Chapter 9 Credit Problems and Laws

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. .

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

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

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.

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 Why are some sonsumers easy targets for telemarketers? Do you have a way of dealing with callers who interupt your time at home and try to sell you something that wasn’t on your list?

What Help Is Available? Federal agencies State 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 W

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

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

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

Activity: Net Article Vehicles 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

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. .

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?

Avoiding Bankruptcy Call 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

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

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)

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

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.

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

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