Understanding Consumer Sales and Credit

Sep 17, 2024

Lecture Notes: Consumer Sales and Credit

Introduction to Credit

  • Definition: An agreement allowing a borrower to receive goods/services before payment, with a promise to pay later, usually with interest.
  • Types of Credit:
    • Credit Cards
    • Mortgages
    • Student Loans
    • Car Loans
    • Payday Loans

Usery

  • Definition: Charging excessive interest, regulated by state laws.
  • State Law Approaches:
    1. Forfeit excessive interest.
    2. Forfeit entire interest if usurious.
    3. Forfeit principal and interest if usurious.
  • Example (California): Excess interest forfeited over 10% on personal loans.

Payday Loans

  • Basics: Known as deferred deposit transactions.
  • Regulation:
    • Overseen by the California Department of Business Oversight.
    • Maximum loan: $300 with a 15% fee.
  • Impact: High compounded interest rates; average borrower debt: 5 months with $520 in fees for $375 loans.

Important Consumer Credit Laws

  1. Truth in Lending Act: Requires disclosure of credit terms to borrowers.
  2. Consumer Leasing Act: Similar disclosures for leases over $25,000 for >4 months.
  3. Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act):
    • Protections for credit card holders.
    • Increased maximum interest rate to 30%.
  4. Equal Credit Opportunity Act: Prohibits discrimination in credit transactions.
  5. Fair Credit Reporting Act: Specific disclosures for credit seekers.
  6. Fair Credit Billing Act: Protects against billing errors, facilitated by the CARD Act.

Additional Consumer Purchase Protections

  • Warranties:
    • Express Warranties: Affirmation of product performance; can be oral or written.
    • Implied Warranties:
      • Merchantability: Goods fit for ordinary purpose.
      • Fitness for a Particular Purpose: Seller assures product is fit for a specific use.
  • Exclusion of Warranties:
    • Written warranties cannot be disclaimed.
    • Implied warranties can be disclaimed using terms like "as is" or "with all faults".

Conclusion

  • Consumer protections are statutory and warranty-based unless disclaimed.
  • UCC governs warranty protections; statutory law governs Consumer Credit protections.