Section 10.4: Credit Rights & Responsibilities

Section 10.4: Credit Rights & Responsibilities

Consumer Credit Reform Act

• Helped in disputing mistakes on credit report.

• If denied credit, you must check your report for any discrepancies.

• Once you find and report them, bureau has 30 days to investigate.

• After 30 days, they must provide information to affirm their findings, or wipe your record clean.

Truth in Lending

Consumer Credit Responsibilities

1. Lenders are trying to make a profit.

• They will not care if you are hurting for money as long as you pay them.

2. Know your debt capacity.

• Credit affects your family.

• Consumers can now make a rational decision.

• Example: You get a car loan for $19,000

• Your finance charge comes to $28,000

• 28,000 ÷ 19,000 = 1.5% APR

• APR allows you to compare the loans.

• The higher the APR, the more money over the loan amount you are paying the lender.

Self-control with Credit

1. Pay more than the minimum amount.

2. Avoid too many credit cards.

3. Pay in cash or debit.

4. Keep accurate records.

Equality in Lending Act

• Similar to Equal Opportunity Act.

• The ELA of 1975 prevents the discrimination of sex, race, age, national origin, religion, or marital status.

• What does being married have anything to do with a loan?

Truth in Lending Act

Debt Collections Practices Act

• Prohibits abusive acts by collection agencies.

• Threatening calls.

• False/misleading information.

• This ONLY applies to collection agencies, not the lenders themselves.

Fair Credit Reporting Act

Fair Credit and Billing Act

• Gives consumers the right to check their credit once a year for free.

• May request it as many times as you want for a fee.

• Requests by yourself is the exception to the frequency rule.

• If you are denied credit, you have 30 days to request a copy of your file to dispute.

• Lender must tell you which bureau supplied info.

• Gives you the right to refuse payment for an item you claim to not have purchased.

• Must contact the credit company in writing.

• They have 30 days to respond and 90 days from that to resolve it.

• During this time you cannot be charged interest.

• If you are found responsible, the interest you would have been paid will be added.

• Also, if you bought an item of poor quality, you can refuse payment.

• Prior to 1968, banks were allowed to calculate interest rate however they wanted.

• Made picking a loan difficult.

• Truth in Lending Act requires all banks to calculate credit costs the same way.

• Consists of 2 figures:

o Finance charge – TOTAL amount you pay.

o APR – (finance charge calculated as a percentage borrowed).

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