Credit Laws

State and Federal Regulation of Credit

To protect consumers, both federal and state governments control and regulate the credit industry.
A law restricting the amount of interest that can be charged for credit is called a usury law.
The Federal Trade Commission (FTC) is the U.S. agency that enforces credit laws and helps consumers with credit problems and complaints.

Federal Credit Laws

A number of federal laws help inform consumers about the costs of credit and set rules concerning the credit application process, credit history information, privacy, and debt collection.
To make comparing credit costs easier, Congress passed the Consumer Credit Protection Act.
- The Consumer Credit Protection Act (also called the Truth in Lending Act) is a federal law that requires creditors to inform consumers about the costs and terms of credit.
- The law states that advertisements for credit must communicate a fair and reasonably comprehensive indication of the nature and true cost of the credit.
The Equal Credit Opportunity Act is a federal law stating that credit applications can be judged only on the basis of financial responsibility.
- No person can be denied credit on the basis of marital status, gender, age, ethnicity, religion, or receipt of public assistance.
- A person who is denied credit must be given a written statement listing reasons for the denial.
Each consumer with credit has a credit report.
- A credit report, also considered a credit history, is a record of an individual’s past borrowing and repayments.
  - It includes information about late payments and bankruptcy.
The Fair Credit Reporting Act is a federal law that allows individuals to examine and correct information used by credit reporting agencies.
In the United States, most credit report information is collected and kept by three credit bureaus: Experian®, Equifax®, and TransUnion®
The Fair Credit Billing Act is a federal law that requires creditors to correct billing mistakes that are brought to their attention.
- The Fair Credit Billing Act also permits consumers to stop a credit payment for an item that is damaged or defective.
The Fair Debt Collection Practices Act (FDCPA) is a federal law that serves to regulate collection agencies.
- The purpose of the FDCPA is to prevent deception, harassment, and other unfair debt collection practices by collection agents.
A collection agent is a person or business that collects payments for overdue bills.

Solving Credit Issues

Preventing Credit Fraud

Credit card theft, the misuse of credit information, and identity theft are increasing problems.
The first step a consumer should take when he or she gets a credit or ATM card is to write down the card issuer’s phone number and other contact information.
A stolen credit card can lead to identity theft.
- Identity theft occurs when someone steals another person’s financial information with the intention of committing fraud under that person’s identity.
Consumers can protect their identities by being careful with the way they handle their credit and ATM cards, checks, and Social Security number.

Repairing Credit Problems

Many consumers charge too many of their purchases and later realize that they cannot afford the monthly payments.
To fix the problem, they have a few options to consider.
- The first thing a consumer should do is contact the creditor.
  - Consumers can often work out a new payment plan to lower payments.
Consumers who are unable to work out their credit problems should talk to a credit counselor.
- A credit counselor helps people work out a plan for getting out of debt.
- There are several different types of credit counseling services.
  - Many credit counseling services charge a fee to “clean up” a poor credit report.
Another possible solution is a consolidation loan.
- A consolidation loan combines a consumer’s debts into one loan with lower payments
The last resort is to declare bankruptcy.
- Bankruptcy is a legal process in which a borrower is relieved of debts after showing an inability to pay.
- People should avoid bankruptcy because it gives a debtor a bad credit record that can last for 10 years.

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Chapter 27: Credit and the Law

Credit Laws

State and Federal Regulation of Credit

To protect consumers, both federal and state governments control and regulate the credit industry.
A law restricting the amount of interest that can be charged for credit is called a usury law.
The Federal Trade Commission (FTC) is the U.S. agency that enforces credit laws and helps consumers with credit problems and complaints.

Federal Credit Laws

A number of federal laws help inform consumers about the costs of credit and set rules concerning the credit application process, credit history information, privacy, and debt collection.
To make comparing credit costs easier, Congress passed the Consumer Credit Protection Act.
- The Consumer Credit Protection Act (also called the Truth in Lending Act) is a federal law that requires creditors to inform consumers about the costs and terms of credit.
- The law states that advertisements for credit must communicate a fair and reasonably comprehensive indication of the nature and true cost of the credit.
The Equal Credit Opportunity Act is a federal law stating that credit applications can be judged only on the basis of financial responsibility.
- No person can be denied credit on the basis of marital status, gender, age, ethnicity, religion, or receipt of public assistance.
- A person who is denied credit must be given a written statement listing reasons for the denial.
Each consumer with credit has a credit report.
- A credit report, also considered a credit history, is a record of an individual’s past borrowing and repayments.
  - It includes information about late payments and bankruptcy.
The Fair Credit Reporting Act is a federal law that allows individuals to examine and correct information used by credit reporting agencies.
In the United States, most credit report information is collected and kept by three credit bureaus: Experian®, Equifax®, and TransUnion®
The Fair Credit Billing Act is a federal law that requires creditors to correct billing mistakes that are brought to their attention.
- The Fair Credit Billing Act also permits consumers to stop a credit payment for an item that is damaged or defective.
The Fair Debt Collection Practices Act (FDCPA) is a federal law that serves to regulate collection agencies.
- The purpose of the FDCPA is to prevent deception, harassment, and other unfair debt collection practices by collection agents.
A collection agent is a person or business that collects payments for overdue bills.

Solving Credit Issues

Preventing Credit Fraud

Credit card theft, the misuse of credit information, and identity theft are increasing problems.
The first step a consumer should take when he or she gets a credit or ATM card is to write down the card issuer’s phone number and other contact information.
A stolen credit card can lead to identity theft.
- Identity theft occurs when someone steals another person’s financial information with the intention of committing fraud under that person’s identity.
Consumers can protect their identities by being careful with the way they handle their credit and ATM cards, checks, and Social Security number.

Repairing Credit Problems

Many consumers charge too many of their purchases and later realize that they cannot afford the monthly payments.
To fix the problem, they have a few options to consider.
- The first thing a consumer should do is contact the creditor.
  - Consumers can often work out a new payment plan to lower payments.
Consumers who are unable to work out their credit problems should talk to a credit counselor.
- A credit counselor helps people work out a plan for getting out of debt.
- There are several different types of credit counseling services.
  - Many credit counseling services charge a fee to “clean up” a poor credit report.
Another possible solution is a consolidation loan.
- A consolidation loan combines a consumer’s debts into one loan with lower payments
The last resort is to declare bankruptcy.
- Bankruptcy is a legal process in which a borrower is relieved of debts after showing an inability to pay.
- People should avoid bankruptcy because it gives a debtor a bad credit record that can last for 10 years.