Consumer Credit Laws Explained
Consumer credit laws are a set of regulations that govern the relationship between creditors and consumers who borrow money. These laws exist to promote fair lending practices, protect consumers from abuse and discrimination in the lending process, and ensure that creditors do not engage in unfair collection practices. Both federal and state laws apply to consumer credit transactions.
In general, these laws apply to people who loan money and credit people for purchases and/or charges. Therefore, they apply to banks, credit unions, auto dealers, retail stores, and other businesses that make loans or allow customers to purchase on credit. The purpose of consumer credit laws is to provide consumers with information about credit terms before they borrow money. If creditors did not have to disclose interest rates and terms of repayment , some consumers would pay higher rates than necessary and others would not borrow at all because they could not afford to pay back the loan.
Some consumer credit and collection laws are enforced by government agencies, such as the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), but others must be enforced by individuals through civil lawsuits. Federal consumer credit laws that are enforced by the CFPB and FTC include:
In addition to the laws listed above, there are state laws that require additional disclosures and protections to consumers. Consumers living in a community property state have additional rights under debt collection laws. Federal debt collection laws do not apply in those states. Some states do not allow creditors to contact consumers directly unless the creditor is an attorney. Other state laws may limit how many times a creditor can contact consumers each week.
What to Look for in a Quality Consumer Credit Law Book
In addition to statutory information, a useful consumer credit law book may include tools and guidance, such as leading cases on each point, detailed overviews of relevant laws, and explanations of how various statutes are interconnected. For example, while bankruptcy may have only a passing reference in the Fair Debt Collection Practices Act, lenders should be sensitive to what happens if a customer files for bankruptcy. Knowing the law in advance can help better facilitate an understanding of customer loans and the risks associated with those loans. In that same regard, information about repayment, the impact of a lawsuit, repossession, and foreclosure can be extremely helpful to otherwise untrained lending professionals.
Add to this, how a creditor may implements certain action plans. For example, while many creditors and lenders are familiar with sending out standard letters, dunning letters are often a delicate thing. A comprehensive consumer credit law book may help lenders and creditors understand basic tactics, when it is appropriate to send letters, and when letters may not be appropriate. Along those lines, a thorough consumer credit law book might include a series of letter templates, or suggestions on how to inform a debtor that an account is past due, how to make requests for payment, and how to approach forbearance. Having the ability to reference original statutes, digest leading case law on an issue, and see how the issues are connected can give a retailer both an edge over the competition and a greater understanding of the general regulations that govern their industry.
Benefits of Having a Consumer Credit Law Book
For both legal professionals and consumers alike, a consumer credit law book serves as a critical resource that helps navigate the complex web of rules and regulations. One of the primary benefits is the clarity it provides. As previously mentioned, these laws are often dense and convoluted. A consumer credit law book has the advantage of breaking down sections into digestible language, making it easier to understand the implications of the laws. An additional benefit is staying up-to-date with changes in law. With how rapidly the legal landscape shifts, having access to the most recent information is invaluable. A consumer credit law book can significantly aid in this endeavor, allowing you to stay ahead of the curve. Staying organized is another benefit. As consumer credit laws have numerous initial disclosures, well-organized information can be a godsend. From readily accessible reference material to detailed explanations, being able to unify all the different aspects of this area of law under one cover will prove invaluable when questions arise.
How to Select the Best Consumer Credit Law Book for You
A few factors can help you decide on a credit law book. First, you should consider the author’s credentials. Is the author an attorney? A consumer credit advocate? Someone with a graduate degree in a relevant field? If the author has extensive professional experience, it is likely that he or she can be a trusted guide. If you have a specific issue in mind, you might prefer a book by an attorney or advocate over a general overview written by a professor.
Second, the depth of content may matter to you . You might prefer a white paper on a specific topic if you need to research one problem rather than receiving a larger overview of credit laws in the U.S. A comprehensive book on consumer credit laws is best if you want a starting point to learn about the history of consumer credit law or explain the general history of relevant laws.
Finally, getting peer reviews from other readers may help you find the best option and assess the quality of the book that you are considering. Reviews from other consumers can help you to learn more about different volumes on the market.
Consumer Credit Law Books We Recommend
Here are a few recommended books that may be helpful to you in understanding consumer credit law:
- "Credit repair: A Guide to FCRA: Fair Credit Reporting Act and FCBA: Fair Credit Billing Act" is an in-depth, yet reader-friendly guide. Written for consumer lawyers, the book effectively combines the history and basic legal theory of consumer credit scoring with detailed guidelines focused on present-day realities.
- "Consumer Credit and the American Economy (Economic Issues Series) (Hardcover)" is an extensive work of credit law reference including discussion and analysis of abusive practices by creditors, definitions of complex terms, and more.
- "Consumer Credit and the American Economy (Updated Edition)" presents the remarkable economic, social, and legal problems posed by the consumer in credit markets. It examines developments such as increased borrower risk, cutthroat competition among lenders, and the uneven distribution of financial resources.
Reading these books is a good way to prepare yourself for taking action against an entity that may have violated consumer credit laws.
The Future of Consumer Credit Laws
The future of consumer credit law is uncertain amid shifting political tides and a greatly unsettled economic environment. Experts’ predictions have for some time largely amounted to doom and gloom. But there are some bright spots one could pick out of the storm clouds to be mindful of, while staying watchful for new developments.
Among the potential positive developments in the coming years is the prospect that those challenging credit agencies may gain some traction. Mega settlements over the last few years – such as those with the three biggest agencies: TransUnion, Experian and Equifax – could give civil litigants greater leverage in making their cases, civil actions having huge monetary outcomes beyond just the mere statutory pre-litigant fines that can be assessed.
For example, after settling with the big three in 2016, TransUnion and Experian shelled out another $12 million to settle several class actions alleging they violated the Fair Credit Reporting Act (FCRA). In these price-fixing claims, there was no evidence of a serious harm, only allegations that the companies charged inflated prices by failing to promote more cost-effective alternatives. Settling the cases cost the agencies about $109 million in total.
The agencies have long been criticized for offering report alerts that are overpriced and perhaps unnecessary. Federal regulators already force the industry to keep an eye on false advertising and customer service practices surrounding the sale of consumer credit reports and other personal information .
Simultaneously, the expectation is that the industry will continue cleaning house in terms of its ability to find, use and offer increasingly detailed credit information to creditors seeking the very best people, people they can count on. Doing so may require the sale of less profitable divisions to focus on information sources and sales funnel development.
It’s also possible that a wave of new startup companies will emerge, providing innovative solutions for credit reporting and analytical engine services. This could and should drive further changes in the industry, implementing the latest technology and allowing the most solid information to be offered.
As always, however, state actions and politics will influence the sector. Some states are expected to pass sweeping credit reporting legislation, and whether or not that actually occurs and when it does so could depend on Capitol Hill.
And, of course, with the rise of online lending and mobile payments comes a myriad of other challenges. Emotional credit reporting and other significant user data may fall more and more into the wrong hands, and bi-partisan efforts to curb the crisis could prompt huge changes to the law, as might a potential economic downturn – especially one as bad as the last. There’s no predicting the future, but this market – while volatile – is always in demand.
