Chapter 9 Credit Problems and Laws

1. Chapter 9 Credit Problems and Laws

2. Chapter 9 Objectives • Explain how to dispute errors on billing statements • 2. Explain the purposes and types of bankruptcy and list strategies for avoiding bankruptcy • 3. Recognize credit scams and ways to protect yourself. .

3. Credit Cards: Error and Fraud • Disputing a charge: the process of informing a credit company of an error on your bill- pages 280-281 • First: _____! Then, document all steps of your dispute and send a letter to the credit company • Credit card fraud: when someone uses your credit account to steal money or goods • Notify creditor as soon as possible • Time limit: 60 days from receiving statement

4. Prevent Credit Card Fraud • Carry only the cards you need • Verify all purchases • Close inactive accounts • Keep a list of credit cards and phone #’s • Do not loan your credit card to others • Use only secure websites to buy online – https: • Monitor your credit activity online • Do not give your information over the phone or email

5. Credit Scams • Credit repair scams: when someone offers to “fix” your credit rating • Identity theft: when someone uses your personal information to commit fraud or other crimes.

6. Focus On . . . Telemarketing Fraud • To protect yourself, know the danger signs • Examples: upfront fees, pressure to act immediately, no written documentation • Use a credit card in case you need to dispute the charge later • Be cautious when dealing with unknown companies • Use caller ID to avoid unwanted calls

7. What Help Is Available? • Federal agencies • Federal Trade Commission (FTC) Bureau of Consumer Protection • U.S. government (www.usa.gov) • Consumer Action Handbook • Consumer Financial Protection Bureau • Federal Bureau of Investigation (FBI) • State agencies • Consumer Advocacy Groups • Better Business Bureau Consumers Union • Consumer Action National Consumers League • Consumer Federation of America Public Citizen

8. Consumer Protection Laws-pgs. 298-301 • Fair Credit Reporting Act • Truth-in-Lending Act • Credit Card Act of 2009 • Fair Credit Billing Act • Equal Credit Opportunity Act • Fair Debt Collection Practices Act

9. What Problems Arise from Debt? • Credit delinquency • Collection agencies • *Judgment • *Garnishment • *Repossession and foreclosure

10. Reflection Questions • What are some steps to disputing a charge on a credit card? • What does a consumer advocacy group do? • What can you do to avoid bankruptcy or having your accounts turned over to a collection agency? • Explain what a judgment and garnishing of wages is… • Think, Pair, Share: Discuss in small groups what you might say to convince a creditor to work with you when you are delinquent in some way. • Why should you avoid delinquencies, repossessions and foreclosures? Slide 10

11. Activity: Net ArticleVehicles are among the most frequently repossessed assets. • Go to my website and click on Assignments: ‘Repossesion article and Questions’ • Read eHow article about reposession process and answer these questions: • Does a borrower have to be present when a vehicle is repossessed? • What happens to the personal belongings left inside a repossessed vehicle? • How can a borrower get the repossessed vehicle back? Slide 11

12. Chapter 9 Objectives • Explain how to dispute errors on billing statements • 2. Explain the purposes and types of bankruptcy and list strategies for avoiding bankruptcy • 3. Recognize credit scams and ways to protect yourself. .

13. What is Bankruptcy? Bankruptcy: a legal procedure to relieve a person of excessive debt (gives immediate protection) • It can be voluntary or involuntary • It gives debtors a fresh start • It helps ensure fair treatment for creditors • It should be a last resort because it damages your credit rating….for 10 years! • What is Bankruptcy Fraud?

14. Avoiding BankruptcyCall and keep creditors informed, make agreements, follow through • Credit counseling • Sets up a budget and arranges a payment plan • Free service by financial institutions • Debt management • Creates a plan to pay off debt • Debtor must turn over checking account and give up credit cards • Most charge a fee (adds to your debt) • Debt consolidation • Process of getting one loan to pay off all debts • Can reduce the monthly payments and interest paid • *If you own a home, you can take out a home equity loan

15. Types of Bankruptcy • Chapter 7- for individuals • Also called straight or liquidation bankruptcy (income must qualify) • Involves the forfeiture of assets in exchange for discharge of debts • Allows for exemptions, or property that a debtor does not have to forfeit, such as tools of trade – • See page 293 Figure 9-2.1

16. Types of Bankruptcy • Chapter 11 – for businesses • Also called a reorganization • It is the reorganization of debt as decided by the court. • Allows a business to remain viable • Chapter 13 – for individuals • Also called individual debt adjustment • Involves a 3- to 5-year repayment plan for some of the debt (Debt repayment plan)

17. Additional Info: • Automatic Stay: For all 3 types of bankruptcy. This provides immediate protection from any further action by creditors(no new fees, etc.) • Some debts cannot be discharged through bankruptcy proceedings: • taxes due the IRS • student loans • child support • government fines for criminal charges Slide 17

18. Success Skills Dealing With Difficult People • Deal with the issues head-on. • Meet the person in a private setting. • Ask the person to explain his or her situation. • Listen to what the person is saying and repeat concerns. • Ask for suggestions about how the problem can be resolved. Make suggestions/solutions of your own. • Talk to others affected by the behavior. • Stay calm and rational.

19. Reflection Questions • What are some ways to avoid bankruptcy? • Credit counseling, debt management, debt consolidation • What are the 3 types of bankruptcy and what makes them different? Slide 19

20. Exit Ticket: Question 4 of 4: Name the 3 types of Bankruptcy and whether they apply to an individual or business Slide 20