Selected Federal and Maine Consumer Credit Protection Laws and Regulations

Selected Federal and Maine Consumer Credit Protection Laws and Regulations

SELECTED FEDERAL REGULATIONS

- Regulation B: Equal Credit Opportunity Act (ECOA) -
Lenders are prohibited from discriminating against borrowers based on age, sex, marital status, religion, race, color, national origin, or receipt of public assistance. Regulation B also prohibits discrimination if consumers make a good faith exercise of any of their rights under any federal consumer credit laws. Regulation B additionally requires that a lender provide an applicant with a written denial notice (adverse action) within 30 days of their loan application date. 

- Federal Reserve Board Regulation M: Truth in Leasing Act -
“The Truth in Leasing Act” governs consumer lease transactions such as auto leases. For any consumer leases of $25,000 or less, and for leases longer than four months, the consumer must receive the following disclosure:
•    The amount ($) due at lease signing
•    The monthly payment amount
•    Other charges such as: early termination fees, charges for excessive vehicle wear/mileage, reconditioning charges, and purchase option at the end of the lease

As is the case with renting, consumers who lease a vehicle don't actually own the car or truck in question. Unlike renting, the consumer (called the lessee) must insure the vehicle during the entire term of the lease.  Auto leasing is not for everyone. Some consumers who put relatively few (10,000/year or less) miles on their vehicles could be potential lease customers, oftentimes electing to swap their vehicle and lease another brand new car or truck at the end of their 2-3 year lease term. Our agency has also heard multiple stories from lessees who have paid substantial penalties for exceeding the maximum mileage allotments allowed in their lease agreement. 

Ask the lessor questions before committing to a lease, and get promises in writing. Attempt to negotiate (down) the initial capitalized cost of the vehicle in question. Remember, the lower the price, the lower your monthly payments!

- Regulation Z: The Truth in Lending Act -
Shoppers for consumer credit are provided with a "measuring stick" to compare loan rates/fees from one creditor or lender to another: the Annual Percentage Rate (APR).  This important provision of REGULATION Z allows consumers to shop for credit by simply comparing APRs from one lender to another. For mortgage borrowers, the APR must include certain prepaid finance charges like points and other fees which are added to the percentage. For example, with a mortgage loan, the note rate could be 6.50% and the APR 6.98%. For other loans (auto, boat, personal, etc.) the note rate and APR are almost always identical (example: auto loan interest rate 9.99%, APR 9.99%).  REG Z also allows some mortgage borrowers to rescind or cancel a transaction (home equity loans/lines of credit most frequently have this protection since consumers are putting their homes "on the line" as collateral). REG Z also requires specific disclosures to the consumer at closing so that costs such as the finance charge, total of loan payments, and monthly payment amount are clearly understood by the consumer before he/she becomes indebted by signing the loan documents. 

•       REMEMBER: take the time to shop for the lowest APR when applying for a credit sale or loan!


SELECTED MAINE LAWS

- Credit Card Restrictions: Title 9-A M.R.S.A §8-303 -
"No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means."  Essentially, this law prohibits store owners from adding an extra fee to consumers who choose to utilize credit cards when making purchases. Each year, the Bureau of Consumer Credit Protection receives several consumer inquiries alleging the illegal imposition of a surcharge by a Maine merchant. (Note: The law does not prohibit the merchant from offering a discount for cash purchases). 

- Maine Funded Settlement Act: Title 33 M.R.S.A, Chapter 9 - Subchapter 1-A -

This Act governs the funding of mortgage loans at or around their closing date. Lenders must provide funds to the settlement agents at or before the mortgage's closing. In the case of a mortgage loan that has a rescission period, funds must be made available prior to noon on the first business day after the rescission period (3 days after the closing date; Sundays do not count).

This Act was created due to the Bureau of Consumer Credit Protection's experience with of lenders that failed to provide loan proceed checks in a timely manner. Violation of this act can result in a court award of between $250 and $1,000, plus court costs and reasonable attorney's fees. 

- Mortgage Discharge Time Limits: Title 33 M.R.S.A, Chapter 9, §551 -
Within 60 days of a mortgage payoff, lenders must record a valid and complete release of the paid mortgage to establish their former borrower's record of ownership. After the expiration of 60 days, damages for failure to follow this Act can result in penalties of $200/week up to an aggregate amount of $5,000. 

This Act was created in response to consumer complaints fielded by Bureau of Consumer Credit Protection staff from frustrated consumers whose mortgage loans were not discharged in a timely manner. 

-Protection of Social Security Numbers: Title 10 M.R.S.A, Chapter 208-
"Except as otherwise provided in federal or state law, a person, a corporation or other entity may not deny goods or services to an individual because the individual refuses to provide a Social Security number." However, the law contains several exceptions, including lenders, landlords, insurance companies, healthcare providers, and employers conducting background checks, who have the right in certain situations to request the Social Security number from an individual. 

- Budget Planning Companies: Title 17 M.R.S.A, Chapter 29 -
&
- Debt Management Services: Title 32 M.R.S.A, Chapter 8-A -
Any company that makes contracts with debtors to accept and then distribute funds to a debtor’s creditors must be licensed as a debt management service provider (credit counselor) with the Bureau of Consumer Credit Protection. Maine lawyers, banks, and supervised lenders such as mortgage companies are exempt from this rule.

Warning: Licensed companies must post a $50,000 bond; and are examined by the Bureau of Consumer Credit Protection on a regular basis. Our agency deals with many consumer complaints that result when Maine citizens enter into contracts with unlicensed debt settlement or credit counseling companies that they have found on the Internet. Be a safe and smart consumer and visit the “Roster” section of the Bureau of Consumer Credit Protection’s website (www.Credit.Maine.Gov) to see if the Debt Management Service Provider (credit counseling company) you are considering is licensed!

- Pawnbroker Act: Title 30-A M.R.S.A, Chapter 183 -
A pawnbroker may not directly or indirectly receive a finance charge of greater than 25% per month on the part of a loan that is $500 or less, nor more than 20% per month on the part of a loan that is more than $500, made on property pawned. Pawnbrokers may contract for and receive a minimum charge of not more than $2.50, notwithstanding the fees in the previous sentence. No additional fees, other than those mentioned above, are allowed.