Federal & State Laws and Financing

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Federal Laws

Some federal and state laws affect the vehicle financing and leasing process. They offer important information that can help you negotiate a better deal, better understand the process, and give you certain rights.

Consumer Leasing Act

requires the leasing company, or lessor (a dealership, for example), to disclose certain information before a lease is signed. That includes the amount due at lease signing or delivery; the number and amounts of monthly payments; all fees charged, including license fees and taxes; the charges for default or late payments; whether the lease can be ended early; whether the leased vehicle can be bought at the end of the lease; the price to buy at the end of the lease; and any extra payments that may be required at the end of the lease. The lessor also must disclose the annual mileage allowance and charges for excessive mileage.

Credit Practices Rule

Requires creditors to provide a written notice to potential co-signers about their liability if the other person fails to pay; prohibits late charges in some situations; and prohibits creditors from using certain contract provisions that the government has found to be unfair to consumers.

Equal Credit Opportunity Act

Prohibits discrimination related to credit because of gender, race, color, marital status, religion, national origin or age. It also prohibits discrimination related to credit based on the fact that you are receiving public assistance or that you have exercised your rights under the federal Consumer Credit Protection Act. It requires certain creditors to provide consumers with information if the creditor denies them financing or takes other adverse action.

Credit Practice RulesFair Credit Reporting Act

Gives consumers many rights, including the right to one free credit report each year from each of the three nationwide consumer reporting agencies. It allows consumers to call one number to notify credit reporting agencies of identity theft. It also provides a process for consumers to dispute information in their credit reports that they believe is inaccurate or incomplete. It requires creditors to give consumers their credit reports and credit scores if a creditor used a credit score in denying them credit or taking other adverse action against them; and it requires creditors to provide consumers with their credit scores and related information in certain other circumstances.

Risk-Based Pricing Rule

Gives most consumers information about their credit scores when they apply for financing. Most creditors comply with the rule by providing consumers who apply for vehicle financing with a Credit Score Disclosure Notice. This notice contains a consumer’s credit score and additional information to put the score in context (for example, it indicates how the credit score compares to the credit scores of other consumers).

Truth in Lending Act

requires that, before you sign the agreement, creditors give you written disclosure of important terms of the credit agreement, like the annual percentage rate (APR), finance charge, monthly payment amount, payment due dates, amount financed, length of the credit agreement, and any charges for late payment.