EXTENDING CONSUMER CREDIT TO YOUR CUSTOMERS REQUIRES COMPLIANCE WITH FEDERAL LAWS, by Henry J. Fasthoff, IV

Houston Business Show legal commentator Hank Fasthoff, of Stumpf Craddock Massey & Farrimond, provides weekly information on our show about business law issues. He can be reached at 713.871.0919.

If your company sells consumer, family, or household goods or services on credit, there are certain federal laws with which you must comply: the Truth in Lending Act; the Fair Credit Billing Act; the Equal Credit Opportunity Act; and the Fair Debt Collection Act. These statutes apply generally to all business-to-consumer transactions, but not to business-to-business transactions. An example of a business-to-business transaction would be Home Depot’s purchase, on credit, of a 1,000 refrigerators from the refrigerator manufacturer. An example of a business-to-consumer transaction would be your purchase of one of those refrigerators from Home Depot using your Home Depot credit card. (Note also that there are state statutes that govern the consumer credit area with which businesses must also comply.)

1. Truth in Lending Act

The Truth in Lending Act requires a business selling on credit to disclose to its customers the credit terms on the customer is allowed to purchase an item. It also governs certain aspects of how you may advertise the credit terms. Some of the items that are required to be disclosed include:

• monthly finance charge;
• annual interest rate;
• payment due date;
• total sale price (which includes the cash price plus interest and all other charges);
• late payment charges; and
• circumstances that give rise to the imposition of late charges.

2. Fair Credit Billing Act

The Fair Credit Billing Act dictates the responsibilities of a customer complaining about a billing mistake, and your responsibilities in responding to the disgruntled customer. A customer is required to notify you within 60 days after the first bill containing the alleged error was mailed to the customer. After receiving the customer’s complaint you have 30 days within which to notify the consumer that you have received the complaint and will investigate. You are required to perform a “reasonable investigation” of the consumer’s complaint. Within 90 days of receiving your first notification from the customer, you must either (1) correct the error, or (2) explain—in writing—the reason(s) the bill is correct. Failure to follow these procedures requires you to give the consumer a $50.00 credit toward the disputed amount—even if the bill was correct. Importantly, once you have received a dispute from a customer you may not report the unpaid bill to a credit bureau until the dispute if finally resolved.

3. Equal Credit Opportunity Act

Similar in purpose to the Equal Opportunity Employment Act, the Equal Credit Opportunity Act prohibits discrimination against credit applicants based on race, color, religion, national origin, age, sex or marital status. One exception: you are permitted to reject applicants who haven’t reached the legal age for entering into contracts, e.g., 18 in most states.

4. Fair Debt Collection Practices Act

All of us have probably heard at least one horror story about the abusive practices of debt collection agencies. At the federal level, the Fair Debt Collection Practices Act dictates what creditors and third party collection agencies may or may not do. Generally speaking, however, the state statutes governing debt collection are more important than the federal statute because some states, including Texas, have implemented stricter consumer debt collection laws.

HOUSTON BUSINESS BRIEFS

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Daily Court Review Changes Name, Overhauls Image. The "old faithful" of daily legal and business information--the Daily Court Review has changed its name to DCR, and has overhauled its image. The new publisher of the daily business and legal newspaper, Sarah Morin, has made the publication much more visually attractive, is bringing more practical business content to readers, and is promoting the market value of the legal information featured in the paper. There is no other place where one can find more leads that are more up to date and at a lower cost than in the DCR. The pages of the DCR are filled with critical legal information about your competition, prospective vendors, and potential customers and clients. HBR congratulates DCR for becoming the daily business tool that every entrepreneur and business leader needs.

Do You Know How to Promote Your Business? The Houston West Chamber of Commerce is offering a seminar on how to promote your business that Kevin Price will be speaking at in August. Furthermore, Mr. Price will be speaking at a Houston West Chamber networking meeting in July. If you want to know how to get your business known to the larger community, you really need to attend this event. Details are pending but get more information by visiting the website of the Houston West Chamber of Commerce.

Changes at Business Radio 650. Unless you have been under a rock this last week, you have heard that Howard Stern's radio show has been added to the daily line up of Business Radio 650. It is believed, but this is speculative, that Stern's will lead to sweeping changes to the entire line up. We at HoustonBusiness.com know only about as much about what may or may not happen as you. One thing we do know, however, is that the weekend format will remain business oriented. The positive to this development is that the only place people will get continuous business information will be during the weekends on Business Radio 650. For obvious reasons, we will not comment on potential negatives. However, we will keep you informed of any possible changes for the Houston Business Show, as well as Business Radio 650.

Kerry Advocates Minimum Wage Increase. Senator John Kerry has begun advocating the controversial position of raising minimum wage. Often a politically popular position with the average voter, minimum wage increases are full of potential problems, including:

- People are paid for the job, if the salary became more than the job is worth, the result would be the elimination of many of these jobs.
- Historically, minimum wage has led to the elimination of jobs for the people it was intended to help: minorities, youth, and those with minimal skills.
- Those who survive with a job after an increase will face higher prices (because the cost of goods will likely go up to pay for labor costs) and higher taxes (because many have multiple jobs and could find themselves in a higher tax bracket).
- Such laws are a huge blow to small businesses (the nation’s primary job creator) that find staying afloat to be big enough of a challenge without additional costs.
- This could be a blow to America’s international competitiveness in an already cheap labor market.

The thing most interesting about Kerry’s position is that no responsible politician has advocated a minimum wage increase in a weak economy. Many are speculating that either Kerry is advocating an irresponsible position or he is admitting that the economy is enjoying a recovery. Neither of these seem like positions that Kerry would want to maintain.

HOUSTONBUSINESS.COM PRESS RELEASE SERVICE

HoustonBusiness.com now offers a free press release service. To submit your release to us just send us an email with the completed, ready-to-publish press release at press.releases@houstonbusiness.com. If it meets our editorial guidelines (no sexually-oriented businesses) we'll post your release to our site in the Media Room section of our site. You can put a link on your site back to your press release on ours and increase your presence, credibility, and, most importantly, get your message out to the public.

GET IT FIXED RIGHT THE FIRST TIME

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ON FUTURE SHOWS AND NEWSLETTERS

Coming up on future shows and in future newsletters:

All Star Game’s Economic Influence. There is a lot of excitement about Major League Baseball's 2004 All Star Game that is coming to the Bayou City. Sports fans are thrilled and store owners are salivating. The question is, what kind of impact will it have on the city? That will be the focus of an upcoming show.

Houston West Chamber of Commerce. Jeannie Bollinger of the Houston West Chamber of Commerce will be on to talk about some of the activities at one of Houston’s most active Chambers.

Spokesperson From the Clear Lake Chamber of Commerce. We discussed this chamber briefly on the Show this week. Stay tuned for a lengthy interview and visit the Clear Lake Area Chamber of Commerce.

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