Category Chapter 6

Apr 1 2015

Credit Report Accuracy

Credit Report Accuracy

In late January 2015, The Federal Trade Commission issued a follow-up study of credit report accuracy and found that most consumers who previously reported an unresolved error on one of their three major credit reports believe that at least one piece of disputed information on their report is still inaccurate.

The study found that one if five consumers had an error that was corrected by a credit reporting agency after it was disputed on at least one of their three credit reports.  The study also found that about 20 percent of consumers who identified errors on one of their three major credit reports experienced an increase in their credit score that resulted in a decrease in their risk tier, making them more likely to be offered a lower auto loan interest rate.

For more information, Click Here.

Teaching Suggestions

  • Ask students what are their legal remedies if a credit reporting agency engages in unfair reporting practices.
  • Bring to class examples of credit-related problems of individuals and families. Suggest ways in which these problems might be solved.

Discussion Questions

  1. Why is it important for consumers to check their credit reports at least once a year?
  2. What can consumers do to ensure that their credit reports are free from errors?
Feb 25 2015

Unscrupulous Debt Collectors

In January 2015, the U.S. Department of Justice sued a Texas-based Commercial Recovery System, Inc., a debt collection company that allegedly impersonated attorneys, law firm staff, judicial employees and mediators.  The company threatened people with lawsuits, seizure of their property, or wage garnishment.  All these practices are against the law.  Under federal law, debt collectors–including collection agencies, lawyers who collect debts, and companies that buy delinquent debts and then try to collect them–can’t use abusive, deceptive or unfair practices to collect from you.

For additional information, click here.

Teaching Suggestions

  • Ask students to check a local Consumer Credit Counseling Service to learn about their services provided to consumers.
  • Ask students to compile a list of places a person can call to report dishonest credit practices, get advice and help with credit problems.

Discussion Questions

  1. Which federal law(s) protect your rights if you are ever contacted by a debt collector?
  2. If you need help regaining control of your finances, what resources are available to you?
Jan 28 2015

Free Credit Scores

“Free credit scores” sounds good, right?  But what if you signed up for “free credit scores,” then found out you were enrolled in a credit monitoring program that costs $29.95 per month?  Not so good.  That’s what the FTC says happened with a company called One Technologies, Inc.  Now the company has agreed to settle the FTC’s charges that it misled consumers by advertising “free credit scores” but failing to tell them that they would be enrolled in a credit monitoring program for a monthly fee.

One Technologies, Inc. offered people “free” online access to their credit scores through at least fifty websites, including freescore360.com, freescoreonline.com , and scorescense.com.  But according to the FTC, the company didn’t clearly inform people that once they got their score, they would pay $29.95 per month for a credit monitoring program.  You could only get out of that monthly fee by calling to cancel.  Some people had to call multiple times.  Others were denied refunds.  One Technologies, Inc. will pay $22 million to compensate its customers and must get their consent before billing them.  Also, it must provide the customers with an easy way to cancel.

For additional information, click here.

Discussion Questions

  1. What can you do if you become victim of a deceptive marketing practice?
  2. Where can you get your free credit report at least once every year?

Teaching Suggestions

  1. Ask students to obtain their credit reports from Experian, TransUnion, and Equifax.
  2. Ask students to search the Internet for “free credit scores” and summarize their findings.
Jan 24 2015

Refinancing Loans: Not Just for Mortgages

Most people know they can refinance a mortgage—that is, replace an existing loan with a new one that may offer better terms.  But did you know you can also refinance personal loans, including auto loans, credit cards and student loans?

“Refinancing a personal loan may save you money, especially if you get a lower interest rate, a lower monthly payment or other benefits,” notes Susan Boenau, Chief of the FDIC’s Consumer Affairs Section.  “However, refinancing does not always equate to saving money or better terms.”

Understand potential pitfalls in refinancing a personal loan.  For example:

  • You may have a higher APR than what you were originally paying when the promotional rate ends.
  • Closing a credit card account also reduces your available credit and may adversely affect your credit score.
  • A balance transfer may result in your account having multiple interest rates.
  • You may be assessed a prepayment penalty if you refinance a loan before it matures.
  • If your credit score is low, wait to refinance until you can raise it.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of similarities and differences between a home equity loan and refinancing personal loans.
  • Ask students to use the Internet to obtain information about refinancing.

Discussion Questions

  1. What are the possible advantages and disadvantages of refinancing?
  2. What are your legal remedies if a credit reporting agency engages in unfair reporting practices?
Nov 1 2014

Be Smart About Your Smartphone

You just bought the latest Smartphone.  You loaded all your favorite apps–online banking, GPS, even an app to track your health.

But now your phone is full of information about you–how much money you have, where you are and whether you’ve gained a little weight.  Your information can cause problems if it’s in the wrong hands.  Want to protect it?  These tips are for you:

  • Set you phone to lock automatically. When you don’t use the phone for a few minutes, the phone should automatically lock itself and require a password to reopen.
  • Use passwords for your phone. In addition to a password to unlock your phone, use a different passwords for each shopping or financial app. Don’t share your passwords with anyone.
  • Be wise about Wi-Fi. Don’t send personal information on a public wireless network in a coffee shop, library or hotel. Wait until you can use an encrypted Wi-Fi network that requires a password.
  • Foil phishing attempts. Don’t text or email personal information, and delete any texts or email messages that ask for it. If you must give out personal information, do it only if you type in the organization’s web address yourself and you see signs that the site is secure–either “https” (the “s” stands for secure) or a lock icon.
  • Connect to Bluetooth carefully. Bluetooth makes it easier for you to connect your phone with other devices. But, like other wireless connections, Bluetooth also can make it easier for thieves to steal your personal information. So, connect to Bluetooth in private, uncrowded areas only. Don’t forget to turn off Bluetooth when you are not using it.

Now you are ready to start using your new phone, right? Before you toss your old Smartphone,  remove all your personal information.  It’s important to protect your personal information from the moment you start using your phone until you get rid of it.

For additional information go to

http://www.ncpw.gov/blog/be-smart-about-your-phone

http://www.consumer.ftc.gov/articles/0272-how-keep-your-personal-information-secure

Teaching Suggestions

  • Ask students how they get rid of all the personal and financial information stored in their mobile devices.
  • Why is it important to use strong passwords with your mobile device, laptop, credit, bank, and other accounts?

Discussion Questions

  1. Why is it important to protect your personal information from the moment you start using your phone until you get rid of it?
  2. What steps should you take to remove personal information before discarding your mobile device?
Sep 27 2014

Prescreened Credit and Insurance Offers

Many companies that solicit new credit card accounts and insurance policies use prescreening to identify potential customers for the products they offer.  Prescreened offers–sometimes called “preapproved” offers–are based on information in your credit report that indicates you meet criteria set by the company.  Usually, you receive prescreened solicitations via mail, but you may also get them in a phone call or in an email.

For additional information, go to

http://www.consumer.ftc.gov/articles/0148-prescreened-credit-and-insurance-offers

Teaching Suggestions

You may want to use the information in this article to discuss

  • Why some people prefer not to receive prescreened offers in the mail, especially if they are not in the market for a new credit card or insurance policy?
  • What might be some advantages of receiving prescreened offers?
  • Ask how many students have received prescreened offers and what did they do with them.

Discussion Questions

  1. Can prescreening hurt your credit report or credit score?
  2. How can you reduce the number of unsolicited credit and insurance offers you receive?
Sep 24 2014

Data Breaches and Credit Freezes

News reports of large-scale data breaches–like the September 2014 announcement from Home Depot–have prompted many people to consider a credit freeze.  Also known as a security freeze, this tool lets you limit access to your credit report, which makes it more difficult for identity thieves to open new accounts in your name.

Remember, credit freeze doesn’t prevent a thief from making charges to your existing accounts.  Even if you elect a credit freeze, you still must monitor your existing credit card and bank accounts for charges you don’t recognize.  Also, remember that you can check your credit reports for free, every few months by visiting AnnualCreditReport.com or calling 1-877-322-8228.

For additional information, go to

http://www.consumer.ftc.gov/blog/data-breaches-credit-freezes-and-identity-theft-oh-my?utm_source=govdelivery

Teaching suggestions

You may want to use information in this article to discuss

  • The difference between a credit freeze and a fraud alert.
  • If anyone can see your credit report, is it frozen?

Discussion Questions

  1. Does a credit freeze affect your credit score?
  2. Does a credit freeze stop prescreened credit offers?
  3. How can you place a freeze on your credit report and how do you lift a freeze?
Sep 17 2014

The Credit Card Mistake That’s Costing Millenials

“A new survey from BMO Harris Bank shows consumers are confused on how credit card balances affect credit scores. . .”

While using a credit card is one of the easiest ways to build credit, there are plenty of misconceptions about how best to do that.  According to this survey

  • 39 percent of Millennials—people between ages 18 to 34—believe carrying a balance increases their credit scores. In fact, carrying a balance does not improve credit scores and can actually hurt scores.
  • 23 percent of those surveyed indicated that a person’s educational level affects his or her credit score. In fact, a credit score is based only on the information in your credit report, and educational level is not included in your credit report.
  • 27 percent of those surveyed thought checking their credit scores would lower their credit score. In fact, the opposite is true:  If you regularly check your credit scores, it’s likely you’ll make financial decisions that will improve your credit score.

For more information go to http://finance.yahoo.com/news/credit-card-mistake-thats-costing-103040745.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss why a credit score is important.
  • Stress the importance of “managing” credit card debt.

Discussion Questions

  1. What affect will your credit score have on the finance charges you pay for credit purchases?
  2. How can your credit score affect your ability to purchase a home or an automobile?
  3. Assume you have a low credit score and have been turned down for a home mortgage. What steps can you take to increase your credit score?
Sep 10 2014

Home Depot Data Breach May Top $50 Million

“Home Depot spokeswoman Paula Drake said ‘protecting our customers’ information is something we take extremely seriously.’” 

At the time of this blog, it is not clear how many Home Depot stores or shoppers were involved, but this breach could be one of the largest data breaches to ever hit a retailer.  It is also estimated that the cyber thieves made an estimated $50 million from this breach by selling credit card numbers and personal information.

Home Depot and many other retailers including Target, P. F. Chang’s, Neiman Marcus, and other companies, have all experienced similar data breaches in recent months.  To combat this problem, many companies are beginning to use a new “chip and pin” technology.  Already in use in Europe, the new technology contains a chip in your credit or debit card with account information, requires the user to use pin identification, and is nearly impossible to counterfeit.  Because the new technology has dual verification, card transactions are much, much safer for both retailer and customer.

For more information go to http://www.cbsnews.com/news/home-depot-data-breach-may-top-50-million/

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of students monitoring credit and debit card activity on a regular basis.
  • Obtain a credit or debit card with the new chip and pin technology.
  • Encourage students to determine their liability if their credit or debit card information is stolen.

Discussion Questions

  1. Assume you are trying to decide between two different credit cards. One card does not have chip and pin technology and does not charge an annual fee.  The other card does have chip and pin technology, but charges an $85 annual fee?  Which card would you choose?  Explain your answer.
  2. Besides choosing a credit or debit card with chip and pin technology, what other steps can you take to make sure you are not a victim of identity theft?
Aug 30 2014

Consumer Finance: Medical Credit Cards

Medical credit cards are offered by financial institutions to pay for services not covered by health insurance, such as, dental and cosmetic procedures, or for veterinary care.  Medical credit cards received increased attention after the New York attorney General and the Bureau of Consumer Financial Protection brought enforcement actions against Care Credit LLC, an affiliate of GE Capital Retail Bank.  It is alleged that Care Credit failed to provide disclosures and gave inaccurate information to 4.4 million cardholders.

Medical credit cards from large banks offer a revolving line of credit with an established credit limit with some form of promotional financing (special terms and conditions, which are valid for a specified period of time). The most commonly used financing option is deferred interest, with no interest charged for promotional period, but interest charged retroactively if the balance is not paid in full before the end of the promotional period, usually 6 to 24 months.  Among large banks the Government Accountability Office reviewed in May 2014, the most commonly used cards had an annual percentage rate of 26.99 percent or more.  These banks also offered revolving line of credit with fixed monthly payments, with an APR of zero to 17.99 percent.

For more information , go to

http://www.gao.gov/assets/670/664256.pdf

Teaching Suggestions

  • Ask students what are other alternatives in financing medical expenses that are not covered by health insurance.
  • Have students survey friends or relatives to determine the use of medical cards.

Discussion Questions

  1. Why would someone get medical credit cards when mainstream credit cards, such as Visa, and MasterCard, offer relatively lower-rate credit cards?
  2. What might be advantages or disadvantages of using medical credit cards?