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| Question | Answer |
| Give a couple of characteristics that a person should look for when choosing a legitimate credit counseling agency. | Non-profit company, offer a wide range of services, counselors are accredited, agency is member of NFCC or AICCCA, clearly discloses fees and provides regular statements showing fund distribution for DMP clients. |
| Debt Management Plans are one of many services offered by upstanding credit counseling firms. What is an advantage of enrolling in a debt management plan? | 3rd party credit negotiations often lower interest rates, cutting of fees and making just one payment |
| A Debt Management Plan is not always the best options, give an example of why a DMP would not be the best plan of action. | Client has no disposable income, Client is not able to pay their high priority debt on their own, Client is not willing to make a long term commitment, Client is not able to stop using credit cards, client has mostly secured debt. |
| Debt Settlement companies claim to negotiate settlement of debt for less than the amount owed, are these agencies typically non-profit or for-profit? | For-profit |
| If debt settlement seems like a viable option for your client, they can usually settle debts on their own, with no need to go through a Debt Settlement Company. What other warning should we give a client who wishes to settle a debt? | Possible tax ramifications, as the IRS may consider the amount written off as income |
| Debt settlement companies provide instant debt relief, true or false? | False |
| Who can a client contact to find out if a debt relief company offering debt termination services is legitimate? | the Attorney General or the Better Business Bureau |
| Your client is trying to raise her credit score to buy a home in the next year. She has an old inactive credit card with Macey’s and wonders if it would be wise to close it, since she doesn’t use it anyway, what is your advice? | Closing an old inactive credit card will lower a credit score, because it ends the history of the card, and length of credit history is one of the factors in determining a credit score. |
| Your client has decided to close an old delinquent credit card account. You have suggested that he request that it is considered “closed by consumer” and that it be a “hard close”. What is a “hard close” and why should he do this? | A hard close will keep the credit card company from allowing any new charges to be added, such as recurring fees. This will ensure that there are no new fees added. We should also suggest that your client cancel all recurring fees. |
| A client comes to you for advice. She is in need of a credit card to pay for business related expenses during business trips. These expenses will be reimbursed to her monthly, so paying the balance in full will not be an issue. She will likely be using an ATM often to make cash withdrawals for bus or taxi fare. When reviewing credit card offers, what should she consider? | Fees, grace period and computation method – as she will be using an ATM, what kind of fees are attached? She will need a few days for reimbursement, how long is the grace period, and how do they compute the bill. |
| Name one of the protections that the Credit CARD Act provides to consumers. | rate increases, minimum payment, limits on fees, payment allocation, due dates, under 21 |
| What is one thing to consider when contemplating a low rate balance transfer credit card offer? | they are often associated with very high fees and they may revive zombie debt |
| Because you have more rights to dispute charges; it is a good idea to put a big purchase like a vacuum on a ______ card. (Debit or Credit) | Credit |
| If you lose a debit card, why is it important to report it promptly? | Consumer liability is higher with a debit card, as a consumer could be responsible for as much as $500 if you fail to notify the bank within 2 days from the time you found out it was taken. You may be responsible for all charges if you fail to report the loss within 60 days of your bank statement. |
| A client comes to see you because they applied for a loan and feel like the loan officer discriminated against them due to the fact that she receives SNAP benefits. The Equal Credit Opportunity Act and Fair Housing Act prohibit such discrimination, where can she go for assistance? | she can go to the consumer finance website and file a complaint |
| Give a couple of tips for wise credit card use. | pay on time, pay in full or at least more than minimum, charge something you would have paid for anyway, check statements, don’t lend card, send change of address, report lost or stolen card, sign card, protect PIN |
| To dispute a billing error on a credit card, you must do so in writing within how many days? | 60 |
| A client is interested in knowing how to dispute a charge on his credit card for unauthorized use, his little sister babysits his son often and he gives her is credit card to pay for dinner and entertainment, but last week she charged a tank of gas and some clothes at the mall. Can he dispute these charges? | No, if a consumer regularly gives his card to someone, they have automatically authorized them to use the card, not just for specific purchases. |
| Describe the difference between open-ended and close-ended credit and give an example of each. | - Open: revolving, credit card, HELOC - Closed: Installment, specific purpose, specific period of time, car loan, student loan |
| A secured loan that give the borrower money to purchase a home, the most common type of home mortgage loan is called what? | Purchase Money Loan |
| What is the difference between a refinance loan and a home equity loan? | Both are secured by the home, but a refinance loan pays off an existing home loan, whereas a home equity loan is a second mortgage. |
| Reverse mortgages are secured loans that allow senior citizens who have equity in their home to draw down the equity and use it as income. What choices do they have to receive these funds? | a lump sum, monthly payments or a line of credit |
| List 3 of the required disclosures for installment loans. | amount financed, finance charge, APR, specific payment information, security interest information, late fee charges and prepayment penalty if applicable |
| Your client has over $5,000 in unpaid medical debt from a car accident 2 years ago, the collector encouraged him to refinance his house, and use the new loan to pay off the debt, is this a good idea, and why or why not? | No, this would turn unsecured debt into secured debt – low priority to high priority. |
| What is the difference between a wage assignment and a wage garnishment? | don’t need a court judgment to attach wages in an assignment, as it a clause in the contract |
| What is the difference between Annual Percentage Rate (APR) and finance charge? | APR incorporates fees, charges and interest and is expressed as a percentage; Finance charge refers to the total amount that the lender will pay above the principle amount and is expressed as a dollar amount. |
| What kind of an interest rate fluctuates over time based on a benchmark interest rate or an index that changes periodically? | Variable |
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