Credit allows consumers to finance transactions without having to pay the full cost of the merchandise at the time of the transaction. A common form of consumer credit is a credit card account issued by a financial institution. Merchants also may provide financing for products they sell. Banks may finance purchases through loans and mortgages.
The law of consumer credit is primarily embodied in federal and state statutory laws. These laws protect consumers and provide guidelines for the credit industry.
States have passed various statutes regulating consumer credit. The Uniform Consumer Credit Code has been adopted in 11 states. Its purpose is to protect consumers obtaining credit to finance their transactions, ensure that adequate credit is provided and govern the credit industry in general.
Congress passed the Consumer Credit Protection Act in part to regulate the consumer-credit industry, including credit card companies and credit-reporting agencies. The act requires creditors to disclose credit terms to consumers. It also protects consumers from loan sharks, restricts the garnishing of wages and established the National Commission on Consumer Finance to investigate the consumer finance industry.
The act prohibits discrimination based on sex or marital status in the extending of credit and also regulates certain debt collectors.
Last update: Sept. 25, 2008
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