Consumer and Non-Profit Law
Consumer Credit and You
Questions and Answers
The intent of this pamphlet is to answer some of the commonly asked questions about consumer credit. It does not contain a complete statement of the law in this area. Changes in the law may occur from time to time. Anyone needing specific advice on a particular legal position should contact a lawyer.
What Are Some of the Benefits of Consumer Credit?
Credit may help you to take advantage of sales and bargain opportunities. It also gives you the immediate benefit of goods and services when you are short on cash. If you are not careful, however, credit can place you in trouble later when payments are due.
Is it Hard to Get Credit?
If a borrower has collateral, capacity, character and a good credit rating, then credit is usually available.
- Collateral is whatever you give to guarantee repayment of a loan. It backs up your word. It gives creditors rights to the items given if you do not make the payments as agreed. People use items such as cars, stocks, bonds and real estate as collateral.
- Capacity means enough income to handle existing debt.
- Character refers to your dependability. How long have you worked at your present job? How have you handled previous debts? These are some of the things considered. A good credit rating means that you have a history of making all your payments on debts in full and on time. A lender will usually check your credit rating with a Credit Bureau.
Can I Improve My Credit Rating?
There are several things that you can do to improve your credit rating. For example, making payments in full and on time improves your credit rating. Getting a credit card, having your own bank account, managing household expenses, or opening a line of credit are all ways of establishing and improving your credit. Lenders use records of these transactions as indicators of your reliability as a debtor.
What Are Some of the Advantages of Credit Cards?
Credit cards give you another way to buy and pay for goods and services. Generally, if your account is paid in full within a certain time, no interest charges will be added.
What Are Some of the Disadvantages of Credit Cards?
The interest rates on credit cards are usually high and vary from card to card. Shop around for the card which best suits you. Different cards have different ways of determining interest charges. Generally speaking, bank cards calculate interest from the date the items/goods were bought. If you use your credit card for a cash advance, interest is charged from when the money is taken. Check into these charges when applying for a credit card. A creditor may freeze a credit card when you do not make a payment when due or if you go over your credit limit or make a payment less than the minimum.
What if I Receive a Credit Card in the Mail That I Did Not Ask For?
In New Brunswick, it is illegal for a lender to send a credit card in the mail that you did not ask for. If you do receive a credit card in the mail you can report it to the Consumer Affairs Branch of the New Brunswick Department of Justice.
Remember, use of the card, even once, is seen as acceptance of the card. Credit cards should not be confused with department store courtesy cards which are commonly mailed to preferred customers.
Does Marital Status Affect Credit?
Your ability to get credit may depend upon a credit assessment and your credit rating. If you are married the Credit Bureau usually holds a credit rating for each spouse. However, if only one spouse signs a credit agreement, generally the other spouse's credit rating is not checked. When you and your spouse jointly apply for credit you may have more assets. If you and your spouse both have income, you will have a greater capacity to repay any loans. This will improve your chances of getting credit.
Separation or divorce does not automatically deny you access to credit. Lenders place much emphasis on your credit rating. If you do not have a separate credit rating, it may take you time to set one up. Lenders will usually look at your income, what you own and what you owe before deciding.
Who is Responsible for Joint Credit Card Debts?
Credit card debt is always the responsibility of the person who signed the card. If you apply for a card and ask for a second one for your spouse both of you will be responsible for any debt placed on that card. This remains the same despite changes in marital status.
How Can I End My Responsibility on a Joint Credit Card?
Upon separation or divorce there are several ways to end your responsibility on a joint credit card. If it is not possible to get the card back you can visit your lender to change your account and thus cancel your responsibility for future debts. You may also see your lender to sign a Statement of Non-Responsibility. This signed statement will end your responsibility for future debts.
Am I Responsible for My Spouse's Personal Bank Loans?
If you sign or co-sign a loan, then you are liable for repayment of the debt unless the lender agrees in writing to cancel your responsibility. As with credit cards your responsibility for credit contracts, such as bank loans remains the same despite changes in marital status.
Upon separation or divorce a Court may decide one spouse is responsible for the debts. If that spouse decides not to continue making payments then he/she can be found in contempt of a court order.
Is Credit Available to Teens?
Up to the age of nineteen, credit to teenagers is limited. If a parent has a credit card it is possible for a teenaged son or daughter to have one with the parent's permission. In this case all banking activity is recorded on the parent's account and the parent is responsible for any outstanding debts.
Until a person reaches nineteen, it is difficult to get a personal loan. A loan can be made, however, through an adult who is responsible for the loan until it is repaid.
If you guarantee a loan for a relative or a friend and that individual does not make payments on that loan, you will be responsible for the debt.
Are There Signs Which May Spell Financial Difficulty?
- If you spend more than 15%-25% of your take home pay on credit card or loan payments other than a mortgage.
- If you borrow money to buy basic necessities.
- If you have no idea about the total amount of debt you carry.
- If you cannot make regular monthly payments.
- If you have no emergency fund available.
What Can I Do to Get Out of Financial Problems?
Stop borrowing immediately.
Take a close look at your lifestyle to see where the money problems arose.
Contact the people to whom you owe the money. Creditors do not like to push anyone into default.
If financial counselling is available through a community agency get advice on dealing with your money problems.
Establish a well-planned budget.
Set realistic goals for yourself so you can see any progress made.
Where Can I Get More Information on Consumer Credit?
Many financial institutions have materials on consumer credit available to the public. You can check other sources of information such as the Better Business Bureau and your local library.
The Federal Department of Industry Canada and the Provincial Consumer Affairs Branch of the Department of Justice can also give you information about credit. You will find the telephone numbers for these departments in the telephone book.
Public Legal Education and Information Service of New Brunswick (PLEIS-NB) is a non-profit organization. Its goal is to provide New Brunswickers with information on the law.
PLEIS-NB receives funding and in-kind support from the federal Department of Justice, the New Brunswick Law Foundation and the Deparment of Justice of New Brunswick.
We gratefully acknowledge the help of the Consumer Affairs Branch, New Brunswick Department of Justice, in the preparation of this pamphlet.
Published by:
P.O. Box 6000 Fredericton, N.B.
E3B 5H1 CANADA
Tel: (506) 453-5369
Fax: (506) 462-5193
Email: pleisnb@web.ca
July 2004
ISBN: 1-555048-275-0
Disclaimer: Please note that our website contains general information about the law. This is not a complete statement of the law on particular topics. We try to update our publications often, but laws change frequently so it is important for you to check to make sure the information is up to date. The information in our publications is not a substitute for legal advice. To receive legal advice about your specific situation, you need to speak to a lawyer.
