Fair Debt Collection
Credit lets you charge a meal on credit cards, pay for an appliance on the installment plan, take out a loan to buy a house, or pay for schooling or vacations. With credit, you can enjoy your purchase while you’re paying for it, or you can make a purchase when you lack ready cash. However, there are strings attached to credit and what is borrowed must be paid back!
The cost of credit can be expensive so protect yourself by learning how interest rates are figured and ways to save money when using credit. Protect yourself even more by learning your consumer financial legal rights, there are dozens of state and federal statutes protecting you every day.
You get credit by promising to pay in the future for something you receive in the present. If you are thinking of borrowing or opening a credit account, your first step should be to figure out how much it will cost you and whether you can afford it. Then you should shop around for the best terms. Credit costs vary, but you can compare credit prices from different sources.
First, consider the finance charge, or the the total dollar amount you pay to use credit. It includes interest costs, and other costs, such as service charges and some credit–related insurance premiums. For example, borrowing $100 for a year might cost you $10 in interest. If there were also a service charge of $1, the finance charge would be $11.
Next consider the annual percentage rate (APR), or the percentage cost (or relative cost) of credit on a yearly basis. This is your key to comparing costs, regardless of the amount of credit or how long you have to repay it. Again, suppose you borrow $100 for one year and pay a finance charge of $10. If you can keep the entire $100 for the whole year and then pay back $110 at the end of the year, you are paying an APR of 10 percent. But, if you repay the $100 and finance charge (a total of $110) in twelve equal monthly installments, you don’t really get to use $100 for the whole year. In fact, you get to use less and less of that $100 each month. In this case, the $10 charge for credit amounts to an APR of 18 percent.
Under Truth in Lending, the creditor must tell you–in writing and before you sign any agreement–the finance charge and the annual percentage rate. All creditors–banks, stores, car dealers, credit card companies, finance companies-must state the cost of their credit in terms of the finance charge and the APR. Federal law does not set interest rates or other credit charges. But it does require their disclosure so that you can compare credit costs. The law says these two pieces of information must be shown to you before you sign a credit contract or before you use a credit card.
Even when you understand the terms a creditor is offering, it’s easy to underestimate the difference in dollars that different terms can make. Other terms–such as the size of the down payment–will also make a difference. Be sure to look at all the terms before you make your choice.
| No. of Payments: |
Interest Rate: |
Amount Borrowed: |
Monthly Payment: |
Total Cost of Interest: |
| 72 | 14% | $7,500 | $154.54 | $3,637.09 |
| 60 | 14% | $7,500 | $174.51 | $2,9707.12 |
| 48 | 14% | $7,500 | $204.94 | $2,337.50 |
The lowest cost loan is available from Creditor C. If you were looking for lower monthly payments, (choice A or B) you could pay the loan off over a longer period of time. However, you would have to pay more in total costs.
- Open end consumer credit plans
- Disclosure for credit or charge card applications and solicitations
- Additional credit and charge card disclosure information
- Telephone credit solicitations
- Applications and solicitations by other means
- General information without any specific term
- Charge card applications and solicitations
- Additional Charge Card Applications and Solicitations Information
- Applications and solicitations by other means
- Issuers of charge cards and access to open end credit plans.
- Charge card defined
- Disclosure prior to renewal
- Insurance in connection with certain open end credit card plans
1. Open end consumer credit plans
Required disclosures by creditor:
Before opening any account under an open end consumer credit plan, the creditor shall disclose to the person to whom credit is to be extended each of the following items, to the extent applicable:
(1) The conditions under which a finance charge may be imposed, including the time period (if any) within which any credit extended may be repaid without incurring a finance charge, except that the creditor may, at his election and without disclosure, impose no such finance charge if payment is received after the termination of such time period. If no such time period is provided, the creditor shall disclose such fact.
(2) The method of determining the balance upon which a finance charge will be imposed.
(3) The method of determining the amount of the finance charge, including any minimum or fixed amount imposed as a finance charge.
(4) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances to which it is applicable, and the corresponding nominal annual percentage rate determined by multiplying the periodic rate by the number of periods in a year.
(5) Identification of other charges which may be imposed as part of the plan, and their method of computation, in accordance with regulations of the Board.
(6) In cases where the credit is or will be secured, a statement that a security interest has been or will be taken in
(A) the property purchased as part of the credit transaction, or
(B) property not purchased as part of the credit transaction identified by item or type.(7) A statement, in a form prescribed by regulations of the Board of the protection provided by sections 1666 and 1666i of this title to an obligor and the creditor’s responsibilities under sections 1666a and 1666i of this title. With respect to one billing cycle per calendar year, at intervals of not less than six months or more than eighteen months, the creditor shall transmit such statement to each obligor to whom the creditor is required to transmit a statement pursuant to subsection (b) of this section for such billing cycle.
(8) In the case of any account under an open end consumer credit plan which provides for any extension of credit which is secured by the consumer’s principal dwelling, any information which;
(A) is required to be disclosed under section 1637a(a) of this title; and
(B) the Board determines is not described in any other paragraph of this subsection.(9) Statement required with each billing cycle. The creditor of any account under an open end consumer credit plan shall transmit to the obligor, for each billing cycle at the end of which there is an outstanding balance in that account or with respect to which a finance charge is imposed, a statement setting forth each of the following items to the extent applicable:
(1) The outstanding balance in the account at the beginning of the statement period.
(2) The amount and date of each extension of credit during the period, and a brief identification, on or accompanying the statement of each extension of credit in a form prescribed by the Board sufficient to enable the obligor either to identify the transaction or to relate it to copies of sales vouchers or similar instruments previously furnished, except that a creditor’s failure to disclose such information in accordance with this paragraph shall not be deemed a failure to comply with this part or this subchapter if:
(A) the creditor maintains procedures reasonably adapted to procure and provide such information, and
(B) the creditor responds to and treats any inquiry for clarification or documentation as a billing error and an erroneously billed amount under section 1666 of this title.
In lieu of complying with the requirements of the previous sentence, in the case of any transaction in which the creditor and seller are the same person, as defined by the Board, and such person’s open end credit plan has fewer than 15,000 accounts, the creditor may elect to provide only the amount and date of each extension of credit during the period and the seller’s name and location where the transaction took place if :(A) a brief identification of the transaction has been previously furnished, and
(B) the creditor responds to and treats any inquiry for clarification or documentation as a billing error and an erroneously billed amount under section 1666 of this title.(3) The total amount credited to the account during the period.
(4) The amount of any finance charge added to the account during the period, itemized to show the amounts, if any, due to the application of percentage rates and the amount, if any, imposed as a minimum or fixed charge.
(5) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances to which it is applicable, and, unless the annual percentage rate (determined under section 1606(a)(2) of this title) is required to be disclosed pursuant to paragraph (6), the corresponding nominal annual percentage rate determined by multiplying the periodic rate by the number of periods in a year.
(6) Where the total finance charge exceeds 50 cents for a monthly or longer billing cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, the total finance charge expressed as an annual percentage rate (determined under section 1606(a)(2) of this title), except that if the finance charge is the sum of two or more products of a rate times a portion of the balance, the creditor may, in lieu of disclosing a single rate for the total charge, disclose each such rate expressed as an annual percentage rate, and the part of the balance to which it is applicable.
(7) The balance on which the finance charge was computed and a statement of how the balance was determined. If the balance is determined without first deducting all credits during the period, that fact and the amount of such payments shall also be disclosed.
(8) The outstanding balance in the account at the end of the period.
(9) The date by which or the period (if any) within which, payment must be made to avoid additional finance charges, except that the creditor may, at his election and without disclosure, impose no such additional finance charge if payment is received after such date or the termination of such period.
(10) The address to be used by the creditor for the purpose of receiving billing inquiries from the obligor.
2. Disclosure in credit and charge card applications and solicitations (direct mail applications and solicitations)
Any application to open a credit card account for any person under an open end consumer credit plan, or a solicitation to open such an account without requiring an application, that is mailed to consumers shall disclose the following information, subject to subsection (e) of this section and section 1632(c) of this title:
Annual percentage rates
Each annual percentage rate applicable to extensions of credit under such credit plan.
Where an extension of credit is subject to a variable rate, the fact that the rate is variable, the annual percentage rate in effect at the time of the mailing, and how the rate is determined.
Where more than one rate applies, the range of balances to which each rate applies.
Annual and other fees
Any annual fee, other periodic fee, or membership fee imposed for the issuance or availability of a credit card, including any account maintenance fee or other charge imposed based on activity or inactivity for the account during the billing cycle.
Any minimum finance charge imposed for each period during which any extension of credit which is subject to a finance charge is outstanding.
Any transaction charge imposed in connection with use of the card to purchase goods or services.
Grace period:
The date by which or the period within which any credit extended under such credit plan for purchases of goods or services must be repaid to avoid incurring a finance charge, and, if no such period is offered, such fact shall be clearly stated.
If the length of such ”grace period” varies, the card issuer may disclose the range of days in the grace period, the minimum number of days in the grace period, or the average number of days in the grace period, if the disclosure is identified as such.
Balance calculation method
The name of the balance calculation method used in determining the balance on which the finance charge is computed if the method used has been defined by the Board, or a detailed explanation of the balance calculation method used if the method has not been so defined.
In prescribing regulations to carry out this clause, the Board shall define and name not more than the 5 balance calculation methods determined by the Board to be the most commonly used methods.
3. Other Credit and Charge Card Disclosure Information
In addition to the information required to be disclosed under subparagraph (A), each application or solicitation to which such subparagraph applies shall disclose clearly and conspicuously the following information, subject to subsections (e) and (f) of this section:
Cash advance fee
Any fee imposed for an extension of credit in the form of cash.
Any fee imposed for a late payment.
Over-the-limit fee
Any fee imposed in connection with an extension of credit in excess of the amount of credit authorized to be extended with respect to such account.
In general any telephone solicitation to open a credit card account for any person under an open end consumer credit plan, the person making the solicitation shall orally disclose the information described in this Act as required except telephone solicitations shall not be required to orally disclose information described in this Act if the credit card issuer:
Does not impose any fee;
Does not impose any fee in connection with telephone solicitations unless the consumer signifies acceptance by using the card;
The card issuer discloses clearly and conspicuously in writing the information described in paragraph (1) within 30 days after the consumer requests the card, but in no event later than the date of delivery of the card; and
The card issuer discloses clearly and conspicuously that the consumer is not obligated to accept the card or account and the consumer will not be obligated to pay any of the fees or charges disclosed unless the consumer elects to accept the card or account by using the card.
5. Applications and solicitations by other means
In general
Any application to open a credit card account for any person under an open end consumer credit plan, and any solicitation to open such an account without requiring an application, that is made available to the public or contained in catalogs, magazines, or other publications shall meet the disclosure requirements of this Act.
Specific information
An application or solicitation described in above meets the requirement of this subparagraph if such application or solicitation contains –
the information – described in herein, in the form required under section 1632(c) of this title, subject to subsection (e) and described in a clear and conspicuous form, subject to subsections (e) and (f) of this section;
A statement, in a conspicuous and prominent location on the application or solicitation, that –
the information is accurate as of the date the application or solicitation was printed;
the information contained in the application or solicitation is subject to change after such date; and
the applicant should contact the creditor for information on any change in the information contained in the application or solicitation since it was printed; a clear and conspicuous disclosure of the date the application or solicitation was printed; and a disclosure, in a conspicuous and prominent location on the application or solicitation, of a toll free telephone number or a mailing address at which the applicant may contact the creditor to obtain any change in the information provided in the application or solicitation since it was printed.
6. General information without any specific term
An application or solicitation described in subparagraph above meets the requirement of this subparagraph if such application or solicitation contains a statement, in a conspicuous and prominent location on the application or solicitation, that:
there are costs associated with the use of credit cards; and the applicant may contact the creditor to request disclosure of specific information of such costs by calling a toll free telephone number or by writing to an address, specified in the application;
contains a disclosure, in a conspicuous and prominent location on the application or solicitation, of a toll free telephone number and a mailing address at which the applicant may contact the creditor to obtain such information;
7. Charge card applications and solicitations
(A) In general
Any application or solicitation to open a charge card account shall disclose clearly and conspicuously the following information in the form required by section 1632(c) of this title, subject to subsection (e) of this section:
Any annual fee, other periodic fee, or membership fee imposed for the issuance or availability of the charge card, including any account maintenance fee or other charge imposed based on activity or inactivity for the account during the billing cycle.
Any transaction charge imposed in connection with use of the card to purchase goods or services. (
A statement that charges incurred by use of the charge card are due and payable upon receipt of a periodic statement rendered for such charge card account.
8. Additional Charge Card Applications and Solicitations Information
In addition to the information required to be disclosed under subparagraph (A), each written application or solicitation to which such subparagraph applies shall disclose clearly and conspicuously the following information, subject to subsections
Cash advance fee
Any fee imposed for an extension of credit in the form of cash.
Late fee
Any fee imposed for a late payment.
Over-the-limit fee
Any fee imposed in connection with an extension of credit in excess of the amount of credit authorized to be extended with respect to such account.
9. Applications and solicitations by other means
Any application to open a charge card account, and any solicitation to open such an account without requiring an application, that is made available to the public or contained in catalogs, magazines, or other publications shall contain –
the information – described in subparagraph (A) in the form required under section 1632(c) of this title, subject to subsection (e) of this section, and (II) described in subparagraph (B) in a clear and conspicuous form, subject to subsections (e) and (f) of this section;
a statement, in a conspicuous and prominent location on the application or solicitation, that –
the information is accurate as of the date the application or solicitation was printed;
the information contained in the application or solicitation is subject to change after such date; and
the applicant should contact the creditor for information on any change in the information contained in the application or solicitation since it was printed;
a clear and conspicuous disclosure of the date the application or solicitation was printed; and
a disclosure, in a conspicuous and prominent location on the application or solicitation, of a toll free telephone number or a mailing address at which the applicant may contact the creditor to obtain any change in the information provided in the application or solicitation since it was printed.
10. Issuers of charge cards which provide access to open end consumer credit plans.
If a charge card permits the card holder to receive an extension of credit under an open end consumer credit plan, which is not maintained by the charge card issuer, the charge card issuer may provide the information described in subparagraphs (A) and (B) in the form required by such subparagraphs in lieu of the information required to be provided under paragraph (1), (2), or (3) with respect to any credit extended under such plan, if the charge card issuer discloses clearly and conspicuously to the consumer in the application or solicitation that –
the charge card issuer will make an independent decision as to whether to issue the card;
the charge card may arrive before the decision is made with respect to an extension of credit under an open end consumer credit plan; and
approval by the charge card issuer does not constitute approval by the issuer of the extension of credit.
The information required to be disclosed under paragraph (1) shall be provided to the charge card holder by the creditor which maintains such open end consumer credit plan before the first extension of credit under such plan.
For the purposes of this subsection, the term ”charge card” means a card, plate, or other single credit device that may be used from time to time to obtain credit which is not subject to a finance charge.
12. Disclosure prior to renewal
In general
A card issuer that imposes any fee shall transmit to a consumer at least 30 days prior to the scheduled renewal date of the consumer’s credit or charge card account a clear and conspicuous disclosure of –
the date by which, the month by which, or the billing period at the close of which, the account will expire if not renewed;
the method by which the consumer may terminate continued credit availability under the account.
13. Insurance in connection with certain open end credit card plans
Change in insurance carrier
Whenever a card issuer that offers any guarantee or insurance for repayment of all or part of the outstanding balance of an open end credit card plan proposes to change the person providing that guarantee or insurance, the card issuer shall send each insured consumer written notice of the proposed change not less than 30 days prior to the change, including notice of any increase in the rate or substantial decrease in coverage or service which will result from such change. Such notice may be included on or with the monthly statement provided to the consumer prior to the month in which the proposed change would take effect.
Notice of new insurance coverage in any case in which a proposed change occurs
the insured consumer shall be given the name and address of the new guarantor or insurer and a copy of the policy or group certificate containing the basic terms and conditions, including the premium rate to be charged.
Right to discontinue guarantee or insurance
The notices required under paragraphs (1) and (2) shall each include a statement that the consumer has the option to discontinue the insurance or guarantee.
No preemption of State law
No provision of this subsection shall be construed as superseding any provision of State law which is applicable to the regulation of insurance.
Board definition of substantial decrease in coverage or service
The Board shall define, in regulations, what constitutes a ”substantial decrease in coverage or service” for purposes of paragraph
If you’ve fallen behind on your bills, especially credit cards, don’t panic. You may have several good options available to you. Your success starts by assessing your current situation and finding a trusted service provider that is licensed in your state.