11-4 Consumer Credit Contracts 11-4a Discrimination in Credit Contracts Under the Equal Credit Opportunity Act (ECOA), it is unlawful to discriminate against an applicant for credit on the basis of race, color, religion, national origin, gender, marital status, or age; because all or part of the applicant's income is obtained from a public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act (CCPA) . If a credit application is refused, the lender must provide the applicant with a written explanation, such as high credit card balance or no credit history installment loans. 11-4b Subprime or Predatory Lending Subprime Lending Market is a credit market that makes loans to consumers who have bankruptcies, no credit history, low to moderate incomes, or a poor credit history. Because of the higher risk of these types of loans, these credit contracts involve lower loan amounts; higher origination costs, broker's fees, and credit insurance fees; higher interest rates; significant collateral pledges; large payment penalties; faster repayment requirements. Subprime contracts has notoriously difficult-to-read-contract. New regulations emerged that have changed and simplified contract disclosures for subprime loans. Part of this market involves lenders who take advantage of less sophisticated consumers or consumers who are desperate for funds. Title loans - loans made in exchange for title to a car or house if the borrower defaults - are sometimes called predatory loans. These loans are now highly regulated by the government. 11-4c Credit Disclosures Federal Law requires the disclosure of all interest charges, points, and fees for all types of loans and credit contracts. The law requires the disclosure of an annual percentage rate (APR) so that the consumer can see just how much the transaction costs per year and can compare alternatives. The Truth in Lending Act (TILA) provides the requirements for disclosures in credit contracts and consumer right when full disclosure is not made. When a consumer sale or contract provides for payment in more than 4 installments, its subject to the TILA. There are additional obligations of disclosure under the Fair Credit and Charge Card Disclosure Act , the Home Equity Loan Consumer Protection Act , and the Credit Card Accountability, Responsibility and Disclosure Act (CARD). The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFCPA), [also known as the Wall Street Reform and Consumer Financial Protection Act or the Consumer Financial Protection Act (CFPA)] created the Consumer Financial Protection Bureau (CFPB). Housed with the Federal Reserve, the CFPB now serves the combined roles that rh Federal Reserve and the Federal Trade Commission (FTC) played in enforcing consumer credit laws and regulations. 11-4d Controlling Credit Card Contracts Federal regulations prohibit the unsolicited distribution of credit cards to persons who have not applied for them. Credit Cards for Those Under the Age of 21 The Credit Card Accountability, Responsibility and Disclosure Act (CARD) substantially restricts the solicitation of credit card accounts form those under the age of 21.
Credit card comp have a written application in hand from those under 21 + signature of a parent, guardian, or someone over 21 with means to repay debt. The line of credit on a co-signed card for someone under 21 cannot be increased without the co- signers permission. College and universities are not restricted in their partnering with credit card companies. The CARD Act limits locations for college student credit card solicitations, requires colleges and universities to disclose their financial relationships with such credit card companies, and also requires colleges and universities to provide debt counseling for their students. Liability Limitations A cardholder is not liable for more than $50 for the unauthorized use of a credit card. To even recover the $50, the credit card issues must show that: 1. The card was an accepted card. 2. The issues gave the holder adequate notice of possible liability in such a case. 3. The issuer furnished the holder with notification mean in the event of loss or theft of the credit card. 4. The issuer provided a method by which the user of the card could be identified as the person authorized to use it. 5. Unauthorized use of the cars has occurred or might occur as a result of loss, theft, or some other event. Unauthorized Credit Card Use and the Chip As of 2016, merchants who did not require consumers to use a chip credit card would not be entitled to reimbursement from the credit card companies for any fraudulent transactions. Transfer Terms The CARD Act has changed everything from the maximum fees allowed with transfers of consumers credit to how quickly credit card companies can change the advertised terms of the transfer. Mandates => upfront disclosure of transfer fees + potential changes in the APR once the transfer is occurred. The CARD Act also places limits on how often companies can change the credit card holder's interest rate.
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