A Breakdown of the Consumer Credit Protection Acts

All consumer credit businesses must be fully aware of the Federal Laws and consumer credit protection acts in place. These laws cover not only the creditors, but also provide protection to the debtors.  All companies must abide by all consumer laws. Keep in mind:  These laws are not a substitute for a legal counsel.

According to the Truth in Lending Act (TILA), effective in 1969, the terms of credit must to be made clear to clients.  Additionally, all terms and conditions should be set forth and agreed to mutually by both the engaging parties. All specific provisions of the act are enforced by Regulation Z. Regulation Z specifies who and what is covered under this regulation, it also gives specific disclosure requirements that must be met for open end and closed end credit transactions and credit accounts.

Companies must abide by the laws at all, even when promoting credit cards or other credit related facilities by media or mail.  The company must disclose all requirements as laid by in Truth in Lending and by Regulation Z. Under this act any person who regularly extends credit for domestic or family purposes is covered, if the finance charge or payments are in more than four instalments. Remember that an ad is also covered by the act, all ads must meet the criteria set forth by the act itself.

Credit cards, charge cards and open-ended consumer credit transactions are covered by open ended credit disclosures. You will be required to disclose important factors of the process to the consumer before the actual agreement has been signed. Once the customer shows interest then a complete disclosure of all the terms and conditions and the laws applicable have to be made within a certain time frame. Sometimes, disclosures on monthly billing statements and on subsequent statements are also required on opened transactions. For example a cardholder will need to give at least 15 days prior notice to the consumer if there is a change in terms. They must make the changes very clear and everything must be in writing.

There are also miscellaneous provisions under which a credit card cannot be issued unless there has been an oral or written application made for it by the customer. Although the companies can send written applications for new cards or renewal application to the existing customers on periodic basis or as the need arises. Another part of the act is that a customer is only liable to pay a maximum of $50 for any unauthorized use of the credit card before it is reported lost or stolen by the consumer.

Regulation Z also carefully regulated the closed end credit disclosures. Under the law, all such disclosures are to be made very clearly and in writing.  The consumer can read the items in writing, before closing any loan agreement. Also the creditors are liable to make additional disclosures and also comply with prohibitions against some practices on closed end home equity loans. They must meet triggers, triggers are thresholds for maximum allowable fees, relating to APR or points and fees.

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