Practice Consumer Law

Costly Credit Arrangements

Truth in Lending. To prevent credit abuses, Congress passed the Truth in Lending Act. This law requires creditors to give you certain basic information about the cost of buying on credit. The creditor must tell you – in writing and before you sign a contract

– the finance charge and the annual percentage rate. The finance charge is the total amount you pay to use the credit, including interest charges and any other fees. The APR is the percentage cost of credit on a yearly basis.

The law requires creditors to give you special information about variable–rate loans if you are being offered this plan. Remember that with these plans, your payments may increase over time.

The law also requires that consumers be given a copy of the disclosure form containing the credit information. They must also be told the rules and charges for any late payments. Violators can be subject to both civil and criminal penalties, and consumers who sue creditors under this act may recover damages, court costs, and attorney’s fees.

Using Credit

•Credit costs money. Don’t buy things you don’t need or want. Resist high–pressure safes techniques.

•Determine how much debt you can handle.

•Comparison shop for credit. If you are suspicious about a lender, check to see if the lender is licensed and whether complaints have been filed.

•Before making a credit purchase, read and understand the entire contract. Don’t sign contracts with blank spaces.

•If a contract calls for a large final payment, be sure you can afford it.

•Once you’ve signed a credit agreement, keep a copy in a safe place. Keep receipts for each payment.

Find the equivalents of the following words and expressions in the text.

Стать жертвой, ростовщик, погашение кредита один раз полной суммой; условие ускоренного платежа по ссуде; боль- шие выплаты; объединение счетов; вычесть выплаты из еже-

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месячных взносов; перед расплатой с кредиторами; злоупот- ребления в вопросах кредитования; стоимость всех элементов кредита; условия плавающей процентной ставки; условия оп- латы и дополнительные издержки при задержках с выплатами взносов; нарушитель; не поддаваться на уговоры продавцов.

Answer the questions:

1.How can consumers fall prey to loan sharking. Who are loan sharks?

2.Are usurious loans illegal under state laws?

3.What are balloon payments? Why should consumers carefully consider any agreement that calls for a large final payment?

4.What is the acceleration clause and why should consumers avoid it in financing agreements?

5.Why should you also beware of bill consolidation?

6.What is done to prevent credit abuses? What does the Truth in Lending Act require creditors to do?

7.Are there such (or similar) laws in Russia?

8.You’ve read some advice concerning credit. Which piece do you find most useful? Why?

9.Where can consumers go to comparison shop for a loan?

Match the words on the left with the correct definition on the right:

Usurious	it permits the creditor to accelerate the loan,
	making all future payments due immediately in
	the event a consumer misses a single payment.
Balloon payment	liquidate.
acceleration clause	the total amount you pay to use the credit,
	including interest charges and any other fees.
Bill consolidation	corrupt practice.
Wind up	the last payment is much larger than the
	monthly payments.
Abuse	illegal.
Finance charge	disturber.
Violator	combining all your debts into a single one.
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Costly Credit Arrangements

Problem–solving:

The Hidden Charges

Chang buys a new guitar amplifier on an installment plan. When he receives the itemized bill, he discovers that he owes a total of $745,’ though the price of the amp was only $553. He calls the music store and is told that he is paying more than 20 percent interest. He would never have bought the amp if he’d known it would cost this much. What mistakes did Chang make? What can he do now?

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UNIT 24.

What Lenders Want to Know Before Extending Credit

Read and translate the texts.

Any store, bank, or credit card company that extends credit to consumers wants to know that the money will be repaid. Before making a loan, the creditor will want to know several things about the consumer:

•Is the consumer a reliable person? (For example, a person who moves or changes jobs frequently might not be considered reliable.)

•Does the consumer have a steady income that is likely to continue into the future?

•Is the consumer’s income high enough to enable him or her to pay for the items to be purchased?

•Does the consumer have a good record in paying off other loans and bills?

Creditors are in business to make money; thus, it is understandable that they would ask questions such as these. However, creditors have sometimes unfairly denied credit for reasons such as the debtor’s race, sex, or source of income (such as public assistance or alimony). Today a federal law, the Equal Credit Opportunity Act, protects consumers against credit discrimination based on sex, marital status, race, color, religion, national origin, old age, or source of income. The Federal Trade Commission handles credit discrimination complaints against finance companies, retail stores, oil companies, and travel and entertainment credit card companies. Bank regulatory agencies, such as the Federal Reserve Board and the Comptroller of the Currency, handle complaints against banks and bank credit cards. If you think you have been discriminated against, you may complain to one of these agencies or sue the creditor in court.

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What Lenders Want to Know Before Extending Credit

Many states also have laws that forbid credit discrimination. Complaints should be directed to the state or local consumer affairs office or human rights commission.

What to Do If You Are Denied Credit

If you ever apply for credit, the creditor will evaluate your application according to certain standards. The creditor may investigate you personally or may pay a credit bureau to check your credit word. Many creditors do both. There are thousands of credit bureaus across the country. Financial and personal information about consumers is often stored in computers and may be passed among the various bureaus. Information about you in a credit bureau’s files can be a key factor in determining whether you get loans, credit cards, or other forms of credit in the future.

If a credit report indicates that you are a poor risk, the creditor will probably deny credit. Also, if you are trying to get credit for the first time and have no credit record at all, the creditor may deny credit. Sometimes creditors decide to deny credit based solely on information in the application, without taking the time to order a credit report.

The Equal Credit Opportunity Act says that creditors must tell consumers why they were turned down. The reasons given must be specific. For example, “applicant does not meet our standards” is not specific enough. On the other hand, “insufficient income” is a specific reason. It tells you how your circumstances must change to qualify for credit.

Another federal law protests you from inaccurate credit bureau reporting. The Fair Credit Reporting Act requires creditors who deny credit based on information received from a credit bureau to tell you that fact. The creditor must also give you the name and address of the credit bureau that supplied the report.

Every consumer has the rights to learn the nature of information in his or her credit file. Although credit bureau are not required to show consumers copies of the actual file, they must disclose the nature and substance of the information it contains.

If you discover false, misleading, incomplete, irrelevant, or out–of–date information in your file, you can require the credit bureau to recheck its information and correct the errors. If the credit

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bureau does not cooperate in correcting your credit file, you may complain to reinvestigating the information the bureau still believes that it is correct, you have the right to have your version of the dispute inserted in the file. If the information being reported about you is accurate, the credit bureau can report it for seven years.

Find the equivalents of the following words and expressions in the text.

Надежный человек; иметь постоянный доход; неспра- ведливый отказ в кредите; алименты; cоциальная помощь; дискриминация при получении кредита; семейное положе- ние; источник дохода; магазин торгующий в розницу; кон- тролер денежного обращения; федеральное резервное обра- щение; комиссия по правам человека; оценить заявку на кре- дит в соответствии с определенными стандартами; базиро- ваться только на информации в заявлении; недостаточный доход; получить право на кредит; картотека кредитной ин- формации; отдел кредитов; устарелая информация; перепро- верить информацию и исправить ошибки.

Answer the questions:

1.What do lenders usually want to know before extending credit? Why do they want to know all these points?

2.What reasons can be for unfairly denied credit?

3.Who handles credit discrimination complaints?

4.How do creditors evaluate applications?

5.What do credit bureaus do?

6.Why can the creditor deny credit if you are trying to get it for the first time?

7.What does the Equal Credit Opportunity Act say?

8.What does the Fair Credit Reporting Act require creditors to do?

9.What can you require if you discover false, misleading, incomplete, irrelevant, or out–of–date information in your credit file?

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What Lenders Want to Know Before Extending Credit

Match the words on the left with the correct definition on the right:

Unfairly denied	an account in permanent form, esp. in writing,
credit	preserving knowledge or information about
	facts or events.
Qualify for	able to be trusted.
Record	judge or assess the worth of; appraise.
Reliable	be provided with the abilities or attributes nec-
	essary for smth.
Steady	credit discrimination.
Evaluate	inquire into a situation or problem thoroughly;
	examine systematically, esp. in order to dis-
	cover the truth.
Investigate	make information known.
Solely	essence, meaning.
Turn down	erroneous.
Disclose	reject or refuse.
Substance	not relating or pertinent to the matter at hand.
Inaccurate	only.
Irrelevant	regular.

Problem–solving:

You are a loan officer at a local bank. Each of the following people is seeking a loan. Based on the information provided, evaluate each applicant and make a decision regarding each loan request. Discuss your reasons for granting or denying credit.

a.Alice Johnson is the mother of four children. Her only income consists of public assistance payments of $420 per month and $80 per month from the pension other deceased husband. She wishes to buy a new oven and refrigerator totalling $700. She lives in a public housing development. Her rent and other expenses usually total about $375 a month.

b.Jerry Levitt is a carpenter seeking work wherever he can find it. Depending on the weather and other factors, he is subject to seasonal unemployment. He currently brings home about $650

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per month and has car payments of $150 a month, TV payments of $105 a month, rent of $220 a month, and no money in the bank. He would like to borrow $2,500 to buy a motorcycle.

с. Barbara Griego, 22, is in her second year of college. She has excellent grades and plans to attend medical school after graduation. Until recently, her parents paid her bills, but she is now on her own. She is seeking $2,000 for her college tuition and expenses. She has never borrowed money before, but she plans to repay all loans after finishing medical school.

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Default And Collection Practices

UNIT 25.

Default And Collection Practices

Read and translate the texts.

Consumers who use credit sometimes have difficulty making all their payments. Problems can arise because the consumer is overextended or too deeply in debt. Problems can also arise because of unexpected unemployment, family illness, or a variety of other reasons. A consumer who is unable or unwilling to pay a debt goes into default.

What a Consumer Can Do in Case of Default

If you have problems paying your bills, you should consider the following options:

1.Reassess your financial lifestyle to determine where the problem arose. If you are not already on a budget, consider starting one.

2.Notify each creditor of the problem and ask to have the term of debt extended (leading to smaller monthly payments) or to have the amount of the debt reduced or refinanced. Keep in mind that refinancing over a longer period usually results in increased finance charges.

3.Contact a consumer credit counseling service or a family service agency that offers free or low–cost financial counseling

4.Seek assistance from friends or relatives to reduce the debt to a manageable level.

Bankruptcy If these steps do not resolve your problem, you may have to declare bankruptcy. This is a procedure through which a person places assets under the control of a federal court in order to be relieved of debt. In recent years, an enormous number of bankruptcies have been filed in the United States. In 1991–1992, more than 70% of the civil cases filed in federal court were bankruptcies.

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Under Chapter 13 of the federal bankruptcy law, a wage earner can make an arrangement, supervised by a federal court, to pay off some or all of what is owed to creditors over an extended period of time. A more severe form of bankruptcy is called a Chapter 7 bankruptcy. Under Chapter 7, the federal court takes control of most of the debtor’s assets (some states allow the debtor to keep certain items), sells them, and pays off as much debt as possible. Generally, the money received from the sale of the assets is not enough to fully pay all creditors.

A declaration of bankruptcy has serious long–term consequences for the debtor. Records of personal bankruptcy remain in credit reports for 10 years. Even after that time, it may be very difficult to obtain credit or borrow money. In addition, some debts are not wiped out through bankruptcy. Taxes, alimony, child support, and student loans must still be repaid.

Find the equivalents of the following words and expressions in the text.

Неожиданная потеря работы; объявлять дефолт; пере- смотреть; составлять финансовую смету; продлить срок вы- платы долга; объявить банкротство; поместить имущество под контроль федерального суда; огромное количество; долго- срочные последствия.

Answer the questions:

1.Why do consumers who use credit sometimes have difficulty making all their payments?

2.What steps should be taken by a consumer who is unable to pay his bills?

3.What is default?

4.What is bankruptcy? How does the procedure work?

5.What consequences does a declaration of bankruptcy have– term for the debtor?

6.Are there any laws in Russia concerning default and bankruptcy?

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