Understanding How Consumers Rights Are Protected By Debt Consolidation Law

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Plato must be a better mayor than a MEC for community safety, CT. Photo: Die Vryburger
Plato must be a better mayor than a MEC for community safety, CT. Photo: Die Vryburger

Lenders are known to exhibit some degree of compassion and understanding when debtors are not able to make timely repayments or when they miss a monthly payment just once or twice, but they are supposed to be fake and their sympathies or so-called compassion are supposed to be shallow. In reality, these financial institutions or creditors are actually quite happy to charge late fees, and other penalties. Every state is known to have their own set of laws, policies, and regulations that would be restricting the creditors from going overboard and charging exorbitantly. However, sometimes, it is pretty challenging to enforce or regulate these laws.

Even though it is true that the debtor is very much at fault for not making timely payments or not being able to pay off the amount he owes, there are many debt relief and debt consolidation laws in our country that protect them from harassment. To state clearly, these laws are in place not to absolve them of their duty or responsibility to pay off the amount they owe but to protect the debtors from malpractices. Everyone knows and acknowledges the right of the creditor to ask the debtor for payment or to sue him in court when the situation arises.

However, you must appreciate that there are certain malpractices which are more often than not quite abusive that is the reason why the federal government thought of implementing a few protective laws in favor of the debtors against the creditors and collection agencies. These laws would be protecting the debtors who have defaulted against any kind of harassment.

The Current Debt Scenario

As per the most recent financial reports, over 80 percent of the Americans presently carry over $137,000 in terms of debt. In maximum occasions, these ongoing financial responsibilities are spread over multiple different monthly payments. Sadly, this is exactly where the actual issues arise.

It could be pretty challenging to have multiple outlays; however, many debtors are able to get relief by opting for debt consolidation. While debt consolidation was initiated with primarily consumers’ requirements in mind, many debtors would be encountering unscrupulous business practices while seeking assistance from outside sources.  There are several laws in place for protecting Americans when they require relief from overwhelming debts. However, many consumers are not aware of their protective provisions and rights in this regard.

What Do You Mean by Debt Consolidation?

Debt consolidation is supposed to be a simple concept. You would require tallying up all your debts and taking out a single loan that would be covering it all. A debt consolidation loan would be used for paying off all the diverse financial commitments and obligations, leaving you with just one payment every month instead of numerous separate transactions.

While this could be an effective way of getting out of overwhelming debts for many, it could culminate in greater issues in case it is not pursued or done in the correct manner. Some not only unfair but even illegal practices by debt relief companies or debt management agencies could end up aggravating the issue.

You need to realize that multiple monthly payments could be slightly difficult to cater to even with people who have a sound knowledge of both money management and organization. If you end up defaulting, even a single monthly repayment could culminate in incredibly high late fees, declining credit scores, accruing interest, and many such issues. All this would lead to more miseries and hardships. A simple oversight or a missed payment could in future become a venomous cycle. Those, in turn, bring about hardships when the time comes to make up for that unintentional lapse. Let us explore some existing laws for the protection of debtors against any kind of harassment or malpractice. Visit https://www.nationaldebtrelief.com/debt-consolidation/ for more information about debt consolidation.

ECOA or the Equal Credit Opportunity Act

ECOA or the Equal Credit Opportunity Act is supposed to be a federal law which necessitates creditors and other lenders to make credit available to all equally, irrespective of religion, color, race, national origin, sex, age, marital status, or even the receipt of income you have got from the public assistance programs. As per the ECOA, you are allowed as a lender to consider only factors like credit records and future earnings while coming to an ultimate credit decision. Moreover, commercial lenders would be having some extra responsibilities according to the ECOA and that may include sending a written notification to the credit applicants in case of any adverse or unfavorable credit measures or steps taken; responding to the credit applications within a period of maximum 30 days; and comply with all the record-retention needs.

FCRA or the Fair Credit Reporting Act

FCRA or The Fair Credit Reporting Act is supposed to be a federal law relating to consumer protection and it helps in regulating the disclosure of all consumer credit reports published by the credit reporting agencies, also called the credit bureaus. This law necessitates credit agencies to scrutinize disputed items present in credit reports and also, helps to establish procedures meant for amending mistakes present in your credit record. We know that the FCRA has been intended for protecting consumers from getting their credit ruined because of misleading or incomplete credit report information.

FCRA allows consumers the basic right to scrutinize their credit report free of charge from every credit agency at least, once every year. Moreover, you have the right to examine your credit report whenever you are declined for a debt consolidation loan or any other forms of credit based on the information present in your credit report. While viewing your file, if you come across any discrepancy or inaccuracy, you have the right to ask the credit agency to rectify the error or delete the wrong part. Suppose the credit agency does not listen to your request, you have the right to write a statement stating your own perspective regarding the error. Your statement would be incorporated into your future credit reports.

FDCPA or Fair Debt Collection Practices Act

FDCPA or Fair Debt Collection Practices Act is supposed to be based on the premise that debtors and consumers must be protected from any kind of harassment in the hands of the collection agency or the creditors themselves. This law is not intended to condone or disregard the collection process rather it helps in imposing stringent rules and regulations to make sure that the collection process does not turn abusive.

This federal law is supposed to address effectively the debt collection practices. This law helps in promoting honesty, integrity, and openness in the debt consolidation business. The FDCPA rules out any kind of debtor harassment and helps in regulating the third-party collectors. These would be including lawyers and the collection agencies that are used to taking legal action for collecting overdue bills. You must take note of the fact that the law does not try to regulate the original creditors.

TILA or the Truth-in-Lending Act

TILA or the Truth-in-Lending Act is supposed to be an important federal law which necessitates lenders to essentially provide accurate information for facilitating consumers to compare the various loans and examine their terms thoroughly. They must disclose highly-regulated and detailed information.

Conclusion

Debt consolidation agencies and debt relief organizations must necessarily be transparent and must make their clients understand various debt relief programs and debt consolidation pros and cons. They must inform their clients about the expenses involved in availing their expert financial services. Moreover, these organizations must necessarily abide by the debt relief and debt consolidation laws and the debtors must try to find out more about each existing law for safeguarding their interests. These existing consumer protection laws in case of debt consolidation and other debt relief options are not intended to be in favor of the debtors regarding not paying back the owed amount. These laws only safeguard you against certain undesirable and distasteful practices often used by the collection agencies.

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