Vail Law: The legal responsibilities of turning 18
This is part three of Vail Law columnist Rohn Robbins’ series about the responsibilities that come when a person turns 18.
On turning 18, you are considered competent to enter into contracts. What this means is that you can sign legal agreements (and be held to their terms), open bank accounts and apply for credit in your own name (although the law regarding credit cards has recently changed and you may require a co-signer or guarantor to secure a credit card in your own name).
A contract is a binding agreement between two or more parties to do (or not do) something. It is an exchange of something of value in return for something else of value. A contract may in most circumstances be either oral or written and must pertain to something which is not illegal. Written agreements are generally preferable simply because you can more easily prove what was agreed to.
You may want to consider a couple of tips regarding contracts before heading out into the world: first, read any contract fully before signing it. If there’s something you don’t understand, run it by someone knowledgeable before signing it.
Second, do not sign a contract with blank spaces. Either fill them in or cross them out. If you disagree with a contract term, work it out with the other party before signing it. Keep a complete copy of the agreement. If you break a contract because you didn’t understand it or you have changed your mind, you will likely not be relieved of its obligations and you may be sued.
New adults and banks
A few questions to ask before opening a banking account include: is there a minimum balance which must be maintained in the account? Does the account earn interest and how much? Is there a monthly service fee (and how much)? Is there an ATM fee?
You also need to know the bank’s policies if you write a check for more than the amount you have in your account. Is there overdraft protection and what will it cost? If a check bounces, you can be charged considerable penalties. You should also know that writing a check when you don’t have enough money in your account to pay it may be a crime. Checks are generally good for six months from the date of issue. Thanks to the Check Clearing for the 21st Century Act, checks may clear instantaneously so if you think you’ll write a check and cover it before it clears, you may be in for a surprise.
An ATM card and a debit card are two different things. An ATM card allows you to conduct transactions into or out of your account. A debit card is used to electronically transfer funds from the cardholder’s account. If a debit card is lost or stolen, an unscrupulous finder could empty your account. If a debit card is lost or stolen you must report it within 60 days. If you do so, you cannot be held liable for more than $50.
Beware of credit cards
A credit card is a loan. You are borrowing money. Most require the payment of an annual fee and other charges. Interest on a credit card for purchases (unless paid in full each month) and on cash advances, can be sky-high. Probably the most common problem in people’s personal financial situations in the U.S. is credit card debt. You should do everything in your power not to fall into that trap, even if it means deferring the purchase of things you want but don’t absolutely need.
If you lose a credit card, report it immediately. If you do so, your liability for purchases made on it after its loss will be limited to $50.
A credit report is a summary of your debts and your history of how promptly you have paid them. It is used by lenders of all kinds to determine whether they will loan you money and upon what terms. The better your credit report, the easier it is to get a loan and the better the terms. Your credit report is your passport into a secure economic life.
You should periodically check your credit report for inaccurate information as that information could compromise your ability to secure a loan. An inaccurate credit report can also be, at times, a red flag for identity theft. Keep your credit good. It can take as much as 10 years to correct bad credit.
Collateral is something of value accepted by a lender as a back-up in the event you fail to repay your loan. If you take out a car loan, for example, the car itself may be collateral for the loan. If the loan is not paid, the car may be repossessed and sold by the bank to help pay back the loan. If the collateral is insufficient, you will likely be on the hook for the remainder of the amount due and your failure to pay will hurt your credit rating.
Lastly, when it comes to making loans, it is against the law for a creditor to discriminate against you because of your race, sex, marital status or other similar distinctions. Lenders can only make distinctions based upon your credit rating.
Rohn K. Robbins is an attorney licensed before the Bars of Colorado and California who practices in the Vail Valley. He may be heard on Wednesday nights at 7 p.m. on KZYR radio (97.7 FM) as host of “Community Focus.” Robbins may be reached at 970-926-4461 or at email@example.com