Thanks to the Consumer Credit Protection Act, you may now feel well protected from the unfair practices in money lending that was so common before and are still practiced by many unscrupulous money lenders. Many people think that consumer rights is a given thing but in practice and reality it is virtually non-existing but for the effort of the government to enact rules that will protect the consumers.
In America it started in 1968 with the Consumer Credit Protection Act when the Congress felt that it is necessary to shield the consumers as well as their financial records from misuse and abuse.
In the following years, there were other laws designed and incorporated that refined the rights of the consumers even further. These rules and regulations typically and distinctively spelt out:
- How the government can exercise its discretionary power to access the bank account of customers to gather required and relevant information
- How the banks treat their customers and
- The way in which the banks handle the deposits of the customers.
All these needs were especially felt after the Great Recession in 2008. It was primary due to that the Consumer Financial Protection Bureau was formed which will act as a dedicated government agency to protect the rights of the consumers especially when it comes to borrowing money and money lending.
You will find countless acts, laws, restrictions and regulations today that are specifically aimed for your protection and the sheer number of these laws can be overwhelming by itself. However, it is crucial that you as a consumer understand your fundamental rights so that you can easily identify the situations when and the specific rights that have been violated when you choose for a bank or liberty lending. This will provide you with a lot of peace in mind and the type and amount of loan that you want exactly.
The rights clearly defined
All consumer rights are clearly defined in these laws and acts that are more than a dozen in number. However, there are four basic rights that are broadly explained by these laws and acts such as:
- Right to safety: According to the law enforced by the Consumer Protection Safety Commission in 1972, all consumers have the right to be safe whether they buy a product or hire a service or borrow money. Government has imposed restriction and requirements regarding testing of products, maintaining high standard in service and creating a fair money lending policy.
- Right to information: RTI or right to information will enable any consumer to take an educated and informed decision that will keep them safe as well as service their purpose. According to this right all producers, service providers and money lenders alike must provide accurate, honest and true information in their ads.
- Right to choose: The law also ensures that the consumers have the opportunity to choose alternatives products and services. Usually, anti-trust and unfair competition laws fall broadly into this category.
- Right to be heard: This is a promise made by the government that your complaints will be heard and judged properly when you lodge any with the Consumer Financial Protection Bureau, US Attorney General, Better Business Bureau and Federal Trade Commission.
- Right to financial privacy: This is a federal Act that limits the access of government to your personal financial records. This law was passed by the Congress to protect confidentiality in keeping with the constitutional privacy protection.
All these rights when protected will help the consumers in debt or those who want to take on a loan. This applies to consumer credit contracts made with money lenders, car dealers, financing companies and even departmental stores. However, these do not apply to real estate purchases and bank loans or any contracts with the loan associations.
Rules for credit contracts
In all forms of money lending whether it is from a bank or any private money lender, the credit contract plays the most significant role. This contract can put your finance condition in a better position or even make it worse if you are not careful or knowledgeable. Therefore, it is necessary that you know about the rules and the regulations that banks and money lenders should follow while designing a credit contract. According to the rule, banks and their subsidiaries are restricted from including a few specific provisions in to the consumer credit contracts such as:
- Any clause that will waive any of the rights of the borrower especially the right to be heard in the court or being notified of a court hearing if there is a lawsuit due to default in payment
- Any clause that will relinquish legal protections of a borrower at home
- Clause for seizure of possessions or wages
- Any promise of waiver is any property is given as collateral for the credit
- Any wording that will allow the lender to garnish future wages or earnings of the consumer to cover a loan default
- Any specific clause that will prevent the borrower to cancel automatic deductions at any time if agreed earlier while taking the loan
- Clauses that will allow the lender to take passion of any other household good in case of default other than the ones purchased using the credit line and
- Clauses that will allow pyramiding of late fees
The lender must also notify any cosigners with the consequences of taking on the debt and provide a separate document for such notification before issuing the loan or credit line. This notice to the cosigner must include the facts that they are:
- Liable to pay the debt if the borrower fails
- Responsible for the full debt amount outstanding including penalties and collection costs
- Liable to comply with the creditor if they are asked for payment before the original borrower
- Sure that if the debt goes into default then it will appear on their credit reports as well and
- At risk of their wages garnished.
As mentioned earlier, there are many laws designed and enforced by the government to make the money lending process fairer.