Book Opener

CHAPTERASSESSMENTSection 22.1 What is Credit?● There are two main types of credit. Open-endcredit is credit that can be increased by the debtorby continuing to purchase goods or services oncredit, up to a limit set by the creditor. Closedendcredit is extended only for a specific amountof money.● The Truth in Lending Act requires that lenderstell you both the finance charge and the annualpercentage rate (APR) of the loan. The purposeof this act is to assist consumers in makinginformed decisions when shopping for credit.● A secured loan is one in which you give acreditor a right to something of value, calledcollateral, in exchange for money it lends you.You have possession and use of your collateral,but the creditor has a security interest and thelegal right to repossess your property if you donot pay.● If there is a problem with a good or servicecharged on your credit card, and the initialtransaction took place in your state or within100 miles of your mailing address, you maydispute the charge with your credit card issuer.If your credit card is lost or stolen, credit cardprotection will cover unauthorized charges,except for the initial $50, which you are requiredto pay. However, you should notify your creditcard company immediately if you lose yourcredit card.Section 22.2 Credit Protection Laws● The federal government has passed several creditprotection laws to protect consumers. The EqualCredit Opportunity Act prevents credit issuersfrom discriminating against applicants becauseof gender, marital status, age, religion, race,national origin, or because they get publicassistance income. The Fair Credit Reporting Acthelps you know the source of a credit report andto correct any wrong information in it. The FairCredit Billing Act establishes a procedure for theprompt handling of billing disputes. The FairDebt Collection Practices Act makes it illegal fordebt collectors to threaten consumers withviolence, to use obscene language, or to contactconsumers at inconvenient times or places tocollect debts.Section 22.3 Managing Your Debts● If you experience two or more of the followingwarning signs, you may be in financial trouble:(1) you make only the minimum monthlypayment on credit cards or have trouble payingeven that much; (2) the total balance on yourcredit cards increases every month; (3) you missloan payments or often pay late; (4) you usesavings to pay for necessities such as food andutilities; (5) you receive second or third paymentdue notices from creditors; (6) you borrowmoney to pay off old debts; (7) you exceed thecredit limits on your credit cards; or (8) you havebeen denied credit because of a bad credit report.● If you’re having trouble paying your bills andneed help, you can contact your creditors and tryto work out an adjusted repayment plan, or youcan contact a nonprofit financial counselingprogram. The Consumer Credit CounselingService is an organization that can offer help.● Chapter 7 bankruptcy permits debtors toliquidate their assets and pay off creditors.Chapter 11 bankruptcy allows businesses toreorganize their financial affairs while remainingopen for business. Chapter 12 bankruptcy isreorganization for family farmers. Chapter 13bankruptcy permits an individual debtor todevelop a repayment plan during which periodof repayment creditors may not continuecollection activities.500 Unit 5: Using Your Purchasing Power