Post on 19-Jan-2016
transcript
Chapter 27Your Credit and the Law
pp. 434-447
Learning Targets
1. Explain how government protects credit rights.
2. Name federal laws that protect consumers.
3. Identify consumers’ credit rights.
4. Describe how to handle credit problems.
Why It’s Important
To maintain a good credit rating you have specific rights and protections under the law.
Protecting Your Credit Rights
To protect consumers, the 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.
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.
Truth-in-Lending Disclosure
All costs of borrowing must be made known to the consumer.
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.
Truth in Lending
A credit advertisement must tell the number of payments, the amount, and the period of payments.
If your credit card is lost or stolen and used by someone else, your payment for any unauthorized purchases is limited to $50.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act says that a credit application can be judged only on the basis of financial responsibility.
Cannot be based on: Marital Status Gender Race Religion
Equal Credit Opportunity Act
The ONLY three reasons for denying credit are: Low income Large current debts A poor record of making payments in the past
All credit applicants be informed of whether their application has been accepted or rejected within 30 days.
Fair Credit Reporting Act
When you apply for and use credit, the information goes into a file at one or more credit bureaus. Experian Equifax Trans Union
A credit file includes personal, employment, and financial information.
Right to Know
• The Fair Credit Reporting Act gives you the right to know what’s in your credit file.
If incorrect information is found, it must be removed from your file after the situation is examined. Must request the item be removed in writing.
Right to Privacy
According to the law, only authorized persons can see a copy of your credit report.
Corporations also get credit ratings. Standard & Poor’s assigns ratings to corporations based on several factors. A company’s market position and how it will grow in the near future are considerations.
continued
Financial Flexibility
The financial situation of a corporation is also important. Finally, Standard & Poor’s considers the risk associated with the company’s industry. Technology, for example, has a high degree of risk.
continued
Financial Flexibility
Why do you think technology companies are considered risky?
Analyze
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.
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 amount in error.
The Fair Credit Billing Act permits consumers to stop a credit card payment for items that are damaged or defective.
Stop Payment
The Fair Credit Billing Act permits consumers to stop a credit card payment for items that are damaged or defective.
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.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) regulates the practices of collection agents. Must identify themselves to the people
whose bills they’re trying to collect. Can’t tell others about the debt. Can’t contact a person at work if the
employer doesn’t permit it or if the customer asks to be called at another number.
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.
Collection agents can’t state the amount of a debt on a postcard that a neighbor or someone else might see.
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
Making an Ethical Decision
1. Does a credit card company have the right to call customers whose payment is overdue?
2. How does the Fair Debt Collection Practices Act protect consumers?
continued
Making an Ethical Decision
3. Is a credit card company that uses recorded messages rather than live callers to collect late payments following the spirit of the law? Why or why not?
Enforcing the Laws
The Federal Trade Commission (FTC) is responsible for enforcing the laws on credit.
The FTC also helps consumers with credit problems.
Enforcing the Laws
On the state level, you can contact your state banking department about credit problems.
Enforcing the Laws
A consumer protection division of your state attorney general’s office deals with complaints that other government agencies might not handle.
Fast Review
1. What does the usury law do?
2. In what two ways must the cost of credit be expressed in a truth-in-lending disclosure?
continued
Fast Review
3. What are the only three reasons a person can be denied credit according to the Equal Credit Opportunity Act?
continued
Fast Review
4. Name the three rights the Fair Credit Reporting Act guarantees.
5. What does the Fair Debt Collection Practices Act prevent collection agents from doing?
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.
Consolidating Debts
A consolidation loan combines all your debts into one loan with lower payments.
continued
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.
Consolidating Debts
Because there is only one monthly payment, you might feel that the credit problem is under control and start charging new purchases
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.
Bankruptcy
When bankruptcy is declared for reorganization purposes, the debtor, the creditor, and a court-appointed trustee come up with a plan to repay the debt on an installment basis.
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.
Credit Services
Some companies will provide credit even if your credit rating is poor or if you have been denied credit in the past.
Credit Services
Some companies charge a fee to “clean up” your credit rating but they’re seldom able to restore a bad credit rating.
Credit Services
If you need a credit counselor, you can check with your Better Business Bureau or Chamber of Commerce to recommend one to you.
Fast Review
1. What are the two problems with a consolidation loan?
2. What effect does declaring bankruptcy have?
How might identity theft affect your credit history?
What should you do if your debit card is lost or stolen?
continued
If someone steals your credit card, by federal law, how much are you responsible to pay?
continued
How can you make sure all online transactions are secure?
Key Words
usury lawConsumer Credit Protection Acttruth-in-lending disclosureEqual Credit Opportunity ActFair Credit Reporting ActFair Credit Billing Act
continued
Key Words
collection agentFair Debt Collection Practices Actcredit counselorconsolidation loanbankruptcy
pp. 434-447
End ofChapter 27Your Credit and the Law