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									                          Dakota State University
                                  BUS 315
                           Credit and Collection

                       Unit Two: Consumer Credit II

Reading Assignment

   Chapter 6: All
   Chapter 7: All
   Chapter 8: All
   Chapter 9: All
   Chapter 10: All except pp. 194-195, 206-215
   Chapter 11: All


Chapter 6: Real Estate Credit

  1.   State the typical steps involved in buying a home with credit.
  2.   State several sources of real estate credit.
* 3.   Explain what is meant by the secondary mortgage market.
  4.   Give several examples of institutions in the secondary mortgage
  5.   Describe a conventional mortgage.
  6.   Describe the following special mortgage programs:
         a) Federal housing Administration, FHA
         b) Veterans Administration, VA
         c) Private mortgage insurance, PMI
* 7.   Explain and describe what is meant by the following mortgage
         a) fixed-rate               e) balloon clause
         b) adjustable rate          f) assumption clause
         c) amortize                 g) prepayment clause
         d) points
  8.   State two important mortgage lending standards (ratios) and
         their components.
  9.   State a rough rule of thumb for how expensive a home a consumer
         can afford, in terms of annual gross income.
 10.   Explain what is meant by “closing costs” and give some e xamples
         of closing costs.
 11.   Explain what is meant by a home equity loan.
 12.   Explain the difference between first mortgages and second

Chapter 7: Regulation of Consumer Credit

 13. State three primary goals of the regulation of consumer credit.
 14. State some of the primary federal regulators of consumer credit
       and some specific responsibilities of each.

*15. Describe the main features of each of the following (may require
       a single sentence):
       a) Truth in Lending Act
       b) Credit Card Issuance Act
       c) Fair Credit Billing Act
       d) Equal Credit Opportunity Act
       e) Fair Debt Collections Practices Act
       f) Depository Institutions Deregulation and Monetary Control
       g) Fair Credit and Charge Card Disclosure Act
       h) Financial Institutions Reform, Recovery, and Enforcement
       i) Home Mortgage Disclosure Act of 1975
       j) Community Reinvestment Act of 1977

Chapter 8: Management and Promotion of Consumer Credit

 16.   State the steps in the credit management process.
 17.   State some of the goals of the credit manager.
 18.   State the three types of consumer credit programs.
*19.   Explain what is meant by each of the following as part of
         a credit manager’s activities:
         a) credit policy `          d) rules of conduct
         b) investigation policy     e) procedures
         c) collection policy
 20.   Explain what is meant by the following ways of organizing a
         credit department:
         a) functional organization
         b) customer organization
 21.   Explain what are meant by control measures in a operating a
         credit department.
 22.   State the four P’s or marketing.
 23.   Explain what is meant by a cost/benefit analysis of offering
         retail credit.
 24.   State why a cost/benefit analysis is not relevant for most
         issuers of cash credit.
 25.   Explain why service credit providers are often “forced” to
         offer credit.
 26.   State several reasons why retailers may offer credit.
*27.   Discuss the four P’s of marketing as applied to offering credit.

Chapter 9: The Consumer Credit Investigation

 28. State the purposes of a credit investigation.
 29. State some of the information needed to make a thorough credit
 30. Discuss the importance of facts versus opinions in a credit
*31. State and discuss the six C’s of credit investigation.

 32. Explain what a credit scoring system is and how it is used in
       making credit decisions.
 33. State some of the information to be investigated in a credit
 34. State several sources of credit information.
 35. Discuss the information obtained from the following:
       a) credit applicant
       b) direct inquiry
       c) in-file ledgers

Chapter 10: Consumer Credit Reporting Agencies

 36. Explain what a consumer credit reporting agency (credit bureau)
 37. State where credit bureaus get their information on consumers.
*38. State the names of the three major nation-wide credit bureaus in
       the United States.
 39. State the names of a few credit bureaus in South Dakota.
*40. Give a thorough list of products and services provided by credit
       bureaus with an explanation of what each item is.
 41. State the kinds of information credit bureaus gather on
       consumers and report on inquiries.
 42. State some of the rights that consumers have relative to credit
 43. Explain what FICO scores are, including where the term comes
 44. Explain why a consumer can have several credit scores.
 45. State some assumed benefits for consumers of credit scores.
*46. For FICO state:
       a) the usual range
       b) the five areas considered in the calculation of the score
           and their relative weights
       c) the score at the 50th percentile
       d) expected delinquency rates for consumers with FICO scores
           less than 500
       e) expected delinquency rates for consumers with FICO scores
           greater than 800
       f) how FICO scores can impact loan interest rates

Chapter 11: Decision Making and Control

 47. State what is the most important part of the entire credit
 48. State the two types of credit decision mistakes to be avoided .
 49. State the impact of each type of mistake on company profits.
 50. State some reasons why customers may not be able to make payments
       even if they fully intended to.
 51. State four reasons for making poor credit decisions.

 52. Discuss the following reasons for making poor credit decisions:
       a) insufficient information
       b) misleading or false information
       c) improper interpretation of the facts
       d) failure to establish a credit standard
 53. Explain what is meant by the halo effect in interpreting facts
       in a credit investigation.
 54. State some typical questions that must be asked when establishing
       a credit standard.
 55. State the usual impact of high volume, low markup items versus
       low volume, high markup items on credit standards and explain
       the impact.
*56. Describe the judgmental credit decision making process.
 57. State a primary requirement for the judgmental process to work
 58. State a disadvantage of the judgmental process.
*59. Describe a numerical credit decision making process.
 60. State some advantages of a numerical credit decision making
*61. Describe credit grading systems.
 62. State some advantages of a credit grading system.
 63. State some disadvantages of a credit grading system.
*64. Describe credit scoring systems.
 65. Give an example of a widely used credit scoring system.
 66. State some advantages of credit scoring systems.
 67. State some disadvantages of credit scoring systems.
 68. Explain how credit scores can be used for automated online credit
 69. State some of the functions involved in controlling the credit
       relationship (managing the credit account).
 70. Explain what is meant by information processing in managing the
       credit account.
 71. Explain what is meant by credit lines or credit limits.
 72. State some advantages of credit limits.
 73. State some disadvantages of credit limits.
 74. Explain how credit scores can be used to set credit l imits.
 75. State some other factors that may influence the setting of
       credit limits.
 76. Discuss identification and authorization in the use of credit
       accounts, including three methods of establishing
 77. Describe electronic fund transfer systems.
 78. State some advantages of electronic fund transfer systems.
 79. State some ways in which computers have aided the entire credit

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