Consumer Credit

What are the two choices in declaring personal bankruptcy?

Chpt 7: Straight bankruptcy where many debts are forgiven. Assets are sold to pay creditors. Chpt 13: A plan to pay off debt with future assets & earnings.

A good example of a closed-end credit is A. A credit card issued by a department store B. A credit card issued by VISA or MasterCard C. Using overdraft protection at a bank D. Using a cashier's check to pay for a purchase E. A mortgage loan

E. A mortgage loan

When you complain about your billing error, the creditor must acknowledge your letter within ______ days. A. 10 B. 20 C. 30 D. 60 E. 90

C. 30

FICO scores generally range from A. 100 to 1,000 B. 200 to 700 C. 350 to 850 D. 450 to 650

C. 350 to 850

Karen is notified by her credit card company that the credit limit on her credit card has just been increased to $10,000. This is one example of: A. Open-end credit B. Close-end credit C. A line of credit D. Installment sales credit E. None of the above F. Scrambling Locked

C. A line of credit

Which federal law limits a cardholder's liability for unauthorized used of a card to $50? A. Truth in Lending Act B. Fair Credit Reporting Act C. Fair Credit Billing Act D. Equal Credit Opportunity Act E. Fair Debt Collection Practices Act

C. Fair Credit Billing Act

The Federal Trade Commission enforces the A. Truth in Lending Act B. Equal Credit Opportunity Act C. Fair Debt Collection Practices Act E. Fair Credit Reporting Act

C. Fair Debt Collection Practices Act

Installment sales credit is a A. Direct loan of money for personal purposes B. Direct loan of money for home improvement C. Loan the allows you to receive merchandise such as a refrigerator or furniture D. Direct loan for vacation purposes E. Synonym for a single lump-sum credit

C. Loan that allows you to receive merchandise such as a refrigerator or furniture

A Comsumer Credit Counseling Service (CCCS) is a A. Charity organization B. Lending institution of last resort C. Local, non-profit organization that provides debt counseling services D. Governmental agency E. Legal institution

C. Local, non-profit organization that provides debt counseling services

Serena's gross monthly income is $4,000. Her federal, state, and city taxes amount to $800 and monthly IRA contribution of $200 are deducted from her monthly pay. What is the maximum amount Serena should spend on credit card payments? A. $300 B. $400 C. $500 D. $600 E. $700

D. $600

A valuable asset pledged to assure loan payments and subject to seizure upon default is called A. Capacity B. Character C. Capital D. Collateral E. Conditions

D. Collateral

Which federal consumer credit law prohibits credit discrimination based on sex and marital status? A. Truth in Lending Act B. Fair Credit Reporting Act C. Fair Credit Billing Act D. Equal Credit Opportunity Act E. Fair Debt Collection Practices Act

D. Equal Credit Opportunity Act

(T/F) Anyone overburdened by credit obligations can phone, write, or visit a CCCS office.

True

(T/F) Consumer Credit dates back to colonial time.

True

(T/F) Credit is an arrangement to receive cash, goods, or services now and pay for them in the future.

True

(T/F) If your credit application is denied, the ECOA gives you the right to know the reasons.

True

(T/F) In the 5Cs of credit, capital refers to your assets or net worth.

True

(T/F) It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash.

True

(T/F) Perhaps the greatest disadvantage of using credit is the temptation to overspend.

True

(T/F) The three most common types of closed-end credit are installment sales credit, installment cash credit, and single lump-sum credit.

True

(T/F) You may not be denied credit because you receive Social Security or public assistance.

True

Debt to Equity Ratio is A. Calculated by dividing total liabilities by net worth B. Calculated by dividing monthly debt payments by net monthly income C. Determined by dividing your assets by liabilities D. A useless ratio for determining your credit capacity E. Rarely used by creditors in determining credit worthiness

A. Calculated by dividing total liabilities by net worth

Another name for open-end credit is A. Revolving Credit B. A line of credit C. Using overdraft protection at a bank D. Installment credit E. A single lump-sum credit

A. Revolving Credit

Your friend lends you $2,500 at 5 percent simple interest and you agree to repay the loan at the end of one year. How much interest will you pay for the year? A. $75 B. $100 C. $125 D. $150 E. $175

C. 125

(T/F) Borrowing from car dealers, appliance stores, department stores, and other retailers is relatively inexpensive.

False

(T/F) Consumer credit works because people by and large are dishonest and irresponsible.

False

(T/F) Credit unions rarely offer the same range of consumer loans that banks and other financial institutions do.

False

(T/F) Most economists do not recognize consumer credit as a major force in the the American economy.

False

(T/F) The new bankruptcy law made it easier for consumers to file a Chapter 7 bankruptcy.

False

What can you do if your identity is stolen?

Report it to Credit Reporting Agencies, your creditors, and the police.

The Bankruptcy Abuse Prevention and Consumer Protection Act requires debtors to A. Complete an approved instructional course in personal financial management B. Eliminate their debts over a period of time. C. Wait at least three months before filing for a personal bankruptcy D. Pay a one-time $1,000 fine to cover the court costs

A. Complete an approved instructional course in personal financial management

What should you do if your identity is stolen? A. Contact the fraud departments of each of the 3 major credit bureaus B. Ignore it and hope that it will go away C. Throw away all records dealing with the problem D. Keep your bank accounts and credit card accounts open for one year E. All of the above F. Scrambling Locked

A. Contact the fraud departments of each of the 3 major credit bureaus

Which federal law protects you by requiring credit bureaus to furnish correct and complete information to creditors? A. Fair Credit Reporting Act B. Truth in Lending Act C. Fair Credit Billing Act D. Equal Credit Opportunity Act E. Fair Debt Collection Practices Act

A. Fair Credit Reporting Act

The total dollar amount you pay to use credit is called the A. Finance charge B. Annual percentage rate C. Price of the good/service purchased D. Amortized rebate

A. Finance charge

A Consumer Credit Counseling Service (CCCS) is affiliated with the A. National Foundation for Consumer Credit B. Federal Trade Commission C. Better Business Bureau D. U.S. Consumer Protection Agency E. Federal Reserve Banks

A. National Foundation for Consumer Credit

Dave's take home pay per month is $2200. What is the maximum dollar amount of debt payments he should have? A. $880 B. $440 C. $330 D. $220 E. $0

B. $440

Ruby's liabilities, not including her home mortgage, total $25,000. Her net worth is $30,000. What is her debt-to-equity ratio? A. 1.833 B. 0.833 C. 2.850 D. 3.500 E. 4.000

B. 0.833

Debt payments-to-income ratio is A. Calculated by dividing total liabilities by net worth B. Calculated by dividing monthly debt payments (not including house payments) by net monthly income C. Determined by dividing your assets into liabilities D. A useless ratio for determining your credit capacity E. Rarely used by creditors in determining credit worthiness

B. Calculated by dividing monthly debt payments (not including house payments) by net monthly income

A loan officer is examining your income and the amount of your existing debt payments in deciding whether to make a loan to you today. Which aspect of the 5Cs of lending is the loan officer most likely looking at? A. Character B. Capacity C. Capital D. Collateral E. Conditions

B. Capacity

Installment cash credit is a A. Loan that must be repaid in total on a specified day B. Direct loan of money for personal purposes C. Loan that allows the consumer to receive merchandise, such as a refrigerator D. Down payment made on a purchase E. Synonym for a single lump-sum credit

B. Direct loan of money for personal purposes

What is (are) the signal(s) of potential debt problems? A. Paying only the minimum balance each month B. Missing payments or paying late C. Using savings to pay normal bills D. Depending on overtime to meet normal expenses E. All the above are the danger signals F. Scrambling Locked

E. All the above are the danger signals

(T/F) With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts.

False

What can you do if you are unable to meet your credit obligations?

Haggle for a lower loan with your creditors.