Credit Law in Society Objective: To understand the use of and acquisition of credit. What is it? Credit Creditors Debtors Finance charge Interest Unsecured credit Secured credit Collateral Annual percentage rate How much do you owe? You buy a dozen DVDs on sale for $99.00. And you charge it on your credit card. You receive your billing statement indicating that you owe $99.00. Your interest rate is 1.5% What is your balance? How much do you owe? You pay $40 of the bill. The next month you receive your statement. Now what is your balance? 40.00 X .015 = $0.60 Balance: $40.60 What is the difference between a debit card and a credit card? Credit Card = borrowed money Debit Card = your savings or checking When to use credit… Is it worth having the item before you have saved enough money to pay for it? What items are good long-term investments or necessities? Car, home, large necessities, education… 75% of Americans carry some debt. Using credit can make items cost more. PAY YOUR BALANCE!!! Credit card users spend more. Variable interest rates Good and bad. Rates can go down or up. Currently many home buyers who purchased that obtained variable rate loans are not able to pay. Foreclosure. Video www.rhsroughriders.org What do lenders want to know before giving you credit? Are you reliable? Are you stable? Do you have a steady income? Are you able to afford what you buy? Do you have a good credit history? Equal Credit Opportunity Act Protects consumers based on sex, age, marital status, race, religion, etc…. Costly Credit Arrangement Warning!!!!!! Balloon payment Last payment larger than the rest Acceleration clause Miss payment-lender can demand faster payment Bill consolidation All debts combined under one rate Truth in Lending Act Creditor must tell you in writing: Before you sign Finance charge APR Rules for late payments Denied Credit? Poor risk??? Equal Credit Opportunity Act Creditors must inform consumers why they were denied. Ability to know info in your credit file and dispute errors. Default Unable to pay off loan for whatever reason. What can you do…? Start a budget Notify creditors immediately. Seek consumer credit counseling. Seek assistance from friends and family. Bankruptcy Cannot pay Assets put in hands of federal courts to resolve. Long-term consequences Stain on credit for 10 years or more No escaping taxes, child support, student loans, alimony Creditor Collection Repossession Court Action – sue Results Garnishment - withhold money from your check Attachment – force bank to pay creditor from debtor accounts.