Consumer credit refers to the ability of a consumer to access a loan. The most common form of credit used by consumers is a credit card account issued by a financial institution. Merchants may also provide direct financing for products which they sell. Banks may directly finance purchases through loans and mortgages.
The law of consumer credit is primarily embodied in federal and state statutes. These laws protect consumers and provide guidelines for the credit industry.
States have passed various statutes regulating consumer credit. For example, the Uniform Consumer Credit Code (UCCC) has been adopted as law in eleven states and Guam. Its purpose is to protect consumers obtaining credit transactions and ensure that adequate credit is available. To do this, the UCCC includes provisions outlawing waiving rights through contracts and sets caps on interest rates.
In 1968, Congress passed the Consumer Credit Protection Act to further regulate the consumer credit industry. This act requires loan providers to explain financial terms to consumers, restricts the garnishing of wages, prohibits discrimination on the basis of sex or marital status, and established the National Commission on Consumer Finance to investigate the consumer finance industry. While this commission has since disbanded, credit card companies and credit reporting agencies are still regulated by the Act.
In May 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. This statute even further constrained the practices of financial institutions that issue consumer credit cards. These new regulations include bans on practices such as charging interest on balances that have already been paid off, hiking interest rates without notice, and marketing towards college students. Additionally, the act requires interest rates on consumer credit instruments to remain static for at least one year after the consumer obtains it. Most notably, however, the CARD act contains provisions regulating the use of credit default swaps and increased penalties for noncompliance with federal credit regulations.
U.S. Constitution and Federal Statutes
- Consumer Credit Protection Act - 15 U.S.C, Chapter 41
- Truth In Lending Act - 15 U.S.C. § 1601
- Fair Credit Reporting Act - 15 U.S.C. § 1681
- Fair Credit Billing Act - 15 U.S.C. § 1637
- Equal Credit Opportunity Act - 15 U.S.C. §§ 1691 - 1691e
- The Fair Credit Debt Collection Act - 15 U.S.C. §§ 1692 - 1692o
- CRS Annotated Constitution
Federal Agency Regulations
- Code of Federal Regulations: 12 C.F.R. - Banks and Banking
Federal Judicial Decisions
- U.S. Supreme Court:
- U.S. Circuit Courts of Appeals:
- Uniform Commercial Code - (As Adopted by Particular States)
- Uniform Consumer Credit Code
- New York law governing Unauthorized or Improper Use of Credit Cards and Debit Cards - New York General Business Law Article 29-A §§ 511 et seq.
- New York law governing Debt Collection Procedures - New York General Business Law Article 29-H §§ 600 et seq.
- New York law governing Consumer Credit Balances - New York General Business Law Article 34-A §§ 710 et seq.
- California law governing credit cards and various other aspects of consumer credit - California Civil Code §§ 1747 et seq.
- California law governing fees in consumer credit agreements and related consumer protections - California Financial Code §§ 4000 et seq.
State Judicial Decisions
- N.Y. Court of Appeals:
Key Internet Sources
- Consumer Financial Protection Bureau
- U.S. Federal Trade Commission
- National Foundation for Credit Counseling
- Consumer Credit Guide
- House Committee on Banking and Financial Services (includes information from Subcommittee on Financial Institutions and Consumer Credit)
- ILRG Legal Forms Archive: Credit and Collection, Borrowing and Lending
[Last updated in July of 2022 by the Wex Definitions Team]