Chapter 27
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.
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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.
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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.
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Truth-in-Lending Disclosure
All costs of borrowing must be made
known to the consumer.
These costs are provided in the truthin-lending disclosure that a creditor
gives to a borrower.
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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.
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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.
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Equal Credit Opportunity Act
The Equal Credit Opportunity Act
says that a credit application can be
judged only on the basis of financial
responsibility.
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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
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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.
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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
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Protecting Card Owners
FCRA - not allowed to send cards to
consumers who didn’t request a credit
card.
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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
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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.
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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.
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Stop Payment
The Fair Credit Billing Act permits
consumers to stop a credit card
payment for items that are damaged or
defective.
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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.
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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.
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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.
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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
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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.
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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.
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Graphic Organizer
GraphicCredit
Organizer
Consumer
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
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Repairing Credit Problems
Who can help you?
FIRST:

Contact Creditors and explain your
situation
 Adjust Payments
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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.
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Consolidating Debts
A consolidation loan combines all
your debts into one loan with lower
payments.
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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.
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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.
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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.
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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
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