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Numerous state and federal laws apply to credit transactions with consumers.
If your company extends credit to consumers, you must comply with these laws.
Here is a list of the main federal laws. Check with your attorney regarding
these laws prior to extending credit to consumers, and regarding state laws that
may apply, such as usury laws. Usury laws set limits on the rate of interest
that you may be able to charge a consumer. Some also limit late charges and
other fees. You can also find information on consumer laws on the Federal Trade
Commission's homepage at
http://www.ftc.gov/, and the
U.S. Consumer Gateway's homepage at
http://www.consumer.gov/.
- THE CREDIT PRACTICES RULE. The Credit Practices Rule
applies to consumer credit contracts offered by finance companies and retailers
for any personal purpose except to buy real estate. It prohibits creditors from
including certain provisions (such as wage assignments and waivers of exemption)
in consumer credit contracts, and requires a written notice to consumers before
they co-sign obligations for others.
- THE EQUAL CREDIT OPPORTUNITY ACT. The Equal Credit
Opportunity Act prohibits credit discrimination on the basis of race, color,
religion, national origin, age, sex, or marital status. A business considering
whether to extend credit is free to consider the usual factors in granting
credit, like the applicant's financial status and credit record.
- THE FAIR CREDIT BILLING ACT. The Fair Credit Billing Act
generally applies only to billing errors related to "open-end" credit. Examples
of billing errors are charges that list the wrong date or amount, charges for
goods or services that were not delivered as agreed, math errors, failure to
post payments, failure to send bills to a customer's current address, and
charges for which the customer has requested an explanation. The act requires a
creditor to take certain actions when a customer claims that the creditor made a
mistake in billing them.
- THE FAIR CREDIT REPORTING ACT. The Fair Credit Reporting
Act protects consumers by requiring that inaccurate or obsolete credit report
information be removed from a credit report. It applies to credit reporting
agencies, and to businesses that supply information to credit reporting agencies
and those that use consumer reports. Business owners are responsible for
correcting inaccurate or incomplete information in a credit report.
- THE FAIR DEBT COLLECTION PRACTICES ACT. The Fair Debt
Collection Practices Act protects consumers by prohibiting debt collectors from
taking certain actions when collecting a debt. Personal, family, and household
debts are covered under the act. Prohibited actions include using threats of
violence or harm, using false statements, or contacting the consumer before 8:00
a. m. or after 9:00 p. m. The debt collector must also send the consumer a
written notice containing the amount of the debt, the name of the creditor, and
what the consumer can do if he or she believes he or she does not owe the money.
- THE TRUTH IN LENDING ACT. The Truth in Lending Act deals
with the disclosure of information regarding the credit transaction. It requires
anyone who regularly extends credit to consumers for personal, family, or
household purposes to make certain disclosures regarding those credit terms. The
disclosures include such things as the monthly finance charge, the annual
percentage rate, when payments are due, when late charges are due, and the total
finance charges. The disclosure requirements are very specific, and vary
depending whether the credit is "closed" credit (a single or one-time extension
of credit) or "open" credit (where additional extensions of credit are
anticipated).
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