What are consumer rights for auto loans?
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UPDATED: Sep 21, 2011
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Like other loan industries, auto loans have restrictions that come from federal law. These laws are aimed at protecting consumers by requiring lenders to disclose certain information about the loan before signing and provide notice of any changes down the line. For most auto loans, these laws make it so that the dealership cannot take advantage of the borrower and that the borrower knows what he or she is getting into from the beginning.
The Truth in Lending Act, passed in 1968, applies not only to auto loans, but also to other types of loans like payday or personal. Under this law, lenders must provide written disclosure of the APR, finance charges, monthly payments and due dates and other important terms and costs in the loan agreement.
Federal regulations not only seek to protect the borrower but also any co-signer on a borrower’s loan. The Credit Practices Rule gives co-signers the right to receive written notice about their responsibilities on the loan if the borrower cannot make payments. It also prevents the lender from using unfair contract provisions and sometimes bans late charges.
Another law, the Fair Credit Reporting Act, also makes it easier for borrowers to understand their credit standing before going into a loan agreement by allowing them receive one free credit report a year. In addition, it makes reporting identity theft easier and correcting information on a credit report more accessible.
Finally, federal laws prohibit discrimination based on race, gender, religion, marital status, national origin or age with the Equal Credit Opportunity Act. Additionally, it does not allow lenders to deny you a loan based on the fact that you are receiving a form of public assistance.
In addition to these federal statutes, many states have their own laws and regulations for consumer credit protection when applying for auto loans.