LEARNING OBJECTIVES
After reading this chapter, you should understand the following:
- How consumers enter into credit transactions and what protections they are afforded when they do
- What rights consumers have after they have entered into a consumer transaction
- What debt collection practices third-party collectors may pursue
This chapter and the three that follow are devoted to debtor-creditor relations. In this chapter, we focus on the consumer credit transaction. Secured Transactions and Suretyship and Mortgages and Nonconsensual Liens explore different types of security that a creditor might require. Bankruptcy examines debtors’ and creditors’ rights under bankruptcy law.
The amount of consumer debt, or household debt, owed by Americans to mortgage lenders, stores, automobile dealers, and other merchants who sell on credit is difficult to ascertain. One reads that the average household credit carddebt (not including mortgages, auto loans, and student loans) in 2009 was almost $16,000. 1 Or maybe it was $10,000. 2 Or maybe it was $7,300. 3 But probably focusing on the average household debt is not very helpful: 55 percent of households have no credit card debt at all, and the median debt is $1,900. 4
In 2007, the total household debt owed by Americans was $13.3 trillion, according to the Federal Reserve Board. That is really an incomprehensible number: suffice it to say, then, that the availability of credit is an important factor in the US economy, and not surprisingly, a number of statutes have been enacted over the years to protect consumers both before and after signing credit agreements.
The statutes tend to fall within three broad categories. First, several statutes are especially important when a consumer enters into a credit transaction. These include laws that regulate credit costs, the credit application, and the applicant’s right to check a credit record. Second, after a consumer has contracted for credit, certain statutes give a consumer the right to cancel the contract and correct billing mistakes. Third, if the consumer fails to pay a debt, the creditor has several traditional debt collection remedies that today are tightly regulated by the government.
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