Chapter 27

Your Credit and the Law

Introduction to Business 2

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 3

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 4

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 5

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 6

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 7

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 8

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 9

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 11

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 12

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 aFree Credit Report

If incorrect information is found, it must be removed from your file

Introduction to Business 14

Protecting Card Owners

FCRA - not allowed to send cards to consumers who didn’t request a credit card.

Introduction to Business 15

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 16

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 17

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 18

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 19

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 20

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 21

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 22

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 23

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.

What to do if you are denied credit?

Introduction to Business 24

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 25

Graphic OrganizerConsumer Credit Rights

Graphic Organizer

Consumer Credit Protection Act

Equal Credit Opportunity Act

Fair Credit Reporting Act

Fair Credit Billing Act

Fair Debt Collection Practices Act

Right to know costsand terms of credit

Right to fair opportunityto obtain credit

Right to knowwhat’s in your credit file

Right to have billingmistakes resolved

Right to be protectedfrom collection agencies

Introduction to Business 29

Repairing Credit Problems

Who can help you?FIRST: Contact Creditors and explain your

situation Adjust Payments

Introduction to Business 30

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 31

Consolidating Debts

A consolidation loan combines all your debts into one loan with lower payments.

Introduction to Business 32

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 33

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 34

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 35

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