Full text of FDIC Consumer News : February 1981

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FDII
EDITOR: Josie Downey

The Bank Customers Publication

.

February 1981
Volume I No. 2

Tips For Consumers

ESTABLISHING CREDIT IN
YOUR OWN NAME
Building a credit record often poses a problem for
women and teenagers. There are several ways to establish
credit in your own name. First. open checking and savings
accounts at a local bank. This will establish your financial
identity and may provide you with access to such sources
of credit as bank credit cards, overdraft checking privi­
leges and personal loans.
The next step is to apply for a small personal loan
secured by your savings account. The cost of such a loan is
usually low. Because the loan may be fully secured, a
personal loan may be easier to obtain than other forms of
credit. After the loan has been paid off, you can use this
credit history to qualify for additional sources of credit.
Another way to establish credit is to apply at local
retail stores for small amounts of installment credit. After
the charge account has been paid off, you again can use
this history to obtain additional credit.
There are two things to remember in building a credit
record.First, be extra careful about making payments on
time, since doing so will help you to obtain credit and
keep it. Second, don't abuse credit. Credit improperly
handled can cause you more problems than not having it.

THE IMPORTANCE OF
BUILDING A GOOD CREDIT
RATING
A good credit rating is an important asset. The best
way to maintain a good credit rating is to pay all debts by
the date they are due.To save time and money and protect
your credit rating, be sure to correct any mistakes or
misunderstandings involving your accounts as soon as
you discover them.-If you find a mistake on a billing
statement, you should try to resolve. it directly with the
creditor. The following credit laws can help you settle
complaints.
The Fair Credit Reporting Act requires prompt credit­
ing of payments and correction of billing errors and
allows a customer to refuse to pay for defective goods
charged on a credit card.
The Truth In Lending Act limits your risk from lost or
stolen credit cards and gives you three days to cancel a
loan where a lien or mortgage is placed on your house as
collateral (unless the loan is to purchase the house).
For more information about these Acts, request a copy
of the pamphlets, "The Fair Credit Reporting Act" and
"The Truth in Lending Act," from the FDIC.

INSIDE
Late Loan Payments .............................................................................................................. 2
Questions From Bank Customers .......... . .. . . ... . ........ . ................. . .................................................. 3
Fair Housing .... ..... . ....... . .... ........................ . ................ . .......... ................................... . ........ 3
Read· The Small Print ............................................................................................................. 4

PREPARED BY THE DIVISION OF BANK SUPERVISION
Federal Deposit Insurance Corporation
Washington, D.C. 20429

2

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FDlC.SPONSORS.SEMlNAR.FO·R•·coNS'UMERS ·0N Cif1tl)1fi
_____. AND__CIY.IL.. RlGH_T_s_p_R_O.T.E.C_IION.�---·-·--..·-----·. -·-..•--- __ _
(1

Corporation hopes the semin ar e nha nced cooperatio n
A semi nar to broade n the ba nki ng public's aware ness
of credit rights was spo nsored�by•·the/Redeta,l: Ptrp,Q:$.:iHO �Irn?:·no1oottrrg·fn:e'-f-o,:1@.:-meiThdustry a nd co nsumer groups.
I nsura nce Corporatio n in Bosto n on Januaf�);l;-�:wq1 ') :1:.rn,:·••i.::rn fr�•'.:lq:'.}(©hga�tz'i tio ns participati ng i n the day-lo ng seminar
t f�. m. �: G ,r;c;J�m;·ind(tded about 40 consumer. mi norit y a nd ethnic neighFDIC Director William M. Isaac was i n overall charge
borhood orga nizatio ns i n the Bost o n area. Officers of
of the Bosto n seminar, which was co nducted by the
several area banks also took part i n semi nar workshops
FDIC's Divisio n of Ba nk Supervision. Isaac said the

3

Q:
A:

Q:
A:
Q:
A:
Q:
A:
- 800-424-5488Q:
A:

Q:
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Can a bank �gtrla :set1/i6eif@�)foribl:t�Fit�fgla:.;Uf.S.
Treasury �heck if the customer does not have an
account \\/itqJh �i�'tP.,�1 t.Hrn fI(,i1::, 51 rno ·i:}miu
nr;
,
Yes. Ban�s are allowed to make their own policies
governing the cashing of checks for noncustomers,
--·
as well as service charges.

A:

Is it illegal to put money in a safe deposit box?
There is no federal law covering what should or
should not be placed in a safe depo�it box; however,
the customer should keep in mind that the contents
of a safe deposit box are not insured by FDIC.
Is there a charge for this FDIC Consumer News­
letter?
No. If you would like a copy of the newsletter, call
�DIC toll-free on 800-424-5488 and ask to be put
on the mailing list.
Who insures credit unions and savings and loan
associations?
The National Credit Union Administration and the
Federal Savings and Loan Insurance Corporation.
Is there a limit on the service charge a bank can
- assess for an overdrawn checking account?
No. This is a matter of bank policy and is deter­
mined by the individual bank.
Do negotiable orders of withdrawal (NOW) apply
to all checking accounts.?
No. Negotiable orders of withdrawal (NOW)
accounts are special transaction accounts and the
decision on whether or not to offer NOW accounts
is made by each bank. Some banks may continue to
offer only regular checking accounts, which do not
pay interest, or they may offer both types of
accounts.

It's The Law
THE FAIR HOUSING ACT
In 1968 Congress passed the Federal Fair Housing
Act "to provide, within constitutional limitations, for fair
housing throughout the United States."
The Act prohibits all conduct which has the purpose,
or the effect, of making housing more difficult to obtain
on a "prohibited basis"; that is, based on race, color,
religion, sex or national origin.
Courts have ruled that the Fair Housing Act not only
makes it unlawful for those who sell or rent housing to
discriminate, but also prohibits discrimination by banks,
savings and loan associations and other mortgage and
home improvement lenders, at any stage of the lending
process. Consequently, lenders may n9t act in a manner
that is designed to, or has the effect of:
Ls!:.::•/i•O.ise-c:\iliFH,ging •\v.'6mei'i!-br minorities from applying
-::���!-�.1
1Btp1.hsuing an application for, a housing loan.
•·
:
If
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flrhinating in the terms or conditions upon
lff� . Jal'l.s�ousing loans are made .or denied.

rot.;.

• Advertising the availability of housing loans in a
discriminatory fashion.
• Making housing loans available on the basis of the
race of residents in a neighborhood.
• Discriminating against women or minorities in col­
lection practices.
This list of prohibitions defines rights that you, the
consumer, have under the Fair Housing Act. It is not
all-inclusive, but identifies many of the types of conduct
by lending institutions which the Act makes unlawful.
If you would like to obtain additional information
about the protections granted by the Fair Housing Act or
about the role of the FDIC and other agencies in assuring
that banks and other lending institutions comply with the
Act, request the pamphlet "Fair Housing Act" from the
FDIC's Office of Consumer and Compliance Programs,
550 17th Street, N.W., Washington, D.C. 20429.

Read The Small Print

THE MR. X COMPLAINT
Mr. X received a loan from his bank to purchase a new
home. The loan contract contained a "'demand feature."
Mr. X didn't know what a "demand feature" was and did
not ask for an explanation. He assumed that the interest
rate would be negotiated in 3 or 5 years. which is a
common practice for banks. The documents Mr. X signed
provided that the rate could be renegotiated after one
year. At the end of the first year, Mr. X's interest rate was
raised from 11 percent to 14 percent. It was lowered a year
later to I 3 percent.
As a result of the increased rate. Mr. X found it diffi­
cult to make his house payments.
Moral: Thoroughly read and understand an agreement
before signing it. If any question or doubt exists, ask the
bank for an explanation.

How the FDIC Protects Consumers:
• By insuring bank customers' deposits up to $100,000
• By promoting and_ maintaining the safety and soundness of the banking system through
periodic examinations
• By ensuring that banks comply with the Federal consumer protection and civil rights
laws.

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