| PROTECTION FOR CONSUMERS WHO LEASE PRODUCTS
Q. What is the Consumer Leasing Act?
A. The Federal Consumer Leasing Act applies to any lease of consumer
goods for more than
four months. (It does not apply to leases of real estate.) This law requires
the lessor (the owner of the auto you lease, for example) to disclose
information before you sign the lease. Among the most important items
are:
• total amount of any initial payment you are required to pay;
• number and amounts of monthly payments;
• total amount for fees, such as license fees and taxes;
• any penalty for default or late payments;
• the annual mileage allowance and the extra charges involved if
you exceed that allowance;
• whether you can end the lease early, and the extra charge required;
• whether you can purchase the auto at the end of the lease and
for what price;
• any liability that you may have for the difference between the
estimated value of the auto and
its market value at the time you end the lease;
• any extra payment that you must make at the end of the lease.
You have the same rights to sue for violation that you have under the
TILA You can report
apparent violations of the Consumer Leasing Act to the same agencies that
enforce the TILA
(see final section of this section).
Determining Creditworthiness
Credit grantors may use any of the following factors to decide whether
to extend credit to you.
However, if your credit history is bad, they usually will not give you
credit or else will charge
you a high finance charge for the risk they will accept.
Factor Explanation
Ability to repay This depends on the stability of your current
job or income source, how much you earn, and the length of time you have
worked or will receive that income. Credit grantors also may consider
your basic expenses, such as payments on rent, mortgage loans or other
debts, utilities, college expenses and taxes.
Credit history This shows how much money you owe and whether
you
have large, unused lines of open-end credit. A very important
consideration is whether you have paid your bills on time
and whether you have filed for bankruptcy within the past
ten years or had judgments issued against you.
Stability Your stability is indicated by how long you have lived
at
your current or former address and the length of time you
have been with your current or former employer. Another
consideration is whether you own your home or rent.
Assets Assets such as a car or home may be useful as collateral for a
loan. Credit grantors also look at what else you may use for
collateral, such as savings accounts or securities.
Creditors obtain information about these indicators of credit worthiness
from the credit
report (see below). A recent study was released by Fair, Isaac, a company
that computes
“credit scores” by analyzing the relationships between consumers’
credit records and
their performance in paying their debts. Of the overall score, 35 percent
was based on
payment history. In other words, when your credit report shows that you
repay your debts
on time, you are likely to be able to be able to continue to obtain credit.
Other important
factors and their weight in your total credit score are amount and types
of debt, 30
percent; length of credit history, 15 percent and amount of new credit
sought or gained,
10 percent.
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