Credit and Debt Products

Learning Goals/Objectives:

Students will understand the mechanics and the dangers of check cashing and express consumer loans.
Students will understand what money orders are, and how they are used.

Grouping of Students:

Individual

Methods:

Direct Instruction, Self-Sustained Reading, Written Assessment

Activities:

“Hook” – Has anyone heard the term ‘predatory lending’? The
following is a story that provides an example of what that is… AmeriLoan.com –
A customer complained that multiple payments were taken from their checking
account for over 6 weeks. The customer had taken a $300 loan, and agreed to pay
it back. They set up automatic payment and thought they could expect the $390
paid in full when they received their next paycheck. When the time came to pay
it back, Ameriloan only withdrew $90 to cover the fees. Why did they do that?
Because if they only take the $90 for the fees it allows them to charge an
extra $90 fee for extending the loan two weeks. It keeps going on and on until
the borrower pays back the $390 in full. The customer has to actively contact
them and tell them they want it paid full.– 5 minutes

a. Self-Sustained Reading – 15 minutes

Distribute FTC Consumer Alert and Credit and Debt articles.

b. Direct Instruction – 15 minutes

Review how it works (A borrower writes a personal check
payable to the lender for the amount the person wants to borrow, plus the fee
thy must pay for borrowing. The company gives the borrower the amount of the
check less the fee, and agrees to hold the check until the loans is due,
usually the borrowers next payday. Or the borrower can deduct the amount
electronically.
If you are going to use the service: Understand the dollar amount in fees it will cost you. Get an itemized receipt and compare it with what you were
told you would pay in fees.
Discuss the alternatives to payday loans

c. Direct Instruction – 5 minutes

Do not confuse money orders with predatory lending!
Money Order - A money order is a negotiable instrument
requiring the issuer to pay a certain sum of money on demand to a specific
person or organization. Money orders are issued by governments (usually through
postal authorities), banks, and other institutions to purchasers who pay a
service fee in addition to the face amount of the money order. They are payable
on demand in cash, they are a generally accepted means of payment.
Why would someone use a money order?

d. Written Assessment – 10 minutes