Consumer Credit Protection Law and Legal Definition

Both federal and state legislatures have enacted consumer protection laws intended to limit abuses inherent in the common law approach that would have the buyer beware. The Consumer Credit Protection Act, also known as the federal Truth in Lending Act, and the regulations implementing the Act, must be followed when the following four conditions are met:

1. The credit is offered or extended to consumers;

2. The offering or extension of credit is done regularly;

3. The credit is subject to a finance charge or is payable by a written agreement in more than four installments; and

4. The credit is primarily for personal, family, or household purposes. The primary aim of the Truth in Lending Act is to provide for the informed use of credit by requiring all sellers and lenders to make clear and conspicuous disclosure of all costs in a credit transaction and in any advertisement that includes credit terms. A creditor wishing to disclose information that is in addition to, or in explanation of, that required by the Truth in Lending Act is free to do so, but care must be taken that the extra information does not contradict or detract from the required information and does not mislead the consumer with respect to the information that must be disclosed.

A person also has a right ot receive credit reports from the credit reporting agencies in certain cases, such as fraudulent use of their credit. The user of consumer reports must inform consumers when an adverse action (such as denial of credit, insurance, or employment) is taken on the basis of such reports, and the user must identify the consumer reporting agency making the report.

In addition to the disclosure requirements of the federal Truth-in-Lending Act, many state consumer protection laws require the creditor to disclose information pertinent to consumer transactions, which may differ in some ways from the federally required disclosures. A creditor in a state that has a consumer credit protection act for retail installment sales contracts or motor vehicle retail installment sales contracts, or the like, must comply with both laws in consumer credit transactions.