One of the most significant pieces of legislation to address unfair lending practices and consumer rights is the Fair and Accurate Credit Transactions Act of 2003. The Fair and Accurate Credit Transactions Act address identity theft, as well as allowing the consumer to receive a free copy of their credit report from each of the credit reporting agencies every year.
When you apply for a mortgage, one of the first things the mortgage lender will do is look at your credit report. Credit reports contain information about how you have used and are using your credit lines. They contain information like your payment history, delinquent payments, and outstanding debt. Mortgage lenders use this information to help decide how much of a risk you would be to offer a loan to.
Credit reports are nothing new and have been used by businesses for thousands of years. In concept, using a credit reporting system makes sense, as it allows businesses to more easily analyze risk. However, in the past a great deal of personal information, such as race and religion, was included in credit reports and this information was often used to discriminate against a prospective borrower. There have been many pieces of legislation to address this issue and keep the lending industry more honest, although its success is debatable.
The information contained in a credit report is maintained by one of three credit reporting agencies. Businesses report information to these agencies, who then compile a report that can be used by mortgage lenders and others who offer credit lines.
Up until very recently, there were a number of hurdles that made it difficult and costly for a consumer to view their credit report. It is very easy for an error to end up on your credit report and without being able to easily and inexpensively check, many consumers were penalized for these mistakes when they applied for a mortgage or loan.
The Fair and Accurate Credit Transactions Act addressed this issue and requires that each of the three credit reporting agencies provide consumers with one free copy of their credit report every year. However, in some states, the credit reporting agencies have fought this law by making it more difficult and complicated to receive these reports.
Another big part of the Fair and Accurate Credit Transactions Act is aimed at preventing identity theft. Under the Fair and Accurate Credit Transactions Act, consumers who think they might be about to be the victim of identity theft can place a fraud alert on their credit report, ensuring that potential creditors are more diligent in checking ones identity and providing some recourse if identity theft occurs. It also set up some red flag rules, which were to be developed by the credit industry to help detect fraud, although these have not been fully implemented.
The Fair and Accurate Credit Transactions Act also sets up some rights for those who have been the victim of identity theft. The credit reporting agencies are now required to block cases of identity theft from being visible on credit reports, providing the consumer has provided sufficient evidence of the identity theft. The credit industry is also required to be more corporative when investigating identity theft.
The law also requires that credit card merchants print no more than the last five digits of a credit card on a receipt.
The effectiveness of this law and others that address the credit and mortgage industry are highly debatable and many institutions deliberately try to find ways to get around these law.
Businesses and creditors have for years kept information about the people who use their business, using this information to determine whether to continue offering an individual services. Until the advent of modern technology making it easier to reliably send information across long distances, these records were usually only used internally or in specific locations.
However, beginning in the eighteenth and nineteenth centuries, businesses began sharing these records with each other on a much larger scale, which is the basis for the modern credit report.
As is often the case, with no oversight banks, mortgage lenders, and other creditors were quick to abuse this system. They began storing all sorts of personal information in credit reports, including race, gender, religion, and sexual preference. Worse, the lenders would then use this information to deny or approve a loan.
To help address this problem, the Fair Credit Reporting Act was passed in 1970. Since then, the law has been changed many times, but its premise, to regulate the credit reporting industry, remains the same.
The Fair Credit Reporting Act helps to regulate both credit reporting agencies, as well as who can provide information to these agencies.
There are three main credit reporting agencies, Equifax, TransUnion, and Experian. These agencies compile information about how a person uses their credit lines, including tracking payment history.
As part of the Fair Credit Reporting Act, these agencies are required to ensure that there is a way for consumers to address errors on their credit report and that these errors are removed in a timely manner. They are also not allowed to keep information indefinitely and in most cases can only cover the last 7 years, although bankruptcies can be kept on a credit report for up to 10 years.
Only recently, consumers were given the right to see a copy of their credit report for free and purchase a copy for a fair price.
While a big part of the Fair Credit Reporting Act is aimed at regulating credit reporting agencies, it also deals with who can report information to these agencies and what type of information can be added to a credit report.
As part of the Fair Credit Reporting Act, agencies that report information to credit reporting agencies must:
The Fair Credit Reporting Act also puts limits on who can report information to credit reporting agencies, which is usually limited to banks, credit unions, and other creditors. It also put regulations on how credit reports can be used for background checks by employers.
While the Fair Credit Reporting Act took steps to help make the credit reporting industry more transparent and less discriminatory, it still has a long way to go and it would require a number of other laws to bring the credit industry under better control.
The nineteen sixties was a very controversial time for the United States, with one of the most important issues being equality among race and gender. Racism was visible in almost all areas of life, including the financial industry. To help address this issue, congress passed a series of laws intended to help prevent discriminatory lending practices.
One of the major problems in the lending and credit industries was that the terms of a loan was often not completely obvious to borrowers. This meant there were often hidden terms and costs, which would not be disclosed to the borrower until they violated these terms. To help protect against this, Congress passed the Truth in Lending Act in 1968.
The main purpose of the Truth in Lending Act was to ensure that prospective borrowers were made fully aware of all terms and costs associated with a loan, before they actually signed the loan agreement. This may sound like common sense advice that should be used before entering any contract, but many lenders purposely hid information from borrowers.
In most cases the Truth in Lending Act does not attempt to regulate the types of charges that can be applied to a consumer credit line, but instead is aimed at requiring a standardized disclosure of the charges and terms, without requiring the consumer to first sign the contract. The exception to this is subprime mortgages and high cost mortgages, whose charges may be regulated by the Truth in Lending Act.
The Truth in Lending Act also allows the borrower more freedom in canceling credit transactions that require a lien to be placed on the borrowers primary dwelling.
The Truth in Lending Act contains several sections, which require that:
While the Truth in Lending Act was a step in the right direction, a true change in the lending industry would take many years and still has a long way to go.
With as complicated as most mortgages are, even with the information fully disclosed, many borrowers do not fully read or understand closing documents, which can lead to many problems.
Today, women borrowers are one of the fastest growing demographics in the lending industry, however even just a short while ago, this would have been impossible. This is because until the Civil Rights Movement of the 1960’s, lenders participated in discriminatory lending, discriminating by race and gender. These practices began to change with the passage of several pieces of legislation in the sixties and seventies.
One of the most important pieces of legislation to reduce discriminatory lending practices was the Fair Housing Act of 1968, which led the way for several other laws that would help further reduce discrimination.
The Fair Housing Act of 1968 was passed to prevent mortgage lenders from discriminating against people by their race, gender, religion, or nationality. Today, this seems like common sense, but at the time, creditors would gather a great deal of personal information about prospective borrowers and use this information to decide whether or not to offer them a loan.
Originally, the Fair Housing Act was referred to as the Civil Rights Act of 1968 and came 4 years after the first Civil Rights Act. However, because it addressed housing discrimination, it became known as the Fair Housing Act.
The Fair Housing Act not only prevents discrimination when selling homes, but also in lending, as a it prohibits people from refusing to rent or sell a property based on a persons race, gender, religion, or nationality. It also prevents changing the terms of a loan or rental agreement based on discriminatory factors, using coercion in lending practices, and discrimination in advertising.
While the Fair Housing Act is designed to prevent discrimination, it does allow landlords some rights when selecting a tenant for their rental property. For example, a landlord can discriminate against someone based upon their income, ability to pay rent, job status, or credit history. Landlords are also not required to accept Section 8 Housing Vouchers in all areas.
The main purpose of the Fair Housing Act is to prevent discrimination against prospective buyers and renters, but these groups themselves are allowed to be discriminatory when looking for a home. For example, it is not illegal for a potential buyer to ask their real estate agent to search for homes using a discriminatory basis.
Since the Fair Housing Act prohibited outright discrimination, the lending industry and real estate industry became more subtle in their approach, using redlining and steering to achieve a similar goal. These subtle forms of discrimination took the place of outright discrimination in the real estate and lending industries.
Redlining is the practice of not offering credit to certain areas of a city. This was typically preformed in low income areas or minority areas and would prevent people in these areas from getting a loan. Redlining was so prevalent in the industry that there were even official maps made by banks and other creditors outlining areas that should not receive credit.
Steering is when real estate agents, bankers, and city officials would try to steer minorities and certain social groups to a specific part of the city. These officials would lie or manipulate prospective buyers and steer them into housing projects, creating ghettos and low income housing areas.
Today, other pieces of legislation have been passed to prevent steering and redlining, although the practices still occur.
Discrimination based upon race, gender, religion, and nationality were deep seated and could not be removed with only one law or over night. However, the Fair Housing Act was a step in the right direction to help protect the rights of buyers and renters in the housing market.
It would be followed by a number of pieces of legislation to further protect the rights of minorities.
Today is the last day of the Cash for Clunkers Program, which is scheduled to end at 8pm tonight. At this time, all applications must be turned in by dealers and no new applications will be accepted.
This deadline, which was announced last week, has led dealers to scramble to finalize deals, submit applications, and sell new cars. It has also led to a number of consumers pushing up the purchase date of their new vehicle, so that they can take advantage of this rebate program.
The Cash for Clunkers program offers between $3,500 and $4,500 for trade-ins when a new car is purchased. Vehicles that have a 10mpg increase over the trade-in receive the full $4,500 and those with a 4mpg increase receive $3,500.
Originally, $1 Billion was allotted for the Cash for Clunkers Program, but due to higher than expected demand, this budget was expended in only a few weeks. Congress then approved an additional $2 Billion last week, but demand did not decrease and it is expected that by tonight, this budget will be met.
The short answer to this is NO. This is illegal for the dealer to do.
With only a few hours left to purchase a new car, many consumers are scrambling to take advantage of the program and dealers are continuing to use it as a selling point. So, it is important to note that under the program, car dealers are 100% prohibited from making you sign a contract saying you must repay the discount if the Cash for Clunkers application is not approved.
If the dealer suggests that you must sign this sort of contract, they are violating the terms of the Cash for Clunkers program and should be reported, as this is illegal.
According to Government Officials, the Cash for Clunkers program is set to end on Monday August 24th.
All pending Cash for Clunkers Applications must be submitted by dealers no later than 8 PM EST on Monday.
Congress and the Department of Transportation decided on the premature end date after analysis showed that the program was quickly approaching its budget. They project, however, that there should be enough money to process all transactions up until Monday.
With the announcement of the deadline to submit applications for the Cash for Clunkers Program, new car dealers are expected to aggressively push the program this weekend.
Thus far, over 450,000 new cars have been purchased as part of the program with almost $2 Billion in rebates paid by the government. The next three days is expected to allow the car dealers to finalize any pending sales and give consumers a chance to take part in the program.
The Cash for Clunkers Program, which provides rebates of up to $4,500 for trade-ins, gained a great deal of attention over the last few weeks, when it quickly expended its $1 Billion budget. The program is intended to offer an incentive for Americans to purchase a new more fuel efficient vehicle, with the engine of their older model being destroyed. This is intended to not only stimulate new car sales at a time when many auto manufactures are struggling, but also help create a more fuel efficient fleet of vehicles.
Congress and President Obama apparently did not expect the program to be so popular, nor to generate as many sales as it did, as the original budget was depleted within a month of the programs start. The program had originally been slated to run until November.
To help revive the program congress agreed to give the program an additional $2 Billion last week, but this was obviously not enough to curb the popularity of the Cash for Clunkers Program.
With many car manufactures reporting record sales, including GM who announced they would reinstate a number of union jobs, it remains to be seen whether these sales figures will remain steady after the Cash for Clunkers Program is over, or if sales will rapidly decline as the program ends.