Accounting and Finance Foundations

Unit 10

Accounting and Finance Foundations Unit 10: Credit 755

Credit

Chapter 22

Lesson 22.2

Student Guide

Credit Regulations (cont’d)

The Fair Credit Reporting Act (FCRA) gives consumers the right to know what information credit bureaus

are providing to potential creditors, employers, and insurers. Under this law, if credit is denied, the appli-

cant must be given the name and contact information of the credit bureau(s) that was consulted, and the

applicant is due a free copy of his/her credit report.

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 is a more recent

effort to protect American credit card holders. It eliminates unfair interest rate increases, prohibits exces-

sive and unnecessary fees, and requires credit card companies to disclose their terms and costs of credit

in writing—and in plain language that consumers can understand. The CARD Act also makes credit card

companies as well as their regulators more accountable for their actions and increases the penalties for

violating credit regulations.

Lastly, the CARD Act includes several provisions designed specifically to protect students and young

adults. It requires creditors extending credit to individuals under 21 years of age to either obtain the signa-

ture of a parent, guardian, or other adult who can be held responsible for the young person’s debt or obtain

written proof that the applicant has his/her own means to repay what s/he owes. In addition, it protects

young adults from aggressive, excessive credit card marketing and requires universities to disclose any

agreements that they have made with credit card companies offering credit to their students.

Questions

1. Nathan Jacobs operates a bookstore. One day a customer named Ann walks into his store and
   asks to make a large purchase on credit. Ann explains her financial situation to Mr. Jacobs and
   states she doesn’t have much cash but has a good job and will be able to pay $30 a month.
   a. What additional information (if any) should Mr. Jacobs request?

b. What sources of information could Mr. Jacobs request?

c. Would you give Ann credit? Why or why not?