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Greetings from the Kansas Supreme Court and the Kansas Bar Association. Welcome to this edition of Law Wise and the fourth edition of the 2006-2007 school year. The theme of Februaryís edition of Law Wise is "Consumer Education."
Calendar of Events
By Alisa M. Arst, editor
Americaís economy is dependent upon the buying and selling of goods and services. We make purchases every day, hence the title, "consumer." Consumer education is the process of gaining the knowledge and skills needed in managing consumer resources and taking actions to influence the factors that affect consumer decisions. As a consumer you have specific rights and responsibilities and are an important part of the American economy.
More and more consumers today are teenagers and young adults who are earning money and purchasing more goods than any other generation. This reality has created a market that advertises products directly to teens. It is hard not to be tempted to buy things and let money slip through your hands and also difficult to avoid scams. Looking to the future you may see some major expenses looming. Where will you find the money for a car, college, and a place to live? What about gas for your car, that pizza you like to order or the new iPod or cell phone youíve had your eye on? While a credit card may seem like the perfect answer to your money problems, if used unwisely you can get into trouble. If you canít pay off your credit cards you may end up in a debt hole in which you canít get out. Budgeting is a learning experience; it is a skill that you will use for the rest of your life. Decisions about money, how much you spend, your standard of living, and balancing your wants and needs all determine how you are going to budget. These factors will affect your budget no matter how much money you make.
This issue of Law Wise contains information geared toward consumer education, including information about the Kansas Lemon Law, budget considerations, and identity theft. There is also an article about the CARE Program (Credit Abuse Resistance Education) written by Judge Robert Nugent, chief judge for the U.S. Bankruptcy Court for the District of Kansas, which warns against the overuse of credit cards. I hope this issue will be informative and raise awareness about important consumer issues.
CARE: Learning to Use Credit Right
By Hon. Robert E. Nugent, chief judge for the U.S. Bankruptcy Court for the District of Kansas
More and more young people, including high school students, now have and use credit and debit cards. These cards look alike, but they work in very different ways. Debit cards allow you to access cash in your bank account, but not more than you have deposited. Credit cards allow you to borrow money Ė i.e., spend money that you do not yet have Ė to purchase goods and services. When banks lend you money on credit cards, they charge high interest rates if you do not pay the entire balance that is due at the end of the first month. Oftentimes these rates exceed 20 percent a year. Students (and many adults) often misunderstand the effects of compound interest on their finances. Rather than budget and save for what they want, many of us use credit cards to "have it all now," Ė whether we can afford it today or not. Plastic is a powerful drug: once youíre addicted to credit, itís very hard to get out of its grasp.
Because credit card providers make their money from charging you interest, they are not highly motivated (or legally required) to warn you about these possible consequences. As an example, if a student charges $1,000 on her credit card and only makes a minimum monthly payment of $25, at 20 percent interest, it would take her 67 payments or 5.5 years to pay off the debt Ė if she charged nothing else on the card. Over that period of time, she would pay about $660 in interest, in addition to the $1,000 she paid back in principal. Many people choose to make minimum payments and keep on charging, locking them in what becomes perpetual debt. When they miss payments, their credit rating is affected, making it difficult for them to secure student loans and, sometimes, to be accepted to college or graduate school. Used carelessly, credit card debt can bury you financially. Most of the bankruptcy cases I see today are the direct result of too much credit card usage.
Make no mistake, using credit cards is not always bad. They are helpful in emergencies, for travel, and for situations when carrying and keeping cash is inconvenient. But, they are not a substitute for spending money Ė they merely delay spending it. In other words, if you donít have the money now, you should not charge goods and services on your credit card if you donít know how you will pay for them later. Instead, make a budget of your intended expenditures and income and save up for those special ďbig ticketĒ items you want so you can pay cash (and no interest) when you buy them.
The CARE (Credit Abuse Resistance Education) Program, www.careprogram.us, was established by bankruptcy court judges to educate young people about the dangers of abusing credit. CARE in Kansas is a joint project conducted by the U. S. Bankruptcy Courts for the Districts of Kansas and Western Missouri. Representatives of the project can come to your school, church group, or other organization and give a short presentation about the importance of financial literacy and budgeting and the dangers of abusing consumer credit. The presentation includes a brief video about students who got themselves in trouble with credit and illustrations of how credit and compound interest work. Donít use a credit card until you understand this important information. Consider asking your school or church group to host a CARE session. Those in the Wichita area seeking a CARE presentation should contact the Wichita Bar Association at (316) 263-2251. In Topeka and Kansas City, the contact numbers are (913) 551-6732 in Missouri and (816) 512-1896 in Kansas. There are also links on the Bankruptcy Courtís public homepage found at www.ksb.uscourts.gov. The sessions are taught by judges and lawyers and are free of charge.
To protect your economic future, be an educated user and not an abuser of credit.
Kansas Lemon Law
By Alisa M. Arst, editor
So, you finally bought a new car and it turns out to be defective; a real "lemon." What can you do? Kansas has a "Lemon Law" [K.S.A. 50-645], but you need to be aware of its limitations and requirements. In Kansas, the law only applies if the following requirements are met:
Repair Interval and Coverage Period
The manufacturer must be allowed a ďreasonable number of attemptsĒ to repair the car. This requirement is fulfilled after:
The law encourages vehicle manufacturers to establish third-party dispute settlement programs to settle consumer disputes; however, decisions made through these programs are binding only on the manufacturer, not on the consumer. The manufacturer does not have to make a refund or replace the motor vehicle if the defect does not substantially impair the use and value of the motor vehicle or the condition is the result of abuse, neglect, or unauthorized alterations of the vehicle by the consumer. Kansas the Lemon Law also requires manufacturers to meet the terms of all warranties. The manufacturer must repair or correct any defect or condition, which ďsubstantially impairs the use and value of the vehicle,Ē during the warranty period or during the period of one year following delivery of the vehicle to the consumer, whichever is the earlier date.
Consumers have responsibilities too. Be wary: Just because there have been a "reasonable number of attempts" to repair a defect does not, in itself, make you automatically eligible for a refund or replacement car. As a consumer, you must notify the manufacturer or authorized dealer of the problem during the warranty period or during the year following delivery of the vehicle, whichever is the earlier date. If the manufacturer has an informal dispute settlement program, and most do, you must first attempt to resolve the complaint through this program. If you are still dissatisfied after taking these steps, he or she should contact an attorney or file a complaint with the Attorney Generalís Office. For more information contact the Kansas Attorney General. You can also contact the Better Business Bureau to make a complaint.
Identity theft occurs when someone, without your knowledge, uses your name, Social Security number, credit card number, or some other piece of your personal information to their advantage, such as to open credit card and bank accounts, redirect mail, establish cell phone service, rent vehicles, and more. If this happens, you could be left with the bills, charges, bad checks, and taxes. Identity theft can be one of the most frustrating crimes to deal with.
You may not even know your identity has been stolen until you notice that something is awry. Time can pass before you realize you haven't received a credit card statement or notice the strange bills you are receiving. What can you do?
First, contact the fraud department of one of the three major credit bureaus. Tell the department to flag your file with a fraud alert and include a statement that creditors should get your permission before opening any new accounts in your name. The credit bureau you contact will pass your information to the two other credit bureaus. The fraud alert will be placed on your file within 24 hours at all three agencies. In addition, the credit bureau will send you copies of your credit reports from each credit bureau within seven to 10 days. Credit bureaus must give you a free copy of your report if it is inaccurate because of fraud. Each credit bureau also will opt you out of pre-approved offers sent through the mail for credit or insurance. You will be opted out for two years.
Review your reports carefully to make sure no new accounts have been opened in your name or unauthorized changes were made to your existing accounts. You should order new copies of your reports in a few months to verify your corrections and changes, and to make sure no new fraudulent activity has occurred.
Credit bureau contact information:TransUnion
Equifax Credit Information Services Inc.
Consumer Fraud Division
P.O. Box 105069
Atlanta, GA 30348
Phone: (800) 525-6285
To order a copy of your credit report by phone: (800) 685-1111
To order a report online, visit Equifax's Web site www.equifax.com
Experian National Consumer Assistance
P.O. Box 1017
Allen, TX 75013
To order a copy of your credit report by phone or to place a fraud alert on your report: (888) 397-3742
To order a report online, visit Experian's Web site www.experian.com
After contacting the credit bureaus, you should contact the creditors for any accounts that have been tampered with or opened fraudulently. Ask to speak with someone in the security or fraud department. You need to follow up with a letter. This step is one of the procedures outlined in the Fair Credit Billing Act for resolving errors on credit billing statements, including charges that you have not made. The Federal Trade Commission has information about the Fair Credit Billing Act.
You can also send an ID Theft Affidavit to companies where new accounts were opened in your name. This affidavit is not required, but it does help you explain your case. Credit grantors, consumer advocates, and the Federal Trade Commission developed the ID Theft Affidavit to help you report information to companies using one standard form. The information you provide helps companies investigate and decide the outcome of your claim. While many companies accept this affidavit, others require that you submit more or different forms. Before you send the affidavit, contact each company to find out whether the form is accepted. If someone made unauthorized charges to existing accounts, deal directly with your credit card companies about those charges. The affidavit is for new accounts that were opened up in your name without your permission. You can get a copy of the ID Theft Affidavit from TransUnion.
Finally, don't forget to file a report with your local police or the police in the community where the identity theft took place. Keep a copy of this report in case your creditors need proof of the crime. In some cases, your police report will help quicken the process when dealing with the three major credit bureaus. The Consumer Data Industry Association, which is the trade association for consumer information reporting agencies, states that if a victim of identity fraud files a police report, its national credit bureau members, Equifax, TransUnion, and Experian will immediately delete fraudulent data without the reinvestigation procedure.
Contact your state's attorney general about identity theft:
In Kansas:Consumer Protection Division
A budget is a spending plan that includes everything you will spend money on. A good budget is a spending plan that includes everything you will spend money on and stays within your income. Think about what your income and expenses are or will be. There is a difference between a want and a need. Think about what those are for you. First, budget for your needs. To help you do that, you may want to keep a money diary, which should help you start to break down your income monthly expenses. While all the expenses probably wonít apply to your current situation it may give you an idea of foreseeable expenses. Can you see some areas where you need to change your spending? Are you saving money for a rainy day? What if your car needs new tires or you want a new outfit the upcoming dance or new software? All these are things to think about when analyzing your personal finances. Good luck! Ė Alisa M. Arst, Editor
A money diary shows you where your money comes from, how much there is, and where it goes. Do you know where your money goes? If not, itís time to find out so you can control it better. If you overspend in one area, you wonít have money for another. For example, if you get a $30 designer haircut each month, you might look great, but you also might not have enough money for a social life.
Keep a spiral notebook and, in it, enter ó
By keeping track of how much money comes in and goes out, youíll see where (and why) your money goes. You can start to say, I spend too much on _____. I want to cut back. Or, Whenever I go to the mall, I spend. Or, I need to save more. Iím spending too much now. Iím not going to have enough money in June to buy graduation gifts for friends and take care of Fatherís Day.
Look at the list. Where do you spend the most money? Is it too much? Do you find that you donít have enough money in other areas because you overspend in one or two areas? Letís say you oversleep each morning, and so you have to buy your lunch rather than make it at home. Lunch costs about $4 a day. Thatís $20 a week. Is that really what you want to do with $20? Maybe you can try getting to bed earlier and using the $20 on a purchase that's more long-lasting.
If going to the mall means you buy on impulse, leave your wallet at home. And make your friends promise not to lend you any money ó no matter what. By keeping track, youíll learn about your spending habits, and youíll start to see ways to save.
Money Diary Source: www.themint.org
Grade Band: K-2
Estimated Lesson Time: Three 50-minute sessions
What could be a better purpose for writing than an opportunity to create your own shopping list and use it to buy your favorite treats? This is problem solving at its best!
Students use their problem-solving skills to stay within their budget as they choose items they plan to buy and create their personal shopping lists. If their lists donít stay within budget guidelines, students are highly motivated to revise and edit. Once their lists work, students can actually go to the class store and buy their treats.
This activity is a great way to integrate writing with math problem-solving.
From Theory to Practice:
In her book Radical Reflections, Mem Fox boldly states that "Weíre currently wasting a lot of time by giving unreal writing tasks in our classrooms ... You and I donít engage in meaningless writing exercises in real life ó weíre far too busy doing the real thing." We need to challenge our young students to do real writing for a real purpose ó real writing, like creating their own shopping lists, for a real purpose, like a chance to go to the store and buy favorite treats. If we want our students to be motivated to use their emerging writing skills, we have to make writing purposeful, challenging, and real-to-life. That is the purpose of this activity.
For the Rest of the Lesson Plan Visit:
Handout 1: My Shopping Reflection
My Shopping Reflections
Handout 2: Your Shopping List
Your Shopping List
What to buy? How many? Cost?
Books With a Money Theme
The American Bar Association has a free newsletter that contains information on law-related education. Law Matters, which reports on developments, ideas, programs, and resources in the field of public education about the law, is published three times per year (winter, summer, and fall). For information on ordering, contact the ABA at (312) 988-5735 or firstname.lastname@example.org.
"Research has shown that as little as 10 hours of personal financial education positively affects students spending and savings habits."
"Research shows that an individual who attended high school in a state that possessed a personal finance education mandate (and was, thus, exposed to personal finance in school) achieved roughly one-yearís worth additional net worth when compared to individuals who did not attend school in states with mandates."
"A Consumer Reports survey of 12-year-olds found that 28 percent didnít know that credit cards are a form of borrowing, 40 percent didnít know that banks charge interest on loans, 34 percent didnít know that you canít tell how good a product is by how much itís advertised."
"Teenagers as a cohort spent more than $172 billion in 2001, equal to Mexicoís yearly exports."
"Average expenditures: $104 per week; $5,408 per year."
"Teens surveyed by Teenage Research Unlimited reported spending 98 percent of their money, rather than saving it."
"Childrenís spending has roughly doubled every ten years for the past three decades, and tripled in the 1990s."
"More than one in five youths, ages 12 to 19, have their own credit cards or have access to parentsí credit cards, and 14 percent have debit cards."
These statistics came from The Jump$tart Coalition for Personal Financial Literacy
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