Unmasking the Credit Law Myths That Trip Up Borrowers and Lenders
Where have you heard these incorrect myths before?
As a borrower or lender in the world of real estate investing, you need to be aware of the facts surrounding credit laws to protect your interests. In this article, we’re busting five common myths about the Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Fair Credit Billing Act (FCBA), Fair Debt Collection Practices Act (FDCPA), and debt collection, so you can navigate the industry with confidence.
Myth 1: TILA Only Applies to Mortgage Loans
Many people believe that TILA only applies to mortgage loans. In reality, this law covers a wide range of consumer credit transactions, including personal loans, credit cards, and auto loans. TILA requires lenders to disclose important information about the terms and costs of loans, empowering borrowers to make informed decisions.
- Key TILA Features:
- Loan disclosures, right to rescission, and advertising rules.
Myth 2: You Can’t Dispute Incorrect Information on Your Credit Report
Under the FCRA, you have the right to dispute any inaccurate or incomplete information on your credit report. Credit reporting agencies are legally obligated to investigate your dispute and correct any errors they find. Furthermore, if a creditor discovers an error in your report, they are required to notify the credit reporting agencies to have it corrected.
- Key FCRA Features:
- Consumer credit report rights, dispute procedures, and identity theft protections.
Myth 3: Billing Disputes Must Be Resolved Within 30 Days
Contrary to popular belief, the FCBA does not require billing disputes to be resolved within 30 days. Instead, credit card issuers must acknowledge your dispute in writing within 30 days and resolve it within two billing cycles, which is typically around 90 days. This gives both parties ample time to investigate and resolve the issue.
- Key FCBA Features:
- Dispute rights, billing error procedures, and unauthorized charge protections.
Myth 4: Debt Collectors Can Harass You Until You Pay
The FDCPA protects consumers from abusive, deceptive, and unfair debt collection practices. Debt collectors cannot harass or threaten you, and they are required to respect your privacy. Additionally, you can request written validation of the debt and dispute it if you believe it is incorrect.
- Key FDCPA Features:
- Prohibited collection practices, communication rules, and debt validation rights.
Myth 5: Lenders Can Pursue Debt Collection Indefinitely
Many people mistakenly believe that lenders can pursue debt collection indefinitely. However, each state has its own statute of limitations that sets a time limit on how long creditors can legally attempt to collect a debt. Once the statute of limitations has passed, the debt is considered “time-barred,” and the creditor can no longer sue you to collect it.
- Statute of Limitations:
- Varies by state and type of debt, ranging from 3 to 15 years.
Putting Credit Law Myths to Rest
Now that we’ve debunked these common credit law myths, you can approach your real estate investments with a clearer understanding of your rights and responsibilities as a borrower or lender. Remember, staying informed and vigilant is crucial to protecting your interests and ensuring successful transactions.
Next Steps for Borrowers and Lenders
- Review the laws and regulations governing credit and debt collection.
- Stay up-to-date with changes in credit laws to ensure compliance.
- Seek professional advice if you encounter any issues or have questions.
This article was just a few of the most common credit law myths, there are many more out there.
Were you surprised by any of these credit law myths? Share your thoughts and experiences with us in the comments below!