lending disclosure that a creditor gives to a borrower. Introduction to Business

Truth-in-Lending Disclosure The two ways that the cost of credit must be expressed are: The dollar cost of credit, or the total finance charge The annual percentage rate (APR) The truth-in-lending disclosure also states the credit terms and conditions. Introduction to Business

Protecting Card Owners -The Truth-in-Lending Law states: If your credit card is lost or stolen and used by someone else, your payment for any unauthorized purchases is limited to $50. Introduction to Business

Equal Credit Opportunity Act The Equal Credit Opportunity Act says that a credit application can be judged only on the basis of financial responsibility. Introduction to Business

Equal Credit Opportunity Act The three reasons for denying credit are: Low income Large current debts A poor record of making payments in the past Introduction to Business

Equal Credit Opportunity Act The Equal Credit Opportunity Act requires that all credit applicants be informed of whether their application has been accepted or rejected within 30 days. Introduction to Business

Fair Credit Reporting Act When you apply for and use credit, the information goes into a file at one or more credit bureaus. A credit file includes personal, employment, and financial information. Introduction to Business

Right to Know The Fair Credit Reporting Act gives you the right to know what’s in your credit file. Once a year, you are entitled to a Free Credit Report If incorrect information is found, it must be removed from your file Introduction to Business

Introduction to Business Right to Be Notified The Fair Credit Reporting Act states that you must be notified when an investigation is being conducted on your credit record. Introduction to Business

Protecting Card Owners FCRA - not allowed to send cards to consumers who didn’t request a credit card. Introduction to Business

Introduction to Business Right to Privacy According to the FCRA, only authorized persons can see a copy of your credit report. Apply for a job Apply for credit Apply for insurance Introduction to Business

Fair Credit Billing Act 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. Introduction to Business

Introduction to Business Notify the Creditor The first step in correcting errors is to notify the creditor in writing. If the creditor made the mistake, you don’t have to pay any finance charge on the part in error. Introduction to Business

Introduction to Business Stop Payment The Fair Credit Billing Act permits consumers to stop a credit card payment for items that are damaged or defective. Introduction to Business

Introduction to Business Fair Debt Collection Practices Act A collection agent is a person or business that has the job of collecting overdue bills. Before this act, collection agents could use any method they chose to collect. Introduction to Business

Introduction to Business Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA) regulates the practices of collection agents. Collection agents must identify themselves to the people whose bills they’re trying to collect. Introduction to Business

Introduction to Business Fair Debt Collection Practices Act Collection agents can’t tell others about the debt. Collection agents can’t contact a person at work if the employer doesn’t permit it. Introduction to Business

Introduction to Business Fair Debt Collection Practices Act If they use the phone, collection agents can’t keep calling all the time or pretend to be someone else. (8 am to 9 pm only) They can not harass or abuse, threaten violence or other criminal means to harm the physical person, reputation, or property of any person They can not use of obscene or profane language Introduction to Business

What to do if you are denied credit? If you are not sure whether the reason for the denial is valid: Ask the creditor to explain why you were denied. Review your credit history. If you find your credit history contains errors, take steps to correct the errors. Introduction to Business

Introduction to Business Fair Debt Collection Practices Act Collection agents can’t state the amount of a debt on a postcard that a neighbor or someone else might see. Introduction to Business

Consumer Credit Rights Graphic Organizer Graphic Organizer Consumer Credit Rights Consumer Credit Protection Act Right to know costs and terms of credit Equal Credit Opportunity Act Right to fair opportunity to obtain credit Fair Credit Reporting Act Right to know what’s in your credit file Fair Credit Billing Act Right to have billing mistakes resolved Fair Debt Collection Practices Act Right to be protected from collection agencies Introduction to Business

Introduction to Business Fast Review What does the usury law do? In what two ways must the cost of credit be expressed in a truth-in-lending disclosure? continued Introduction to Business

Introduction to Business Fast Review What are the only three reasons a person can be denied credit according to the Equal Credit Opportunity Act? continued Introduction to Business

Introduction to Business Fast Review Name the three rights the Fair Credit Reporting Act guarantees. What does the Fair Debt Collection Practices Act prevent collection agents from doing? Introduction to Business

Repairing Credit Problems Who can help you? FIRST: Contact Creditors and explain your situation Adjust Payments Introduction to Business

Introduction to Business Credit Counseling A credit counselor can help you revise your budget, contact creditors to arrange new payment plans, or help you find other sources of income. Introduction to Business

Introduction to Business Consolidating Debts A consolidation loan combines all your debts into one loan with lower payments. Introduction to Business

Introduction to Business Consolidating Debts The two problems with a consolidation loan are: There is usually a high interest rate because people who get such loans are considered poor credit risks. Because there is only one monthly payment, you might feel that the credit problem is under control and start charging new purchases. Introduction to Business

Introduction to Business Bankruptcy Bankruptcy is a legal process in which you are relieved of your debts, but your creditors can take some or all of your assets. When bankruptcy is declared, the debtor, the creditor, and a court-appointed trustee come up with a plan to repay the debt on an installment basis. Introduction to Business

Introduction to Business Bankruptcy You should avoid bankruptcy because it gives you a bad credit record. Recent changes in the law have made it harder to declare bankruptcy. Introduction to Business

What to do if you are denied credit? If you think the reasons for the denial are valid: Ask the creditor if you can provide additional information Arrange alternate credit terms. Apply to another creditor whose standards may be different. Contact the CRA to see if there are problems with your Credit Report Introduction to Business

Introduction to Business Bankruptcy Chapter 7 Complete liquidation of non-exempt assets Chapter 13 A reorganization (3-5 years) Make payments to bankruptcy court to pay down a portion of unsecured debt Introduction to Business

Introduction to Business Credit Services Some companies will provide credit even if your credit rating is poor or if you have been denied credit in the past. They charge a fee to “clean up” your credit rating but they’re seldom able to restore a bad credit rating. Introduction to Business