Many businesses find it convenient to offer their customers credit. If your company extends credit to consumers, you have to make sure that you are following the appropriate federal laws. Otherwise, you could find yourself in legal trouble. There may also be state laws that you have to be aware of, but these will vary from state to state. In order to make sure you have all of the right information, you should work with an attorney before you start offering credit to your customers. Here are 10 facts that you need to know regarding federal consumer credit laws:
- Use Written Notices During Co-Signing: According to the credit practices rule, you must provide a written notice to consumers before they co-sign obligations for anyone else. This rule applies to consumer credit contracts for any personal purpose except buying real estate that are offered by either finance companies or retailers.
- Don’t Include Certain Provisions: The same rule prohibits you as a creditor from including wage assignments or waivers of exemption in consumer credit contracts. This means you cannot directly take money from someone’s paycheck to settle their debt.
- Avoid Credit Discrimination: The Equal Credit Opportunity Act protects consumers from being discriminated against based on color, race, national origin, age, sex, religion or marital status. You cannot look at the outer appearance of a customer to choose whether or not you are going to extend credit to that customer.
- Consider the Usual Factors: Instead, the Equal Credit Opportunity Act is meant to ensure that you focus on the usual factors of credit, such as the applicant’s credit record and financial status. You can use financial information to choose not to extend credit to a customer.
- Take Action If a Mistake Occurs: The Fair Credit Billing Act requires that you, as a creditor, should take required actions should a customer claim that you made some sort of mistake. Billing errors normally only apply to open-ended credit.
- Familiarize Yourself With Billing Errors: In order to take the right actions, you have to know that billing errors include listing the wrong date or amount, charging for services or goods that weren’t delivered as agreed upon, making math errors, failing to send a bill to the customer’s current address and failing to post payments.
- Avoid Prohibited Actions While Collecting Debt: The Fair Debt Collection Practices Act states that anyone collecting a debt may not use violence, threaten harm, make false statements or contact the consumer between the hours of 9 p.m. and 8 a.m. These guidelines apply to personal, household and family debts.
- Provide Written Notice of Debt: You are obligated to send consumers a written notice that highlights the amount owed, the name of the creditor and the options the consumer has if he or she believes the billing is in error. You can learn more about this obligation by familiarizing yourself with the Fair Debt Collection Practices Act.
- Supply Accurate Information to Credit Reporting Agencies: According to the Fair Credit Reporting Act, you are legally required to send accurate information to credit reporting agencies, which means you are responsible for correcting partial or incorrect information. This protects consumers from having obsolete or inaccurate information show up on their credit report.
- Be Clear About Your Terms: When you extend credit to consumers, you have to clearly disclose the terms according to the Truth in Lending Act. These disclosures can include a monthly finance charge, the due date for regular payments, the date on which late fees will be applied, the annual percentage rate and the total finance charges.
Taking the right actions regarding consumer credit can save you time and money in legal fees. You have to know what your obligations and rights are as a creditor. Learn more by talking with your company attorney.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.