ECOA and FACTA – Old Tools, New Laws

Wanda Borges, Esq. of Borges & Associates, LLC recently offered credit
professionals legal tips for mitigating the sometimes cumbersome regulations
imposed by recently passed or updated laws like the Equal Credit Opportunity Act
(ECOA) and the Fair and Accurate Credit Transactions Act of 2003 (FACTA).
Borges’ presentation, "Old Tools, New Laws," was part of NACM’s ongoing
teleconference series, which offers credit professionals a convenient and
effective way to improve their practices and educate their staff.

Borges began by discussing the ECOA, which was originally passed to ensure
that credit decisions were not based on sex, race, color, creed, national
origin, age or marital status, but was updated in 2003 to more clearly define
certain terms. According to the law, customers must be notified if a vendor from
whom they’ve contacted for credit issues an adverse decision, which, according
to the updated law, includes a refusal to grant the credit requested, a
termination of an account, an unfavorable change in terms and a refusal to
increase the amount of credit available.

"What becomes harder to understand is what happens when things change," said
Borges. "If [the customer] is not worthy of a $50,000 credit line, but they’re
worthy of a $20,000 credit line, go back to the customer." The ECOA states that
when a creditor denies a request but counteroffers, and the customer agrees to
the change, it does not constitute an adverse action and no formal notification
is required. "You’re required to get this in writing though," said Borges. She
suggested that in today’s digital business environment, an email indicating
agreement would hold up in court.

Borges noted another instance in which no notification is required. "If
they’re currently delinquent," she said, "you can cut off credit and you don’t
have to worry about any notification." She warned, however, against companies
who are lax about their notification policies. "Some companies, because they
receive so many credit applications, will deny a customer and [the customer]
will never hear from them again," Borges added. "Technically, you have to notify
them."

As for FACTA, a piece of legislation that comes in a long line of recent data
security laws, Borges discussed the Act’s disposal rule which requires any
entity holding any consumer info to protect that data from the hands of identity
thieves. "The data belongs to you and only you, and shouldn’t be given to anyone
else," said Borges. "If you get rid of this company’s file, you cannot throw it
out." The disposal rule requires that either the data remain in a safe place, or
that the information be permanently destroyed. "Everything has to be shredded
burned or pulverized," she said.

Borges also discussed secured transactions under Article 9 of the Uniform
Commercial Code and offered tips to creditors who have been looking to sell
their claims. For more information on NACM’s teleconference series, go to www.nacm.org.
Source: Jacob
Barron, NACM staff writer

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