Article Abstract:
The use of surcharges applied to purchases made with credit cards (as opposed to surcharge-free cash purchases) is discussed in relation to the Truth in Lending Law. Those in favor of the surcharge, Senator William Proxmire and Chevron Corp.'s George McGregor, cite the excessive use of credit cards (Americans have 600 million credit cards) and the fact that credit is not a free service. The two opposed to such two-tier pricing, Congressman Frank Annunzio and American Express' Meredith Fernstrom, favor cash discounts over credit surcharges. A report by the Federal Reserve System's Board of Governors, issued July 1983, states that credit card transactions are the most costly for retailers, that credit card usage does not increase retail sales, and that, in fact, cash purchasers canbe said to subsidize credit card users.
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Article Abstract:
Credit regulations are intended to protect uninformed consumers and have been developed for each type of lender, differing in rate limits or maximum amounts which can be loaned, depending generally on the type of customer being served and the costs involved in lending. Credit is a circular relationship, with the money earned from loans determining rates earned by savers. Bad debts must be covered by appropriate rates. Loan rate floors are determined by the rates paid savers, and the ceiling rate determines earnings. Restrictions on rates mean the amount of credit available to borrowers is reduced; a smaller reduction is experienced if subsidies result, but they are at the expense of individuals who pay cash. More expensive credit substitutes must be used when credit is not available.
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Article Abstract:
Creditors are required to disclose certain information to rejected credit applicants under two acts: the Fair Credit Reporting Act and the Equal Credit Opportunity Act. Disclosure must be made whenever outside sources affect the credit decision. The credit applicant is entitled to know that a credit report was used and the name of the agency from which it was obtained; that information was obtained from another source; and that the applicant has the right to learn the type of information through a written request. Through the Equal Credit Opportunity Act, the reason for rejecting a credit applicant must be disclosed. A checklist includes items to remind creditors of actions to be taken and credit reporting requirements.
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