1. Unit 4 Consumer and Credit Law

2. What are some contracts you have made?
Ch. 22 Contracts
What is a contract?
What are some contracts you have made?

3. Elements of a Contract Offer Acceptance Consideration
Can a minor make a contract?

4. When must a contract be written?
Contracts for land or real estate.
Contracts for the sale of goods priced at $500 or more.
Agreements to pay another person’s debt.
Agreements that cannot be performed within a year from the date of the agreement.

5. What are illegal contracts?
Illegal against public policy.
Unfair, harsh and oppressive.
Fraud and misrepresentation.

6. Credit
What is Credit?

7. What is Credit?
Credit is buying goods or services now in exchange for a promise to pay later.
Creditor – The people providing money.
Debtor – The people borrowing money.
Finance Charge – Interest and other fees.
Default – When a person cannot make payments on the loan.

8. Types of Credit Unsecured Credit
Credit given in exchange for a promise that the debt will be repaid.
Ex. Most credit cards, and charge accounts.
Secured Credit
To get credit the consumer must put up some property of value.

9. Credit Cards
Credit cards are issued by companies and allow customers to maintain their charge accounts.
Some companies provide the cards for free, some charge a fee.
Each company may have different interest rates, rate is calculated by the annual percentage rate (APR)

10. Credit Cards Basically a charge account
Gives customer access to a loan all of the time!
First Credit Card 1958 Bank of America- $9 million loss!

11. Credit Card Charges Finance Charge Annual Percentage Rate (APR)
Membership fees
Annual Percentage Rate (APR)
Credit over a year expressed as a percentage

12. Did You Know?
75% of college students carry and use at least 1 credit card / 25% say they obtained their first card while still in high school
College students carry an average of $1,843 in credit card debt
One study indicated that 20% of college students have a credit card debt of $10,000!

13. What if ………
You had a $1000 balance on your credit card at 21% interest…. How long would it take to pay it off if you paid minimum monthly payment of $35?
Answer …….4 years!
Disclosure Laws!

14. Debit Cards “Newest credit phase”
Allows for transfer of funds from checking directly to store
Allows for cashless purchases

15. Applying for Credit
Chapter 4 – Section 3

16. The 5 C’s of Credit……….. Creditworthiness Your Credit Rating
Your Character
Your Collateral
Common Sense

17. Creditworthy? 3 Things They Consider………..
Your ability to hold a steady job
Your character
What type of collateral do you hold?
Credit Bureau conducts a Credit Check
This leads to your credit rating

18. Secured vs Unsecured Loans
Backed with collateral
Unsecured loan
Borrower promises to repay the loan
Riskier
Co-signer

19. When to use credit
Credit is widely used, some services are difficult to obtain without credit.
Consumers should make smart purchases.
75% of American families have some kind of debt.

20. Cost of Credit Interest Credit Property Insurance
Beware of usury
Credit Property Insurance
Credit Life/Disability Insurance
Service Charge
Penalty Charge

22. Costly Credit Arrangements
Loan Sharking
Acceleration Clause
Balloon Payments
Bill Consolidation

23. What Lenders Need to Know About You?
Is the consumer reliable?
Do they have steady income?
Is the income high enough?
Does the consumer have a good record?

24. Default and Bankruptcy
Cannot make payments
Reasons could include:
Overextended
Family Illness
Unemployment

25. Default and Bankruptcy
Placing assets under the control of a federal court so that debts may be relieved.
Can result in serious long-term consequences.
Taxes, alimony, child support, and student loans must still be repaid.
Chapter 13 /Chapter 7 (more severe)
Chapter 11 – Corporations

26. Creditor Collection Practices
Calls and Letters
Repossession
Court Action
Garnishment and Attachment