What should I know about borrowing in Georgia?
Authored By: Georgialegalaid.org
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Basics of borrowing in Georgia
What should I know? +
- What is interest?
- What is the difference between a loan and a credit sale?
- What is the difference between secured and unsecured credit?
- What is the difference between closed-end credit and open-end credit?
- What should I know about credit cards?
- What are my rights?
- What are my responsibilities?
Credit is not free because it involves the creditor taking a risk. Creditors generally want some compensation for taking that risk. For these reasons, creditors require that debtors give them some compensation. Usually, but not always, this compensation takes the form of interest. Interest is generally a percentage of the amount of the debt.
Two types of credit are loans and credit sales. The difference between the two is important in Georgia the laws vary depending on the type of credit.
Loans: Banks, companies, and individuals lend money. They expect that the borrower will pay it back with interest over a period of time.
Credit sale: In a credit sale, a buyer purchases goods or services. The buyer expects to pay the purchase price plus interest in installments over a period of time.
Credit may be classified as secured or unsecured, depending on what the creditor can do if the debtor does not repay the debt.
Unsecured credit: This means that the creditor relies solely on the debtor's promise to repay the debt. An unsecured loan is therefore usually made only when there is little doubt that the debtor can repay it. If the debtor does not keep this promise, the creditor can sue the debtor to recover the money. However, suing a debtor who does not have the money to repay a debt is not very effective.
Secured credit: If a creditor thinks that there is a risk that repayment will not be made, they may require the debtor to sign a contract. This contract states that the creditor can take one or more items of the debtor's property if the debtor does not pay off the debt. This property is called collateral. When collateral is involved, credit is said to be "secured." With automobile loans, the collateral is usually the automobile itself. With bank loans, it may be a savings account.
Another way to get a secured credit is to use a third party. This person promises to repay the debt if the debtor fails to pay. The third-party promise to repay the debt is called a guaranty; the third party becomes the guarantor.
A consumer must be very careful with open-end or revolving credit relationships. The creditor in this kind of relationship may require the debtor to give a securing interest in all of the items that the debtor buys during that relationship.
- Closed-end credit: A debtor might enter into only one credit transaction with a creditor, which could be a loan or a credit sale. The single transaction is referred to as a closed-end credit transaction.
- Open-end credit: A debtor can also enter into a series of credit transactions with the same creditor over a period of time. This arrangement is known as open-end credit.
Credit cards are not free. These charges may include:
An annual card fee,
A monthly finance charge,
A cash advance charge,
A late payment fee, or
An over-limit charge.
State laws regulate the types and amount of charges that may be collected on credit cards. In Georgia, this law is called the Credit Card and Credit Card Bank Act. It provides for the organization of credit card banks in Georgia. It also allows lenders to impose various charges and fees on credit card accounts. Monthly statements show these fees and list all transactions on the cardholder's account during the month. These statements should be read carefully.
Your rights to get, use, and keep credit are enforced by the Federal Trade Commission (FTC). You have the right to a fair and equal opportunity to receive credit and the right to to resolve disputes over credit errors.
There are several laws that protect these rights.
Under the Fair Credit Reporting Act, you have the right:
- To receive a copy of your credit report.
- To know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
- Any company that denies your application must give you the name and address of the consumer reporting agency they contacted, if the denial was based on information given by the consumer reporting agency.
- To a free copy of your credit report when your application is denied because of information supplied by the CRA.
- To add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.
Under the Equal Credit Opportunity Act:
You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.
If you get regular public assistance, creditors must treat this the same as any other income.
If you are denied credit, you have a legal right to know why.
Your credit card company must send you a statement with the rules for correcting billing errors at least once a year. You have the right to fix mistakes on your account statements, including:
Charges that you did not make,
Charges that are for the wrong amount or show the wrong date,
Charges or payments that are not showing up on your account,
Bills going to the wrong address.
It is your responsibility to pay your bill on time. If you do not pay your bill on time, you will likely have to pay late fees and charges.
If you find a mistake on your bill, you are responsible for contacting your creditor within 60 days of finding the error. You can withhold payment on that amount while the charge is being investigated. However, you are responsible for the rest of the bill, including finance and other charges not related to the disputed amount.
If your credit card is lost and someone else uses it before you report the loss, you might be responsible for charges up to $50. Otherwise, you are not responsible for charges made to your card without your permission.
What can I do? +
- What can I do if I find a mistake in my monthly credit card statement?
You should notify the card issuer promptly. You must notify the card issuer in writing within 60 days after the issuer sends the first bill on which an error appears. Charges must be over $50 to be eligible for dispute.
Cardholders do not have to pay the questioned amount while the error is being investigated. But they must pay the parts of the bill that are not in question.
- Find resources to help you make financial decisions on the Consumer Financial Protection Bureau website.
- Read more about the Basics of Borrowing Money from the United Way.
- Submit a complaint about a financial product or service with the Consumer Financial Protection Bureau.
This article is adapted with permission from an excerpt of An Introduction to Law in Georgia, Fourth Edition, published by the Carl Vinson Institute of Government, 1998 (updated 2004). Reviewed and revised by Georgialegalaid.org, October 2019.