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Chapter 27 Your Credit and the Law. Introduction to Business2 Protecting Your Credit Rights To protect consumers the federal and state governments regulate.

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Presentation on theme: "Chapter 27 Your Credit and the Law. Introduction to Business2 Protecting Your Credit Rights To protect consumers the federal and state governments regulate."— Presentation transcript:

1 Chapter 27 Your Credit and the Law

2 Introduction to Business2 Protecting Your Credit Rights To protect consumers the federal and state governments regulate the credit industry. A law restricting the amount of interest that can be charged for credit is called a usury law.

3 Introduction to Business3 Enforcing the Laws The Federal Trade Commission (FTC) is responsible for enforcing the laws on credit. The FTC also helps consumers with credit problems such as Identity Theft.

4 Introduction to Business4 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.

5 Introduction to Business5 Truth-in-Lending Disclosure All costs of borrowing must be made known to the consumer. These costs are provided in the truth- in-lending disclosure that a creditor gives to a borrower.

6 Introduction to Business6 Truth-in-Lending Disclosure 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.

7 Introduction to Business7 Protecting Card Owners -The Truth-in-Lending Law states: If your credit card is lost or stolen and used by someone else, your payment for any unauthorized purchases is limited to $50.

8 Introduction to Business8 Equal Credit Opportunity Act The Equal Credit Opportunity Act says that a credit application can be judged only on the basis of financial responsibility.

9 Introduction to Business9 Equal Credit Opportunity Act The three reasons for denying credit are: Low income Large current debts A poor record of making payments in the past

10 Introduction to Business10 Equal Credit Opportunity Act The Equal Credit Opportunity Act requires that all credit applicants be informed of whether their application has been accepted or rejected within 30 days.

11 Introduction to Business11 Fair Credit Reporting Act When you apply for and use credit, the information goes into a file at one or more credit bureaus. A credit file includes personal, employment, and financial information.

12 Introduction to Business12 Right to Know The Fair Credit Reporting Act gives you the right to know whats in your credit file. Once a year, you are entitled to a Free Credit Report If incorrect information is found, it must be removed from your file

13 Introduction to Business13 Right to Be Notified The Fair Credit Reporting Act states that you must be notified when an investigation is being conducted on your credit record.

14 Introduction to Business14 Protecting Card Owners FCRA - not allowed to send cards to consumers who didnt request a credit card.

15 Introduction to Business15 Right to Privacy According to the FCRA, only authorized persons can see a copy of your credit report. Apply for a job Apply for credit Apply for insurance

16 Introduction to Business16 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.

17 Introduction to Business17 Notify the Creditor The first step in correcting errors is to notify the creditor in writing. If the creditor made the mistake, you dont have to pay any finance charge on the part in error.

18 Introduction to Business18 Stop Payment The Fair Credit Billing Act permits consumers to stop a credit card payment for items that are damaged or defective.

19 Introduction to Business19 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.

20 Introduction to Business20 Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA) regulates the practices of collection agents. Collection agents must identify themselves to the people whose bills theyre trying to collect.

21 Introduction to Business21 Fair Debt Collection Practices Act Collection agents cant tell others about the debt. Collection agents cant contact a person at work if the employer doesnt permit it.

22 Introduction to Business22 Fair Debt Collection Practices Act If they use the phone, collection agents cant keep calling all the time or pretend to be someone else. (8 am to 9 pm only) They can not harass or abuse, threaten violence or other criminal means to harm the physical person, reputation, or property of any person They can not use of obscene or profane language

23 Introduction to Business23 If you are not sure whether the reason for the denial is valid: Ask the creditor to explain why you were denied. Review your credit history. If you find your credit history contains errors, take steps to correct the errors. What to do if you are denied credit?

24 Introduction to Business24 Fair Debt Collection Practices Act Collection agents cant state the amount of a debt on a postcard that a neighbor or someone else might see.

25 Introduction to Business25 Graphic Organizer Consumer 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 costs and terms of credit Right to fair opportunity to obtain credit Right to know whats in your credit file Right to have billing mistakes resolved Right to be protected from collection agencies

26 Introduction to Business26 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

27 Introduction to Business27 Fast Review 3.What are the only three reasons a person can be denied credit according to the Equal Credit Opportunity Act? continued

28 Introduction to Business28 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?

29 Introduction to Business29 Repairing Credit Problems Who can help you? FIRST: Contact Creditors and explain your situation Adjust Payments

30 Introduction to Business30 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.

31 Introduction to Business31 Consolidating Debts A consolidation loan combines all your debts into one loan with lower payments.

32 Introduction to Business32 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. Because there is only one monthly payment, you might feel that the credit problem is under control and start charging new purchases.

33 Introduction to Business33 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. When bankruptcy is declared, the debtor, the creditor, and a court-appointed trustee come up with a plan to repay the debt on an installment basis.

34 Introduction to Business34 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.

35 Introduction to Business35 What to do if you are denied credit? If you think the reasons for the denial are valid: Ask the creditor if you can provide additional information Arrange alternate credit terms. Apply to another creditor whose standards may be different. Contact the CRA to see if there are problems with your Credit Report

36 Introduction to Business36 Bankruptcy Chapter 7 Complete liquidation of non-exempt assets Chapter 13 A reorganization (3-5 years) Make payments to bankruptcy court to pay down a portion of unsecured debt

37 Introduction to Business37 Credit Services Some companies will provide credit even if your credit rating is poor or if you have been denied credit in the past. They charge a fee to clean up your credit rating but theyre seldom able to restore a bad credit rating.


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