Michigan Bankruptcy Laws/Michigan Credit Card Debt Lawyers/Bankruptcy Attorneys

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Facts for Consumers Using Credit Cards

The Credit Practices Rule

If you are one of the millions of Americans who borrows money, buys items on installment credit, or cosigns for another person's debt, you may want to know about the Federal Trade Commission's Credit Practices Rule. The Rule, which became effective March l, l985, prohibits many creditors from including certain provisions in consumer credit contracts. It also requires creditors to provide a written notice to consumers before they cosign obligations for others about their potential liability if the other person fails to pay. Finally, it prohibits one method of assessing late charges.

What contracts are covered?

The Rule applies to consumer credit contracts offered by finance companies, retailers (such as auto dealers and furniture and department stores), and credit unions for any personal purpose except to buy real estate. It does not apply to banks or bank credit cards; to savings and loan associations; or to some non-profit organizations. (However, similar rules for banks -- under the Federal Reserve Board -- and for savings and loans -- under the Office of Thrift Supervision -- went into effect January 1, 1986.) The Rule does not apply to business credit.
 

What contract provisions are prohibited?

The Rule prohibits creditors from including certain provisions in their consumer credit contracts. Specifically, credit contracts no longer can include provisions that:

  • Require you to agree in advance, should the creditor sue you for non-payment of a debt, to give up your right to be notified of a court hearing to present your side of the case or to hire an attorney to represent you. (These clauses were often called "confessions of judgment" or "cognovits.")
  • Require you to give up your state-law protections that allow you to keep certain personal belongings even if you do not pay your debt as agreed. (These clauses were called "waivers of exemption.") State law generally allows you to keep your home, clothing, dishes, and other belongings of a fixed minimum value. However, when the debt incurred is to purchase an item and that item is used as security for the debt, it is permissible under the Rule for a creditor to repossess that item.
  • Permit you to agree in advance to wage deductions that would pay the creditor directly if you default on the debt, unless you can cancel that permission at any time. (These clauses were called "wage assignments.") However, a wage or payroll deduction plan, through which you arrange to repay a loan, is a common payment method and is permissible under the Rule.
  • Require you to use as collateral certain household and uniquely personal items that are of significant value to you but are of little economic value to a creditor. Such items include appliances, linens, china, crockery, kitchenware, wedding rings, family photographs, personal papers, the family Bible, and household pets. (These were called "household goods security" clauses.) However, if you borrowed money to buy any of these household or personal items, and use the items as collateral, the creditor can repossess the purchased item if you do not repay the loan.

What notices must be given to cosigners?

When you agree to be a cosigner for someone else's debt, you are guaranteeing to pay if that person fails to pay the debt. The Rule requires that you be given a notice that explains the responsibility you are undertaking. Under the Rule, the cosigner notice must say:

You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

The creditor can collect this debt from you without first trying to collect from the borrower.* The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

This notice is not the contract that makes you liable for the debt.

*Depending on your state, this may not apply. If state law forbids a creditor from collecting from a cosigner without first trying to collect from the primary debtor, this sentence may be crossed out or omitted on your cosigner notice.

This notice is not required when you receive benefits from the contract, such as when you buy goods, take out a loan, or open a joint credit-card account with another person. In these cases, you would be a co-buyer, co-borrower, or co-applicant (co-cardholder) rather than a cosigner. Therefore, the creditor would not be required to provide the notice.

How can late charges be assessed?

A creditor can charge a late fee if you do not make your loan payment on time. However, it is illegal under the Rule for a creditor to charge you late fees or payments simply because you have not yet paid a late fee you owe. This practice is called "pyramiding late fees." Under the Rule, this means that if you do not include the late fee you owe with your next regular payment, it is illegal for a creditor to subtract the late fee from your payment and then charge you a second late fee because the current payment is insufficient. For example, your loan contract may state that your monthly payments are $100 and that you will be assessed a $10 late fee if you pay after the grace period. If you make your $100 loan payment after that time and you do not include the $10 late fee with your next $100 payment, a creditor cannot first deduct the missing $10 late fee from the $100 payment, claim you have now paid $90, and then charge you an additional late fee. But, if you skip one month's payment entirely, the creditor can charge late fees on all subsequent payments until you bring your account up to date.

 

Equal Credit Opportunity

Credit is used by millions of consumers to finance an education or a house, remodel a home, or get a small business loan.

The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit. This doesn’t mean all consumers who apply for credit get it: Factors such as income, expenses, debt, and credit history are considerations for creditworthiness.

The law protects you when you deal with any creditor who regularly extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Anyone involved in granting credit, such as real estate brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law. Michigan Credit Card Debt Lawyers

When You Apply For Credit, A Creditor May Not...

  • Discourage you from applying because of your sex, marital status, age, race, national origin, or because you receive public assistance income.
  • Ask you to reveal your sex, race, national origin, or religion. A creditor may ask you to voluntarily disclose this information (except for religion) if you’re applying for a real estate loan. This information helps federal agencies enforce anti-discrimination laws. You may be asked about your residence or immigration status.
  • Ask if you’re widowed or divorced. When permitted to ask marital status, a creditor may only use the terms: married, unmarried, or separated.
  • Ask about your marital status if you’re applying for a separate, unsecured account. A creditor may ask you to provide this information if you live in "community property" states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. A creditor in any state may ask for this information if you apply for a joint account or one secured by property.
  • Request information about your spouse, except when your spouse is applying with you; your spouse will be allowed to use the account; you are relying on your spouse’s income or on alimony or child support income from a former spouse; or if you reside in a community property state.
  • Inquire about your plans for having or raising children.
  • Ask if you receive alimony, child support, or separate maintenance payments, unless you’re first told that you don’t have to provide this information if you won’t rely on these payments to get credit. A creditor may ask if you have to pay alimony, child support, or separate maintenance payments. Michigan Credit Card Debt Attorney

When Deciding To Give You Credit, A Creditor May Not...

  • Consider your sex, marital status, race, national origin, or religion.
  • Consider whether you have a telephone listing in your name. A creditor may consider whether you have a phone.
  • Consider the race of people in the neighborhood where you want to buy, refinance or improve a house with borrowed money.
  • Consider your age, unless:
    • you’re too young to sign contracts, generally younger than 18 years of age;
    • you’re 62 or older, and the creditor will favor you because of your age;
    • it’s used to determine the meaning of other factors important to creditworthiness. For example, a creditor could use your age to determine if your income might drop because you’re about to retire;
    • it’s used in a valid scoring system that favors applicants age 62 and older. A credit-scoring system assigns points to answers you provide to credit application questions. For example, your length of employment might be scored differently depending on your age. Michigan Credit Card Debt Attorneys

When Evaluating Your Income, A Creditor May Not...

  • Refuse to consider public assistance income the same way as other income.
  • Discount income because of your sex or marital status. For example, a creditor cannot count a man’s salary at 100 percent and a woman’s at 75 percent. A creditor may not assume a woman of childbearing age will stop working to raise children.
  • Discount or refuse to consider income because it comes from part-time employment or pension, annuity, or retirement benefits programs.
  • Refuse to consider regular alimony, child support, or separate maintenance payments. A creditor may ask you to prove you have received this income consistently.

You Also Have The Right To...

  • Have credit in your birth name (Mary Smith), your first and your spouse’s last name (Mary Jones), or your first name and a combined last name (Mary Smith-Jones).
  • Get credit without a cosigner, if you meet the creditor’s standards.
  • Have a cosigner other than your husband or wife, if one is necessary.
  • Keep your own accounts after you change your name, marital status, reach a certain age, or retire, unless the creditor has evidence that you’re not willing or able to pay.
  • Know whether your application was accepted or rejected within 30 days of filing a complete application.
  • Know why your application was rejected. The creditor must give you a notice that tells you either the specific reasons for your rejection or your right to learn the reasons if you ask within 60 days.
  • Acceptable reasons include: "Your income was low," or "You haven’t been employed long enough." Unacceptable reasons are: "You didn’t meet our minimum standards," or "You didn’t receive enough points on our credit-scoring system." Indefinite and vague reasons are illegal, so ask the creditor to be specific.
  • Find out why you were offered less favorable terms than you applied for—unless you accept the terms. Ask for details. Examples of less favorable terms include higher finance charges or less money than you requested.
  • Find out why your account was closed or why the terms of the account were made less favorable unless the account was inactive or delinquent.

A Special Note To Women

A good credit history—a record of how you paid past bills—often is necessary to get credit. Unfortunately, this hurts many married, separated, divorced, and widowed women. There are two common reasons women don’t have credit histories in their own names: they lost their credit histories when they married and changed their names; or creditors reported accounts shared by married couples in the husband’s name only.

If you’re married, divorced, separated, or widowed, contact your local credit bureau(s) to make sure all relevant information is in a file under your own name.  

If You Suspect Discrimination... Michigan Credit Card Debt Help

  • Complain to the creditor. Make it known you’re aware of the law. The creditor may find an error or reverse the decision.
  • Check with your state Attorney General to see if the creditor violated state equal credit opportunity laws. Your state may decide to prosecute the creditor.
  • Bring a case in federal district court. If you win, you can recover damages, including punative damages. You also can obtain compensation for attorney’s fees and court costs. An attorney can advise you on how to proceed.
  • Join with others and file a class action suit. You may recover punitive damages for the group of up to $500,000 or one percent of the creditor’s net worth, whichever is less.
  • Report violations to the appropriate government agency. If you’re denied credit, the creditor must give you the name and address of the agency to contact. While some of these agencies don’t resolve individual complaints, the information you provide helps them decide which companies to investigate. A list of agencies follows.

If a retail store, department store, small loan and finance company, mortgage company, oil company, public utility, state credit union, government lending program, or travel and expense credit card company is involved, contact:

Consumer Response Center
Federal Trade Commission
Washington, DC 20580.

The FTC cannot intervene in individual disputes, but the information you provide may indicate a pattern of possible law violations that require action by the Commission.

If your complaint concerns a nationally-chartered bank (National or N.A. will be part of the name), write to:

Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, DC 20219

If your complaint concerns a state-chartered bank that is insured by the Federal Deposit Insurance Corporation but is not a member of the Federal Reserve System, write to:

Federal Deposit Insurance Corporation
Consumer Affairs Division
Washington, DC 20429

If your complaint concerns a federally-chartered or federally-insured savings and loan association, write to:

Office of Thrift Supervision
Consumer Affairs Program
Washington, DC 20552

If your complaint concerns a federally-chartered credit union, write to:

National Credit Union Administration
Consumer Affairs Division
Washington, DC 20456

Complaints against all kinds of creditors can be referred to:

Department of Justice
Civil Rights Division
Washington, DC 20530

Michigan Credit Card Debt Lawyers representing Michigan Consumers with High Credit Card Debt

 

  Bankruptcy Basics - For Cases Filed on or after October 17, 2005 (pdf)
Bankruptcy Basics - For Cases Filed before October 17, 2005 (pdf)


   
Contact me, Detroit bankruptcy lawyer Walter Metzen today to schedule your free initial consultation. I also offer clients flexible appointment times and same day appointments if necessary. Get in touch with me today to learn how filing bankruptcy may be beneficial for you and your family. Why should you hire a Board Certified Bankruptcy Specialist? Click Here. My office has handled over 10,000 bankruptcy cases in Michigan and will apply this experience to your case as well. My office prides itself on fast, detailed, personal service. There are many different aspects to a bankruptcy case. Some of the different aspects are listed on the links below for you to explore. If you have any questions while exploring this site or would like a free personal bankruptcy consultation, contact my office at (313) 962-4656 or toll free 888-777-FILE.

 Contact me, bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.

 Be sure to Obtain a copy of your Credit Report after your Michigan Bankruptcy Filing and check it for Mistakes.

Contact me, bankruptcy attorney Walter Metzen to learn more about how the new Chapter 7 bankruptcy law may affect your case. I offer a free initial consultation so we can discuss your case personally.

We are a Debt Relief Agency helping people file for bankruptcy relief under the Bankruptcy Code. Let us help you decide if bankruptcy is right for you.

Bankruptcy attorney Walter Metzen represents clients throughout Southeast Michigan, including the communities of Detroit, Southfield, Warren, Roseville, Farmington Hills, Ann Arbor, Belleville, Canton, Clinton Township, Dearborn, Dearborn Heights, Hamtramck, Highland Park, Holland, Howell, Lincoln Park, Livonia, Macomb, Northville, Plymouth, Port Huron, Redford, Rochester, Saginaw, Southfield, Sterling Heights, Taylor, Trenton, Troy, Westland, Wyandotte, Ypsilanti, Mount Clemens, Howell, Oakland County, Macomb County, Wayne County, Washtenaw County, Livingston County, and all of the surrounding areas.

 


 

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