HDF 322 Lecture 15 Outline of Last Lecture I Credit Outline of Current Lecture II Fair Credit Billing Act III The Credit Card Act 2009 IV Interest Rate Increases V Safeguards for Gift Cards VI Cost of Credit VII Trade Offs VIII Cost of Open Credit IX Credit Considerations X Managing Debt XI Reasons for Debt XII Consumer Credit Counseling Services XIII Declaring Personal Bankruptcy XIV Chapter 7 and Chapter 13 Bankruptcy Current Lecture I Fair Credit Billing Act These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute in 1900s there was consumer push dealing with drug administration you have 60 days to report a mistake in billing you receive have to send you 2 weeks before if you use 3rd party card not the retail store if you use your Visa or Mastercard that s 3rd party so the person that holds the debt if you have product that s not working needs remedy if you have 3rd party holding debt to make remedy possible you can withhold paying that debt until correction has been made car repairs II The Credit Card Act 2009 this law we all know about it s a major step up occurred bc of great recession and debacle we had with investment industry and specifically with credit cards and all abuse consumers were taking and they decided they would make it more consumer friendly went into effect during 2010 give you summary of your account activity then payment info so you know what rules are then gives you totals on what you pay and then the calculation so the current statements now 2 3 pages vs 1 page provides all of this important info that if you read it you would be more informed III Interest Rate Increases unless the disclose they generally cannot increase rate also said there are certain instances where a company could increase interest rate after a first year it s a 1 year rate unless these situations happen workout arrangement is where you have a lot of debt paying off then they can increase if you don t follow through with arrangement if you miss a payment then within 60 days they can increase but in general when you take out new card interest rate will be that way for 1 year if rate increases have to give notice for intro rates cant do 3 months has to be increased within first 6 months now we have not 14 but 21 days to mail in payment when you make payment if diff rates of interest on purchases take highest rates and pay that off first and then do lower used to be opposite banned this double billing cycle you owed double what you had charged also improved disclosures so you are morea ware on front end on what these things are see slide 34 36 now credit card payments are due on same day every month IV Safeguards for Gift Cards had a fee for not using it after 1 year took money out of gift card but that is no stopped this all came in credit card act of 2009 V Cost of Credit a LAW IN TX if issure is out of state of TX than interest rate cannot be more than 14 on bank and for retail it is 21 but you can apply to go higher but a lot of Visa Mastercard have higher interest rate than 14 BECAUSE your bank is out of state OR if it is Texas bank they have domiciled their bank in Delaware or another state where highest interest rate VI Trade Offs a interest rate is compensating for time value of money bc you are paying it back in futureso cost of credit is usually in an interest rate VII Cost of Open Credit you now have to use average daily for average monthly at the end of month after you have added debt its what you owe so you always took last debt balance of billing period previous you take balance of prior month whether you paid it off or added to it that s what they calculate interest on but most have previous balance VIII Credit Considerations a these all count into credit inflation can make you pay more taxes can be taken into account min payment min payment track early repayment credit insurance DON T TAKE out for auto loan or appliance loan but they try to sell it to you but if they require it go to your own insurance agent bc retailers have expensive policies and now they cap it all of these can be considered when making interest IX Managing Debt a this Fair Debt Collection Practices Act how they can collect debts if it is secured then something is collateral maybe its savings account this is saying what you can do you CAN T SEND postcards has to be locator calls people can call to try and find you but once you tell them do not call me at work they cant call you when they call they can t bad mouth you X Reasons for Debt a why people have trouble sometimes it s a spending behavior impulse buying spend to hide troubles behavior where you re like ill show you ill go do it tit for tat that s bad too overindulgence of children let them make mistakes say no Keeping up with Joneses son has 3 70 inch tvs all of these things cause problems with debt XI Consumer Credit Counseling Services a it is nonprofit at times supported by businesses bc they want their money from people who cant pay but help you get on spending plan get out of debt help to even get interest rate to stop accruing so interest rate doesn t continue to grow lots of things that are very beneficial lots of online companies trying to do this be careful XII Declaring Personal Bankruptcy a when people go into bankruptcy usually bad times come a lot of it close to 90 is unemployment incur huge medical expense debts bc of no medical insurance that has pulled people into bankruptcy XIII Chapter 7 and Chapter 13 Bankruptcy this is where almost ALL debt is forgiven where you start with a clean slate the fresh start this is what most people were filing and it STILL have most people filing Ch 13 In Ch 7 your assets are sold not house as long as you pay homestead bills but all other possessions that aren t protected 30 000 if single and 60 000 married most of assets sold you then start over child support and student loans are NOT wiped out