Legal Obligations For Employer For Adverse Action Based On Employees Credit Report

If an employer takes any adverse action regarding an employee based on information in his credit file, he has to follow certain legal procedures, which failing to do could result in a lawsuit against the employer by state and national government agencies.

The employer should tell you that he might use the information in your credit report to make a decision regarding your future employment. This notification is separate from other documents like the job application. The employer cannot get a report about you for a common purpose without getting your permission or authorization first which is usually in written.

Pre-adverse action procedures

If the employer uses the information in your credit file or any other background report to take adverse action against you such as denying your employment or promotion or terminating yours employment or reassigning you, he must give you a copy of the report and a document called a summary of your rights under the fair credit report act before taking the adverse action. Read the report and contact the company that issued it if you think it has inaccurate or incomplete information.

You can try explaining the negative information into your employer which might work to your advantage but that will not fix the errors themselves on your credit report. In order to do so you need to contact the credit bureau and file a dispute. If the dispute results in a revelation that the information is indeed incorrect or inaccurate, the credit reporting company has to correct that information and send an updated report to the employer if you ask them to.

You must always make an effort to keep your credit report as accurate as possible. Even if you do not see any benefit in the short term, having an accurate credit report is important for any and all future need and requirement.

Adverse action procedure

If the employer takes an adverse action against you based on the information contained in your credit file, he must inform you already, in writing or electronically about it. The notice must include the name and address and phone number of the credit reporting agency that supplies the credit report or these background information.

The employer must issue a statement that the company that supplied the information didn’t make the decision to take this adverse action and cannot give you any specific reasons for it.

He must provide you with a notice that says you can dispute the accuracy or completeness of any information in your credit report and to get an additional fee report from the company that supplied the credit or other background information if you ask for it within 60 days.

What happens when employers do not comply with the FTC

There can be legal repercussions for employers who do not comply by the guidelines laid down by the FC are. Whether they failed to get written permission from the employee before getting a copy of their credit file or any other background report, failed to provide the appropriate disclosures in a timely way, failed to provide adverse action notice to unsuccessful job applicants, they can be sued by FTC, as well as other federal and agencies and the state. If you think an employer has violated the guidelines laid down by the fair credit reporting act, you can report it to the Federal Trade Commission.

Notice of negative public records

If the credit reporting bureau provides employers with a credit report that has negative information about you gathered from public records such as tax liens, court judgments, bankruptcy filing or criminal conviction, that company either has to tell you that it provided information to the employer or it has to take special steps to make sure that the information is accurate.

If you do get a notice that her company has provided negative public record information to a potential employer you may have the opportunity to correct or clarify it which may help you get the job.

Your Federal Rights When Cosigning a Loan Application

The FTC lays down certain rules and regulations concerning someone who is cosigning on a loan application. The most notable among these is the requirement for the creditor to provide you with a cosingner’s notice making you aware of the responisibilty that you are ndertaking.

Secondly, in certain states the creditor is prohibited to recover the money from the cosigner without making substantial efforts to recover it from the primary borrower first.

It is agreed that the situation when you need to go sign on a loan application for someone else does not arise too often. But what would you do in case it does? Many people end up cosigning on a loan application for a friend or close family in order to help them out. A common example is parents signing on a loan application for the children to help them start out with credit. Whatever your circumstance is, you must understand exactly what co-signing involves. Under the federal law, a creditor is supposed to inform you of all the obligations and the financial repercussions of signing on somebody else’s loan application.

The cosigner is usually presented with a notice that states the following:

“You’re being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fee or collection costs, which increase this amount.

The creditor can collect this debt from you without first trying to collect from the borrower.

(Depending upon the state and the prevalent law that determines debt collection, this line may either be scratched out or may not be there at all. Certain states prohibit the creditor from trying to collect from the cosigner without first making ample and suitable efforts to recover the money from the primary debt holder).

The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages etc. If this debt is ever in default, that fact may become a part of your credit record.

This notice is not the contract that makes you liable for the debt.”

This notice in itself should tell you enough about the possible consequences of signing on somebody else’s loan application. It does not matter whether the application is for a personal loan, home loan or a credit card. Co-signing makes you equally responsible to pay back the debt in case the primary borrower does not. Of course, the bigger the debt amount, the more liability you are undertaking.

Studies and reports of certain types of lenders have shown that as many as three out of four cosigners are required to pay back the loan on which the primary holder defaults. Cosigning on a loan application simply means that the lender is unwilling to take the risk off giving the loan to the primary borrower because he does not consider him/her creditworthy. So basically the lender is asking you to take on the risk that he would not in his professional capacity as a lender.

While some states prohibit direct collection from the cosigner, most of the states permit a creditor to collect immediately from you without pursuing the borrower first. So when a friend or a family member for whom you have cosigned defaults on the loan, the creditor might try to recover the debt from your straightaway if he feels that you are a better candidate for recovery. After all, if the primary borrower has defaulted on the loan, then the odds are that he does not have the money to pay back the creditor in the first place.

A majority of borrowers do not deliberately defaulted on a loan when they have the resources to pay it off. You should also consider the fact that the amount owed by the primary borrower may be increased by other fees and charges such as late charges, interest as well as a lawyer’s fee if the lender decides to sue in a court of law.

Depending upon the kind of debt and your liability, if the lender wins the case in court, your wages may be garnished or your property may be liquidated to pay off the debt.

What Is The Equal Credit Opportunity Act

The equal credit opportunity act was created by the Congress to prevent discrimination against women when it came to granting credit. This law was expanded to include laws against discrimination on the basis of race, color, creed, national origin, sex, age or marital status. Apart from including laws and guidelines to prevent discrimination against women seeking credit, this law also prohibits any form of retaliatory action such as blacklisting if a woman exercises her rights under the equal credit opportunity act. Some of the few features of the equal credit opportunity act are:

· The lender cannot ask for a person to cosign if you have a sufficient debt to income ratio.

· The woman is allowed to use her maiden or other married name or a combination of both.

· The creditor may enquire upon factors that may influence your disposable income such as the number of dependents but may not enquire about your practices on birth control on your plans to parenthood.

· The creditor must consider all forms of income such as alimony, child support, public assistance and part-time work. The woman is within her rights not disclose a particular line of income in which case it will not be taken into consideration when calculating the debts to income ratio.

· A woman cannot automatically be denied credit if she lists herself as a housewife.

· If there is change in the marital status of the woman, or she chooses to change her name legally, the creditor cannot ask the woman to reapply unless the earlier account was a joint account between her and her former husband.

· A woman’s marital status cannot be a part of the credit application approval process if she is trying to obtain credit separate unsecured credit. The exception is for states where community property is laws apply which are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington.

Problems with the Equal Credit Opportunity Act

While the Equal Credit Opportunity Act was created to prevent discrimination against women what trying to obtain credit and was later amended to include laws against discrimination based on a person’s race, color, national origin, religion, sex, age and marital status, the problem is that the reason for denial of a credit application can be easily disguised by the lender.

Because the lender can easily create another reason for having rejected the credit application, he can easily avoid violating the Equal Credit Opportunity Act on paper.

Another common problem is that many people do not know their rights under this law and are unaware of one their rights have been violated. People may also be an easy about filing a complaint and going through with what they will consider to be a lengthy legal battle.

In order to determine whether your rights have been violated under the Equal Credit Opportunity Act, you need to consider whether you would have been approved credit if you did not belong to a non-minority or different sex with the same economic status. It is essential that you think about this with a clear head. Do not let your emotions cloud your judgment because you’re upset about your credit application being rejected.

Main Points of the New Credit Card Rules

The new credit card rules of the Credit Card Act Of 2009 have come into effect on February 22, 2010. These new rules seek to bring about certain changes in the credit card industry and the guidelines under which it functions. The following are the main points and the changes that the new credit card rules seek to bring about.

No change in the credit card interest rate in the first year.

The creditor is not allowed to increase the interest rate on a credit card offers stay of the account. However the interest rate would increase into circumstances which are if the creditor disclosed a rate interest when you opened the account and if you do not make the minimum payment within 30 days of the due date.

No Interest Rate Increase on Pre-Existing Balances

The creditor is only allowed to apply the increased interest rate to the balances that you charge after the increase in the rate of interest. The increased rate of interest cannot be applied to older and existing balances.

Advance notice of 45 days for interest hike

Before these law creditors only needed to give you a 15 days’ notice to inform you of an interest rate increase and were not required to inform your tour of a penalty rate increase. The new laws require the creditors give the consumers and advance notice of 45 days along with an option to opt out of the interest rate.

No More Double Billing Cycle Calculation

The double billing cycle method of calculating financial charges could allow the credit card issuers to charge and interest on balances that you would rate. This method of calculation has not been made illegal by the Federal Reserve and the new credit card rules.

Limit on the Fee for Sub-Prime Credit Cards

Creditors can no longer charge fees up to hundred percent of the credit limit on the credit card. They are limited to 50% of the credit limit but only credit where percent of that can be charged an account is opened. The remaining amount has to be spread over at least five billing cycles.

The billing statements have to be sent 21 days before payment due date

The new laws require that the creditor send the credit card Bill at least 21 days before the payment is due. Earlier, the law stated that the billing statement should be sent within a “reasonable time”. Under the new credit card laws this reasonable time is clearly explained.

Payments received by 5 PM on the due date are considered to be on time.

Payment received the next working day after a weekend or a holiday is considered to be a time. If your billing due date is on a weekend or on a holiday on which the credit card issuer does not process or accept payments, then making the payment on the next working business day is still considered to be payment on time.

Payments above minimum applied to highest interest rate balances

Before the new credit card laws the practice was that most of the credit card issuers would apply any payment above minimum to the balance with the lowest much interest. This would enable them to run the maximum amount of interest as the balances with the highest interest would not get paid off to all the lower balances were dealt with first. The new credit card laws require that any payments that is above the minimum should be applied to the balance with the highest interest rate. This law saves you money that you pay in interest on the balances.

Billing statements to contained details About Revolving Balance

Whenever you revolve your balance on your credit card you will not be able to see how much it costs you and how much you pay in interest. The credit card companies are required to include the list of the months that it will take to pay off your balance with the minimum payment on the total interest that you’ll end up paying.

What is The Fair and Accurate Transactions (FACT) Act of 2003

The Fair and Accurate Transactions Act of 2003 is the same law that brought the consumer is the right to a free credit report every year from the three national credit bureaus Experian, Equifax and TransUnion. The FACT act Also Amended the Fair Credit Reporting Act (FCRA) to give the consumer is the means to fighting identity theft. However the FACT also has the provisions that have proved to be of a great service to individuals:

1) Allows a centralized system of maintaining fraud alerts. The consumer can notify any one of the national credit bureau to place a fraud alert. This credit bureau automatically shares the fraud alert with every credit bureau.

2) Active duty military personnel who are deployed abroad can use an extended fraud alert.

3) Consumers have rights to a credit score from the credit bureaus and an explanation for that score.

4) Store receipts for credit card purchases can only include the last five digits of the credit card number.

5) Victims of identity theft can get a copy of any application which has been used to get a product service in their name as long as they provide proof of their identity.

6) Lenders must take action on suspected identity theft even before the consumer is aware of it.

How to Contact the Federal Trade Commission ( FTC)

Contact Information for the Federal Trade Commission

The Federal Trade Commission (FTC) enforces the laws associated with unfair business practices. When your rights under any of the several consumer credit acts have been violated, you should report the violation to the FTC. There are several ways to report violations.

To complain about a business

e.g. collection agency, credit bureau
By Web: Report a Business
By Phone: 1-877-FTC-HELP, 1-877-382-4357
By Mail: Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580

To report identity theft violations

By Web: Report ID Theft
By Phone: 1-877-IDTHEFT, 1-877-438-4338
By Mail: Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580