North Carolina Guarantor - Consignor Notice Required by FTC on certain Transactions

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US-GUARANTY
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Description

The Rule applies to consumer credit contracts offered by finance companies, retailers (such as auto dealers and furniture and department stores), and credit unions for any personal purpose except to buy real estate.


When you agree to be a cosigner for someone else's debt, you are guaranteeing to pay if that person fails to pay the debt. The Rule requires that you be given a notice that explains the responsibility you are undertaking. Under the Rule, the cosigner notice must say:


You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.


The creditor can collect this debt from you without first trying to collect from the borrower.* The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.


This notice is not the contract that makes you liable for the debt.


* Depending on your state, this may not apply. If state law forbids a creditor from collecting from a cosigner without first trying to collect from the primary debtor, this sentence may be crossed out or omitted on your cosigner notice.


This notice is not required when you receive benefits from the contract, such as when you buy goods, take out a loan, or open a joint credit-card account with another person. In these cases, you would be a co-buyer, co-borrower, or co-applicant (co-cardholder) rather than a cosigner. Therefore, the creditor would not be required to provide the notice.

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FAQ

The FTC's Credit Practices Rule protects consumers from abusive contract provisions that are designed to give the creditor an upper hand in collections and to evade legal protections for the debtor.

Pyramiding occurs when a credit union properly charges a late payment fee, the member makes a timely payment that does not include the amount of the late fee, resulting in the credit union assessing another late fee. Regulation Z also prohibits pyramiding late fees for mortgages and credit cards.

A: The cosigner notice must be given to the cosigner before the cosigner becomes obligated on the transaction. This means that the cosigner should receive the notice prior to the event that makes the cosigner liable.

A cosigner guarantees the person for whom they are cosigning will repay the debt on-time and in-full. They are contractually obligated to repay the debt if the person they cosigned for fails to pay. As a cosigner, you are as responsible for the debt as the person for whom you cosigned.

Before considering co-signing a loan, make sure you're capable of repaying the loan if the primary borrower defaults. Perhaps a better idea is giving the friend or family member a personal loan for part of what they need. Perhaps a lender is willing to loan no more than 50 percent of what is needed to buy a boat.

The information a co-signer must provide on the application includes: address, Social Security number, marital status, employment, income, expenses and assets. The co-signer must also answer "yes" or "no" to a list of questions regarding financial obligations, residency and real estate owned.

The prohibited contract provisions are confessions of judgment, waivers of exemption, wage assignments, and security interests in household goods. Second, the Rule requires creditors to advise consumers who cosign obligations about their potential liability if the other person fails to pay.

Here are four of them.Become a Subtenant or Roommate. If you're after an apartment, then you can try finding a situation where someone else already is fully obligated to pay the lease but is looking for help with the rent.Use a Co-Signer Service.Try a Peer-to-Peer Lender.Establish or Rebuild Your Credit History.

Pursuant to this rulemaking authority, the FTC issued its Credit Practices Rule. The FTC's Credit Practices Rule is applicable to creditors that are within the FTC's jurisdiction; it is not applicable, for example, to banks, savings associations, and Federal credit unions.

The FTC's Credit Practices Rule protects consumers from abusive contract provisions that are designed to give the creditor an upper hand in collections and to evade legal protections for the debtor.

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North Carolina Guarantor - Consignor Notice Required by FTC on certain Transactions