Unit 24.

What Lenders Want to Know Before Extending Credit

Read and translate the texts.

Any store, bank, or credit card company that extends credit to consumers wants to know that the money will be repaid. Before making a loan, the creditor will want to know several things about the consumer:

• Is the consumer a reliable person? (For example, a person who moves or changes jobs frequently might not be considered reliable.)

• Does the consumer have a steady income that is likely to continue into the future?

• Is the consumer’s income high enough to enable him or her to pay for the items to be purchased?

• Does the consumer have a good record in paying off other loans and bills?

Creditors are in business to make money; thus, it is understandable that they would ask questions such as these. However, creditors have sometimes unfairly denied credit for reasons such as the debtor’s race, sex, or source of income (such as public assistance or alimony). Today a federal law, the Equal Credit Opportunity Act, protects consumers against credit discrimination based on sex, marital status, race, color, religion, national origin, old age, or source of income. The Federal Trade Commission handles credit discrimination complaints against finance companies, retail stores, oil companies, and travel and entertainment credit card companies. Bank regulatory agencies, such as the Federal Reserve Board and the Comptroller of the Currency, handle complaints against banks and bank credit cards. If you think you have been discriminated against, you may complain to one of these agencies or sue the creditor in court.

Many states also have laws that forbid credit discrimination. Complaints should be directed to the state or local consumer affairs office or human rights commission.

What to Do If You Are Denied Credit

If you ever apply for credit, the creditor will evaluate your application according to certain standards. The creditor may investigate you personally or may pay a credit bureau to check your credit word. Many creditors do both. There are thousands of credit bureaus across the country. Financial and personal information about consumers is often stored in computers and may be passed among the various bureaus. Information about you in a credit bureau’s files can be a key factor in determining whether you get loans, credit cards, or other forms of credit in the future.

If a credit report indicates that you are a poor risk, the creditor will probably deny credit. Also, if you are trying to get credit for the first time and have no credit record at all, the creditor may deny credit. Sometimes creditors decide to deny credit based solely on information in the application, without taking the time to order a credit report.

The Equal Credit Opportunity Act says that creditors must tell consumers why they were turned down. The reasons given must be specific. For example, “applicant does not meet our standards” is not specific enough. On the other hand, “insufficient income” is a specific reason. It tells you how your circumstances must change to qualify for credit.

Another federal law protests you from inaccurate credit bureau reporting. The Fair Credit Reporting Act requires creditors who deny credit based on information received from a credit bureau to tell you that fact. The creditor must also give you the name and address of the credit bureau that supplied the report.

Every consumer has the rights to learn the nature of information in his or her credit file. Although credit bureau are not required to show consumers copies of the actual file, they must disclose the nature and substance of the information it contains.

If you discover false, misleading, incomplete, irrelevant, or out–of–date information in your file, you can require the credit bureau to recheck its information and correct the errors. If the credit bureau does not cooperate in correcting your credit file, you may complain to reinvestigating the information the bureau still believes that it is correct, you have the right to have your version of the dispute inserted in the file. If the information being reported about you is accurate, the credit bureau can report it for seven years.

Find the equivalents of the following words and expressions in the text.

Надежный человек; иметь постоянный доход; несправедливый отказ в кредите; алименты; cоциальная помощь; дискриминация при получении кредита; семейное положение; источник дохода; магазин торгующий в розницу; контролер денежного обращения; федеральное резервное обращение; комиссия по правам человека; оценить заявку на кредит в соответствии с определенными стандартами; базироваться только на информации в заявлении; недостаточный доход; получить право на кредит; картотека кредитной информации; отдел кредитов; устарелая информация; перепроверить информацию и исправить ошибки.

Answer the questions:

1. What do lenders usually want to know before extending credit? Why do they want to know all these points?

2. What reasons can be for unfairly denied credit?

3. Who handles credit discrimination complaints?

4. How do creditors evaluate applications?

5. What do credit bureaus do?

6. Why can the creditor deny credit if you are trying to get it for the first time?

7. What does the Equal Credit Opportunity Act say?

8. What does the Fair Credit Reporting Act require creditors to do?

9. What can you require if you discover false, misleading, incomplete, irrelevant, or out–of–date information in your credit file?

Match the words on the left with the correct definition on the right:

Unfairly denied credit	an account in permanent form, esp. in writing, preserving knowledge or information about facts or events.
Qualify for	able to be trusted.
Record	judge or assess the worth of; appraise.
Reliable	be provided with the abilities or attributes necessary for smth.
Steady	credit discrimination.
Evaluate	inquire into a situation or problem thoroughly; examine systematically, esp. in order to discover the truth.
Investigate	make information known.
Solely	essence, meaning.
Turn down	erroneous.
Disclose	reject or refuse.
Substance	not relating or pertinent to the matter at hand.
Inaccurate	only.
Irrelevant	regular.

Problem–solving:

You are a loan officer at a local bank. Each of the following people is seeking a loan. Based on the information provided, evaluate each applicant and make a decision regarding each loan request. Discuss your reasons for granting or denying credit.

a. Alice Johnson is the mother of four children. Her only income consists of public assistance payments of $420 per month and $80 per month from the pension other deceased husband. She wishes to buy a new oven and refrigerator totalling $700. She lives in a public housing development. Her rent and other expenses usually total about $375 a month.

b. Jerry Levitt is a carpenter seeking work wherever he can find it. Depending on the weather and other factors, he is subject to seasonal unemployment. He currently brings home about $650 per month and has car payments of $150 a month, TV payments of $105 a month, rent of $220 a month, and no money in the bank. He would like to borrow $2,500 to buy a motorcycle.

с. Barbara Griego, 22, is in her second year of college. She has excellent grades and plans to attend medical school after graduation. Until recently, her parents paid her bills, but she is now on her own. She is seeking $2,000 for her college tuition and expenses. She has never borrowed money before, but she plans to repay all loans after finishing medical school.