Protections For Users of Credit

Legal Protection Of Borrowers

Like millions of Americans, you probably make at least some of your purchases on credit. The practice of buying now and paying later, though vital to both individual and national economies, can be dangerous if abused. Each year hundreds of thousands of people find themselves over their heads in debt and unable to meet all their monthly payments. Often they resort to desperate means — trying, for example, to consolidate their debts by incurring a single new one, a tactic that sometimes makes matters worse. In some cases they wind up in bankruptcy court, their credit ratings shattered and their property forfeit.

Neither federal nor state governments can prevent people from overextending themselves financially, but the governments can, and do, provide consumers with some protection in the credit marketplace. Because banks are the primary source of credit, they come under particularly close scrutiny.

There was a time, not too long ago, when a bank could turn down a credit applicant for any reason, or for no reason at all. A person might be denied a loan on the basis of sex, race, marital status or just because the loan officer took a dislike to the applicant. Similarly, banks and other lending institutions could conceal the true interest they were charging for loans by stressing the monthly rate and obscuring the total yearly cost. Credit reporting agencies, upon which lenders depend for determining the credit-worthiness of an applicant, were so loosely governed that they could report mere rumors as evidence of a person’s lack of financial responsibility. All such practices, and a host of other dubious credit procedures, have been outlawed.

 



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