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Consumer Credit Regulation: 12.4.3 Truth in Lending Act

The Truth in Lending Act applies to auto title lending and requires disclosure of the annual percentage rate (APR) and finance charge. Rules are established as to when a fee must be included in the finance charge and APR. Violations lead to statutory and actual damages and attorney fees. The Truth in Lending Act is discussed in Chapter 2, supra and in far more detail in NCLC’s Truth in Lending.

Consumer Credit Regulation: Kan. Stat. Ann. §§ 16a-2-101 to 16a-9-102 (Consumer Credit Code).

What types of lenders it applies to (e.g., banks vs. non-banks): Act applies to “consumer credit transactions,” broadly defined. § 16a-1-301(5). Excludes extensions of credit to government or governmental agencies, certain transactions under public utility or common carrier tariffs, licensed pawnbrokers (except for disclosure requirements), and transactions covered by the insurance premium finance act. § 16a-1-202.

Consumer Credit Regulation: Mass. Gen. Laws ch. 140, §§ 114B, 114C; 209 Mass. Code Regs. § 26.01.

What types of lenders it applies to (e.g., banks vs. non-banks): Any creditor. § 114B.

Licensure requirements and implications of licensure: None.

Size and length of loans to which the statute applies, and any restrictions in the statute on these features: Statute is silent.

Other restrictions on applicability of statute (e.g., it only applies if lender takes a mortgage on real property): Applies to open-end credit plans. § 114B. Section 114C applies to credit card issuers.

Consumer Credit Regulation: Mich. Comp. Laws §§ 493.1 to 493.24 (Regulatory Loan Act).

What types of lenders it applies to (e.g., banks vs. non-banks): Applies generally to lenders, but exempts banks, savings banks, industrial banks, trust companies, building and loan associations, credit unions, and licensed pawnbrokering. §§ 493.2, 493.20.

Licensure requirements and implications of licensure: Must have license to make loans at rate higher than non-licensee can charge. § 493.2(1).

Size and length of loans to which the statute applies, and any restrictions in the statute on these features: Statute is silent.

Consumer Credit Regulation: Mich. Comp. Laws §§ 445.1851 to 445.1864 (Credit Reform Act).

What types of lenders it applies to (e.g., banks vs. non-banks): Act applies to extensions of credit made by regulated lenders. § 445.1854. “Regulated lender” means a depository institution, a licensee under the consumer financial services act, the motor vehicle sales finance act, or the regulatory loan act (summarized above), or a seller under the home improvement finance act. § 445.1852(i).

Consumer Credit Regulation: Mich. Comp. Laws §§ 493.101 to 493.114 (Regulatory Loans; Credit Card Arrangements).

What types of lenders it applies to (e.g., banks vs. non-banks): Applies generally to lenders that offer credit cards, but excludes banks, savings and loan associations, credit unions, and retail sellers or other creditors under the Retail Installment Sales Act, except that, to the extent such a lender uses the rate authority provided in the Act, it must also comply with the Act’s other substantive provisions. § 493.114(1).

Consumer Credit Regulation: Miss. Code Ann. § 75-17-19 (Revolving Charge Agreements).

What types of lenders it applies to (e.g., banks vs. non-banks): Any lender or issuer of credit cards and any retail seller. § 75-17-19(1).

Licensure requirements and implications of licensure: Statute is silent.

Size and length of loans to which the statute applies, and any restrictions in the statute on these features: Statute is silent.

Other restrictions on applicability of statute (e.g., it only applies if lender takes a mortgage on real property): Statute is silent.

Consumer Credit Regulation: N.H. Rev. Stat. Ann. §§ 399-A:1 to 399-A:24 (Small Loans).

What types of lenders it applies to (e.g., banks vs. non-banks): Any person engaged in the business of making small loans, including closed-end loans, open-end loans, title loans, and payday loans. §§ 399-A:1(XX), 399-A:2. Chapter does not apply to banks, trust companies, insurance companies, savings or building and loan associations, credit unions, or lenders that exclusively make educational loans. §§§ 399-A:1(XII), 399-A:2(III), 399-A:3.

Consumer Credit Regulation: N.J. Stat. Ann. §§ 17:11C-1 to 17:11C-49 (West) (New Jersey Consumer Finance Licensing Act).

What types of lenders it applies to (e.g., banks vs. non-banks): Applies to anyone making covered loans, but depository institutions, trust companies, insurance companies, and pawnbrokers are exempt. § 17:11C-6.

Licensure requirements and implications of licensure: License required to engage in consumer loan business, i.e., make consumer loans of $50,000 or less at rates greater than a non-licensee may charge. § 17:11C-3. Loan made without a required license is void unless lender meets statutory good faith error requirements. § 17:11C-33(b).

Consumer Credit Regulation: N.C. Gen. Stat. § 24-11 (Open-End Credit).

What types of lenders it applies to (e.g., banks vs. non-banks): Does not apply to banks, savings and loan associations, savings banks, or credit unions. § 24-9.

Licensure requirements and implications of licensure: Statute is silent. Note that §§ 53-166(a) and 53-168(a) require a creditor to have a license if it makes loans that exceed the interest rates provided by this chapter.

Size and length of loans to which the statute applies, and any restrictions in the statute on these features: Statute is silent.

Consumer Credit Regulation: 8.6.8.2 Minimum Payment Repayment Disclosures

In response to the problem of low minimum payments, the Credit CARD Act added a requirement that lenders disclose the actual number of months that it will take to pay off the balance on an account if the consumer makes only the minimum payment.482 Lenders are required to provide the following warning in periodic statements using the exact language below:483

Consumer Credit Regulation: 8.7.1 Deceptive Marketing

Some credit card lenders have engaged in questionable marketing practices when soliciting consumers. “Bait and switch” tactics had been common before the Credit CARD Act. For example, some credit card lenders marketed “no annual fee” credit cards, then imposed an annual fee six months later using a change-in-terms notice.492 They heavily advertised low “fixed” rates, but subsequently raised rates through change-in-terms notices and penalty pricing.493

Consumer Credit Regulation: 8.7.2.1 Background

During the past few decades, there has been a massive increase in credit card debt, as described in § 8.1.2.3, supra. The credit card industry bears a significant portion of the responsibility for this phenomenon. Credit card lenders aggressively solicited consumers at the beginning of this century.

Consumer Credit Regulation: 8.12.1 Introduction

Even with the scope of federal preemption, there is still room to bring state law claims against credit card lenders. If an abusive practice is outside of the scope of the Credit CARD Act or violates a provision without a private remedy, practitioners may want to consider claims for breach of contract or the duty of good faith and fair dealing, or under state laws prohibiting unfair or deceptive acts or practices (UDAP statutes).

Consumer Credit Regulation: 8.12.2 Breach of Contract

A breach-of-contract claim is probably one of the first theories that comes to mind when analyzing an abusive credit card practice for legal violations.729 Obtaining and understanding the underlying contract, however, may not be as easy as it sounds—and not just because the contractual language is obscure. Many consumers do not keep their credit card contracts.

Consumer Credit Regulation: 8.12.3 State UDAP Statutes

Consumers may have claims against credit card lenders under their state’s unfair and deceptive acts and practices (UDAP) statute.738 Private class actions have asserted UDAP claims against credit card lenders for deceptive and unfair practices.739

Consumer Credit Regulation: 8.12.4 Other Claims

In addition to breach of contract and UDAP claims, there are potential claims available under a number of other statutes and common law theories, such as the Racketeer Influenced and Corrupt Organizations Act,762 unconscionability,763 breach of the duty of good faith and fair dealing,764 breach of fiduciary duty,765 unjust enrichment,766 and common law f

Consumer Credit Regulation: 8.12.5.1 General

The problems involved in analyzing an abusive credit card practice for legal violations is always complicated by the complex scheme of federal preemption of state law governing credit, because most credit card lenders are financial institutions who can avail themselves of the benefits of preemption.770 Thus, it is rarely the substantive law of the state where the consumer lives that is applicable.771 Practitioners cannot assume that a creditor has disclosed an illegal term simply by checking the

Consumer Credit Regulation: 8.12.5.2 TILA Preemption

In contrast, the Truth in Lending Act (including the Credit CARD Act provisions) has a narrower scope of preemption.775 Other than state laws relating to disclosures in credit applications, solicitations, or renewal notices, TILA does not preempt state laws governing credit cards (or open-end credit in general) as long as these laws are not inconsistent with TILA requirements.