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Consumer Credit: Debtor and Creditor Laws
Credit allows people to promise to pay in the future in order to buy or borrow in the present. Credit is vital to our commerce system and is used every day by businesses and consumers. An understanding of the law governing credit is vital to protect your own interests, whether you are the creditor, a business owner, an entrepreneur, or a lending agency. Contact an attorney with Fallon, Myers & Marshall, LLP in Warrenton, Virginia, for help with all of your debtor and creditor law questions.
Consumer Credit Laws
Many credit transactions are made through the use of credit cards issued through banks or other financial institutions. However, there are still many business owners who extend credit or provide financing directly to consumers. If a business offers credit, it must comply with the relevant state or federal laws and regulations. The laws are intended to protect consumers and provide guidelines that businesses and credit institutions must follow. This overview will outline the relevant federal statutes. Many state statutes in the credit area are beginning to mirror the federal statutes.
The Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. Under the ECOA a lender can consider legitimate factors such as future earnings and credit records when making a credit decision.
Commercial lenders have certain responsibilities under the ECOA. First, the lender is required to notify credit applicants in writing of any adverse credit action taken. The applicants must be informed in this writing of their right to a statement of reasons for any adverse action. Applicants must request this statement within 60 days of notification of the adverse action. Second, a credit application must be acted upon within 30 days of the application's receipt by the commercial lender. Finally, the ECOA has detailed record-retention requirements for lenders.
The Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act is a federal consumer protection law that regulates the disclosure of consumer credit reports by credit reporting agencies, also known as credit bureaus. It requires credit agencies to investigate disputed items in credit reports and establishes procedures for correcting mistakes in a credit record. The Act is intended to protect consumers from having their credit ruined by incomplete or misleading credit report information.
The Act gives a consumer the right to view his credit report for no charge from each credit agency once per year and also whenever there has been a rejection of a credit application based on information in the report, if requested within the required statutory time frame from the date of notice of the adverse action.
If a consumer views his file and notices an inaccuracy, he or she can ask the credit agency to correct or delete the inaccurate portion. If the credit agency refuses, the consumer may write a statement describing his own perspective regarding the inaccuracy. This statement or a summary of it will then become a part of future credit reports.
In addition, the FCRA regulates and imposes certain duties on furnishers of consumer credit information to credit bureaus and on subsequent users of the information in credit reports.
The Truth-in-Lending Act (TILA)
The Truth-in-Lending Act is a federal law that requires lenders to provide certain information so consumers can compare the terms of various loans. The information to be disclosed is detailed and highly regulated. TILA also regulates how a lender can advertise consumer credit.
The Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act is a federal law that addresses abusive debt collection practices and promotes openness and honesty in the industry. The FDCPA outlaws debtor harassment and regulates third-party collectors. These include collection agencies and lawyers who regularly take legal action to collect overdue bills. It should be noted that the original creditors are not regulated by the Act, except in certain narrow circumstances. Original creditors are more directly regulated by other laws.
The Fair Credit Billing Act (FCBA)
The Fair Credit Billing Act, part of TILA, is a federal law granting consumer borrowers the right to question disputed open-end credit plan bills from creditors. Under the Act, a borrower must notify the creditor of the error within 60 days after the creditor transmitted the disputed bill. Within 90 days, the creditor either must correct the bill or, after conducting a reasonable investigation, notify the consumer why the bill is correct and offer supporting evidence.
Conclusion
This article is simply a brief overview of the relevant federal law. A consumer, business owner, or credit agency should also be aware of state and common law that affects credit and debt collection. Contact an attorney with Fallon, Myers & Marshall, LLP in Warrenton, Virginia, for help with all of your debtor and creditor law questions.
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