Numerous state and federal laws apply to credit transactions with consumers. If your company extends credit to consumers, you must comply with these laws. Below, you'll find a list of the main federal laws.
Check with your attorney regarding these laws prior to extending credit to consumers, and about any state laws that may apply, such as usury laws. Usury laws set limits on the rate of interest that you may be able to charge a consumer. Some also limit late charges and other fees.
- The Credit Practices Rule - The Credit Practices Rule applies to consumer credit contracts offered by finance companies and retailers for any personal purpose except to buy real estate. It prohibits creditors from including certain provisions (such as wage assignments and waivers of exemption) in consumer credit contracts, and requires a written notice to consumers before they co-sign obligations for others.
- The Equal Credit Opportunity Act - The Equal Credit Opportunity Act prohibits credit discrimination on the basis of race, color, religion, national origin, age, sex, or marital status. A business considering whether to extend credit is free to consider the usual factors in granting credit, like the applicant's financial status and credit record.
- The Fair Credit Billing Act. The Fair Credit Billing Act generally applies only to billing errors related to "open-end" credit. Examples of billing errors are charges that list the wrong date or amount, charges for goods or services that were not delivered as agreed, math errors, failure to post payments, failure to send bills to a customer's current address, and charges for which the customer has requested an explanation. The act requires a creditor to take certain actions when a customer claims that the creditor made a mistake in billing them.
- The Fair Credit Reporting Act - The Fair Credit Reporting Act protects consumers by requiring that inaccurate or obsolete credit report information be removed from a credit report. It applies to credit reporting agencies, and to businesses that supply information to credit reporting agencies and those that use consumer reports. Business owners are responsible for correcting inaccurate or incomplete information in a credit report.
- The Fair Debt Collection Practices Act - The Fair Debt Collection Practices Act protects consumers by prohibiting debt collectors from taking certain actions when collecting a debt. Personal, family, and household debts are covered under the act. Prohibited actions include using threats of violence or harm, using false statements, or contacting the consumer before 8:00 a. m. or after 9:00 p. m. The debt collector must also send the consumer a written notice containing the amount of the debt, the name of the creditor, and what the consumer can do if he or she believes he or she does not owe the money.
- The Truth in Lending Act - The Truth in Lending Act deals with the disclosure of information regarding the credit transaction. It requires anyone who regularly extends credit to consumers for personal, family, or household purposes to make certain disclosures regarding those credit terms. The disclosures include such things as the monthly finance charge, the annual percentage rate, when payments are due, when late charges are due, and the total finance charges. The disclosure requirements are very specific, and vary depending whether the credit is "closed" credit (a single or one-time extension of credit) or "open" credit (where additional extensions of credit are anticipated).
Speak to a Lawyer about Federal Credit Laws
If you have questions about federal credit laws, consider speaking to a lawyer. An experienced business and commercial law attorney can help you decipher the laws and what requirements you will have to comply with.
You can also find information on consumer laws on the Federal Trade Commission's homepage and the U.S. government's Consumer Protection portal.