LEGAL Chapter 18

Safeco Insurance Co. v. Burr

- Geico and Safeco fail to inform consumers that they obtained/used credit report, and gave higher insurance rates - The judgements were rescinded because they were not "willfull" or "reckless": no penalty

Equal Credit Opportunity Act: Remedies and Penalties

-Private Remedies: suit for actual damage, attorney's fees, punitive damages up to 10K - Public Remedies: FTC may bring suits to prohibit violations, plus civil penalties

Equal Credit Opportunity Act: Prohibitions

1. Discrimination based on race, sex, age, nationality, marital status, or public assistance 2. Inquiring about marital status or plans to have children 3. Refusal to let a married woman open an account separate from her husband's and/or under her maiden name

Top 3 Consumer Protection Acts

1. Equal Credit Opportunity Act (ECOA) (anti-discrimination) 2. Fair Credit Reporting Act (fairness in reporting) 3. Truth-In-Lending Act (full disclosure)

Responsible Agencies

1. Federal Trade Commission (FTC) ..........Bureau of Consumer Protection promotes mission ..........FTC Act 2. Consumer Financial Protection Bureau

Fair Credit Reporting Act: Credit Reports

1. How timely are payments, how much credit left, how much credit used, whether a collection is underway 2. Public records such as liens, judgements, bankruptcies

Equal Credit Opportunity Act: Responsibilities

1. Must allow regular sources of income, such as veteran benefits, welfare payments, social security, alimony, and child support (though you can consider likelihood of payment) 2. Accounts used by spouses must be reported to 3rd parties in both names 3. Specific reasons necessary for denial of credit

Subprime Crisis

2008 Mortgage Crisis: house prices were high, so banks loaned money to people with undeserving credit rates. When they could not pay back, the debtor's lawyers used Truth-In-Lending to blame the lender. Many banks did not get their money back.

Truth-In-Lending Act: Financing Statement

A disclosure document with the: 1. Finance charge 2. APR 3. Amount financed 4. Default or delinquency charges 5. Description of secured property

Truth-In-Lending Act: Coverage

All transactions where: - Lender is in business of extending credit in connection with a loan of money, sale of property, or providing services - Debtor is a person - Finance charge may be imposed - Credit is obtained primarily for personal, family, household, or agricultural purposes

Equal Credit Opportunity Act: coverage

Any person who, in the ordinary course of business, regularly participates in a credit decision (banks, retailers, c cards, and those who steer consumers toward credit: car dealers, etc...)

Fair Credit Reporting Act: Coverage

Anyone who prepares or uses a credit report in connection with: .......extending credit .......selling insurance .......hiring or firing an employee

Fair and Accurate Credit Transaction Act of 2003

Consumer rights to: 1 Dispute info on credit reports 2. Place fraud alerts 3. Get annual free reports 4. Purchase scores

Truth-In-Lending Act: Remedies and Penalties

Private: actual damages + twice the finance charge (min/max in place for real estate transactions) ..........Debtor (borrower) has 3 days to cancel/rescind transactions Public: criminal sanctions

Fair Credit Reporting Act: Remedies and Penalties

Private: suits for actual damages, attorney fees, punitive damages Public: civil penalties by FTC

FTC Act

Regulates unfair or deceptive methods of competition and commerce

Fair Credit Reporting Act: Investigative Consumer Reports

Report on consumer's character, reputation, mode of living, etc, obtained by interview. The consumer has the right to: 1. Three days' notice before the interview 2. Be informed of the nature/scope of the investigation *These are usually conducted for insurance co's and employment agencies

Truth-In-Lending Act: Concepts for Full Disclosure

The borrower uses these two to determine what his annual cost of borrowing should be: 1. *Finance Charge*: sum of all charges: (interest, service charges, points, finder's fees, credit reports, insurance required) 2. Annual Percentage Rate (APR): percentage of charges each year for a loan

Fair Credit Reporting Act: Consumer Rights

Whenever rejected for credit, insurance, or employment because adverse credit report: 1. Right to be told name of agency making the report 2. Right to require the agency to reveal the information in the report 3. Right to correct information or provide explanation