One of the most common mistakes of lending consumers is diving into debt without knowing their rights and responsibilities to it. Whether made from a traditional bank, Peer-To-Peer Lending, credit union, or other financial institutions, the application for loans may always involve a series of methods that shall take place before qualification.
Once you have received the approval for the loan, you will also take the requested amount of money in a lump sum. But that’s only the beginning. Eventually, you’ll get to encounter terminologies that you may or may not be familiar with. Without sufficient knowledge, some consumers would often start questioning about the interest rate, APR, origination fee, loan term, and more. Therefore, financial troubles would likely occur due to lacking familiarity.
As a general rule: it’s smart to know your rights and responsibilities before making a borrowing decision. This way helps you avoid future errors and misconceptions (especially with unfamiliar terminologies) and deal with lenders in terms of debt management, dispute handling, or filing for bankruptcy.
Some debtors are likely to encounter debt collectors who keep on calling them every time, pressuring them to pay up. Otherwise, interest charges may apply. But the reality is that some debt collectors overcharge or add excessive interest and cost to debtor’s accounts, making their situation even worse.
When dealing with financial troubles like this, know that consumers have their rights to claim. The Fair Debt Collection Practices Act or FDCPA is a federal law that governs the acts and behaviors of third-party debt collectors to protect consumers from abusive or unfair collection practices.
Under this federal law, debt collectors are not allowed to do the following collection practices:
- Calling the debtor before 8 am or 9 pm. This is not permitted to honor the consumer’s work or personal schedules.
- Calling the debtor within working hours especially when the employer does not allow to receive calls inside the workstation.
- Contacting a third party about you. Disclosing your credit information to anyone is strictly forbidden.
- Harassing consumers to pay up immediately.
- Lying about the exact amount a consumer owes.
- Using deceptive methods in collecting debt payments.
Also, consumers are supported by rights with respect to their credit reports. These rights are given by another federal law, the Fair Credit Reporting Act or FCRA. The law enacts the following rights to promote fairness and privacy of consumer’s information.
- Right to know the content of consumer’s file.
- Right to ask for a credit report.
- Right dispute inaccurate information found in the credit report.
- Right to update or remove inaccurate information.
- Right to have a consumer’s credit report given to his or her employer only with his or her consent.
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In line with the consumers’ entitlement to these rights, all consumers shall also have their responsibilities to their credit issuing companies. Upholding these responsibilities is an obligation to their creditors and a key to improving or maintaining a good credit history.
- Consumers must understand the terms of the agreement before signing up to borrowing. He or she must read the fine print that involves a discussion about interests, fees, and other related charges.
- Consumers must ensure that all the information written in their statements are true and correct. If there are certain errors, report to the issuer immediately. Missed or late payments may affect their credit history and incur certain charges.
- Consumers are obliged to return the borrowed money within the specific timeframe to which they have agreed.
- Consumers must update their contact details and billing address to get notified regarding regular billing statements and collection reminders.