| Terms |
Definitions |
|
Bernie Madoff
|
Bernard Lawrence "Bernie" Madoff (pronounced /ˈmeɪdɒf/;[3] born April 29, 1938) is an American former stock broker, investment advisor, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi schemein history.
In March 2009, Madoff pleaded guilty to 11 federal felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the 1970s,[4] and those charged with recovering the missing money believe the investment operation may never have been legitimate.[5] The amount missing from client accounts, including fabricated gains, was almost$65 billion.[6] The court-appointed trustee estimated actual losses to investors of $18 billion.[5] On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.[7][8]
|
|
Insurance Types:
|
Auto insurance
Credit insurance
homeowners insurance and property insurance
health insurance
disability income insurance
life insurance
long-term care insurance
|
|
The primary purpose insurance is______
|
protection
|
|
Checks
|
--americans write 42 billion checks each year
--before a check lands back in your mailbox, it has been handles more then 15 times.
|
|
gold
|
primarily produced in Russia and South Africa
price usually rises when inflation rises and falls when infaltions falls
over 1/3 of americans collect something
|
|
e-consumerism
|
defined as actions of consumers or thier agents to protect and promote consumer interest and to seek empowerment in the context of the electronic
marketplace.
ex: General Motors was the leading fortune 500 company but is now surpassed by Wal-Mart in terms of revenue
|
|
Taxes
|
are payments of money to federal, state, and local govts
each level of govt has various methods of taxation
excise tax: collected from the manufacturer of a product. ex: you pay an excise tax every time you purchase a gallon of gas.
excise taxes are regressive taxes meaning they take a smaller share of peoples income as people's income grow.
the federal income tax is progressive, the more you make, the more you pay.
the greatest percentage of federal income dollars is spent on human resources
tax evasion: is not paying taxes or reporting all income
|
|
Real Estate
|
real estate investments are not liquid, may take a while to sell a property.
about 67% of american households own their own homes (direct investments)
indirect investments: investing with a group of investors to own real estate investment trusts (REITs) which is apartment buildings or office buildings.
REITs can be traded on major stock exchange
|
|
Bunko
|
referring to swindles in which an unsuspecting person or group of people is cheated involving finances, scams, and threats.
|
|
Antitrust acts:
|
Sherman Anti-trust act 1890: maintain a competitive economy
Clayton Act 1914: statements about discrimination in price, services or facilities. discusses corporate mergers
Wilson Tariff Act: encompasses imports and fairness of trade.
|
|
cosignor
collateral
leigns
|
cosignor: a person who agrees to pay the loan if the original person does not
collateral: property such as a car, boat, etc. that can be taken up if a loan is not payed off
leigns: the legal rights to obtain property if a loan is not payed off.
|
|
Regulations and Credentials of financial planning
|
financial planning requires involvement and commitment from everyone in the family or household in order to succeed
over 500,000 people in the US call themselves financial planners
an industry that is largely unregulated.
|
|
Multilevel Marketing Plans
|
pyramids: schemes that require money investments are outlawed in most states
ponzi schemes: kind of a pyramid scheme promising high returns in a short period of time. Early investors are paid with money received from later investors. named after charles Ponzi
|
|
speculating
|
putting your money into an asset that the future value or return relies on supply and demand
ex: collectors items, baseball cards
|
|
Federal Trade Commission
|
created in 1914
purpose is to prevent unfair methods of competition in commerce
amendments:
1938: included unfair or deceptive practices, advertising
1975: Magnuson-Moss Warranty Act-- requires manufacturers and sellers of consumer products to provide consumers with detailed info about warrant coverage.
|
|
What are the 3 credit bureaus that you can make sure you credit report is accurate?
|
Equifax
Experian
Transunion
|
|
How many americans do not have health insurance
|
47 million
|
|
following are factors that affect insurance premiums for auto insurance:
|
driving history
type of vehicle
gender and age (males under 25 is the highest)
territory (urban vs rural)
|
|
Department of Justice
|
estb. in 1862
works with the FTC in enforcing the Sherman Anti-trust law
which approves mergers, stops price fixing, and stops monopolies
|
|
Security and Trust
|
in order to buy online in the marketspace, a consumer must be able to have trust in the process.
--the buyer must trust not only the seller but also the e-commerce infrastructure and environment.
--consumers are more likely to buy brand names than unknown products online
|
|
Banking Secrecy Act
|
requires all national banks to file a suspicious activity report when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.
The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of $10,000 or more (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Many banks will no longer sell negotiable instruments when they are purchased with cash, requiring the purchase to be withdrawn from an account at that institution.
--movements of money over 5000 are likely to be noted.
|
|
Guiding Principles
|
with stocks , much or all of the principal can be lost.
stick with your investment through volatility
some investments provide interest or dividends
investors should use diversification
|
|
Food and Drug Administration (FDA)
|
See that foods, drugs, and cosmetics are safe for consumers
estb. in 1906 by the Food and Drug Act
it is the oldest consumer protection agency in the nation
cant claim to cure if it doesnt
amendments: 1) 1938 drugs must be approved before, 2) modern movement--drugs must be effective
|
|
negative info can stay on your credit report for how many years?
bankruptcy info?
|
7 yrs, 10 yrs
|
|
What is the #1 lobbied interest?
|
insurance with health services and education folowing in 2 and 3rd
|
|
how long does bankruptcy affect your report
|
10 yrs.
--try to do everything possible to avoid bankruptcy
|
|
Federal Food and Drug Act of 1906
|
An act for preventing the manufacture, sale, or transportation of adulterated or misbranded or poisinous foods, drugs, medicines, liqours, and for regulating traffic therein and for other purposes.
|
|
rights under the Fair Debt Collections Protection Act:
|
debt collectors may contact you only between 8am-9pm
debt collectors may not contact you at work if they know your employer disapproves
debt collectors may not harass, oppress, or abuse you
DC may not lie when collecting debts, such as falsely implying that you have committed a crime
DC must identify themselves to you on the phone
DC must stop contacting you if you ask them to in writing
|
|
how much money a year falls into the hands of fraudlent soliciters?
|
$2 billion
--always donate to the charites you beleive in
--always try to determine how efficient the charity spends its donations
|
|
claim rates
|
rebate coupons
|
|
security freeze
|
1/1/07
Security freezes are designed to prevent a credit reporting company from releasing your credit report without your consent. However, you should be aware that using a security freeze to take control over who is allowed access to the personal and financial information in your file may delay, interfere with or prohibit the timely approval of any subsequent request or application you make regarding a new loan, credit, mortgage, insurance, government services or payments, rental housing, employment, investment, license, cellular telephone, utilities, digital signature, Internet credit card transaction or other services, including an extension of credit at point of sale.
When you place a security freeze on your file, you will be provided a personal identification number or password to use if you choose to remove the security freeze from your file or authorize the temporary release of your credit report for a specific person or period after the security freeze is in place. To provide that authorization, you must contact the reporting agency and provide all the following:
|
|
risk
return
|
risk: probability of loss
return: amount earned on investment
**investments that have the highest rate of return are typically those with the highest risk
|
|
STOCKS
|
more than half americans own stock
common stock: refers to shares or units of ownership in a public corporation such as Apple or Coca-cola.
socially responsible investing: investing in stocks that they only believe in.
Stock Market Crash of 1929: Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.
|
|
Federal Regulatory Agencies
|
FDA
Consumer Product Safety Commission
Federal Communications Commission
Federal Trade Commission
Federal Consumer information center
Securities and Exchange Commission
Environmental Protection Agency
|
|
interest
|
--the cost of using money
--the rate of interest is determined by supply(the amt of money lenders are willing to lend) and demand (amount of money borrowers are willing to pay)
--interest rates are expressed as percentages
|
|
Loans
|
the sums of money lent at interest
|
|
bullion
|
gold in its physical form, and investors can easily purchase it from a dealer or in some cases from a bank therefore it is becoming more accessible to the avg person.
|
|
privitization
|
turning over some of the functions of govt to business
|
|
Who is the current secretary of Agriculture? what state is he from?
|
|
|
FICO score
|
--have to pay to see
--ranges from 300-850
--score of 500 or below is considered bad bc you are a subprime borrower and it may be harder for you to obtain a loan or you may be charged high interest rates.
--the median score is 623
--over 750 is a veryyy good score and 800 is unusual.
--employers check FICO scores before hiring someone.
|
|
Credit Protection:
Fair Credit Reporting Act
Fair Credit Billing Act
Equal Credit Opportunity Act
Truth in lending
Fair Debt Collection Practices Act
|
Fair Credit Reporting Act: consumers have the right to see their credit file from Credit Reporting Agencies
Fair Credit Billing Act: Consumer have 60 days to dispute a credit bill
Equal Credit Opportunity Act: consumers cant be discriminated against bc of race, age, or gender
Truth in lending: consumers have to be told the APR.
Fair Debt Collection Practices Act: debt collectors have to follow rules when attempting to collect on past-due bills.
|
|
Auto insurance
|
many states but not all require auto insurance and most require liability coverage
liability insurance is discribes by 3 numbers (25/50/25) which would mean that the policy would pay a max of $25,000 for bodily inujury to one person, $50,000 to more then one person, and $25000 max for property damage in one accident.
may want to have uninsured motorist coverage
progressive is the nations 3rd largest auto insurer
40% of repair jobs found on the general mkt involve some type of fraud.
other types of auto insurane: collision which pays for repair or replacement of car after accident (most people get rid of this after 10 yrs cause car isnt worth much)
comprehensive: pays for losses from incidents other then collision such as fire, theft, flood
towing, medical payments
|
|
Medicaid
Medicare
Medicare Part D
|
Medicaid: the federal health care program for low-income people who qualify
Medicare: federal health insurance program for people age 65 or older or for many people with disabilities
Medicare Part D: reducess the cost of brand name prescriptions drugs for those who qualify
|
|
Disability income insurance
|
pays benefits to policyholders when they are unable to work.
** Clark Howard who is a consumer advocate says that workers compensation only covers an employee if he/she becomes disabled from an injury or an illness while on the job
pays for 60-80% of their paycheck
most people get it through their employer
|
|
Consumer Product Safety Commission (CPSC)
|
headquarted in Bethesda, Maryland
created in 1972 by congress under the Consumer Product Safety Act and began operating in 1973
function is to protect consumers against injuries and deaths associated with consumer products such as toys, spots equipment, household equipment and products such as lawn mowers and coffeemakers.
|
|
CHILDREN AS ONLINE CONSUMERS:
Computer Decency Act (CDA)
|
has provided some safeguards to internet access but content on the internet is difficult to control
parents and children are often seen as partners in consumerism
|
|
Financial Planner
Financial Counselor
|
looks at person's or family's total financial picture and helps that person or family define and prioritize goals and then works out a plan to achieve those goals.
|
|
Homeowners insurance:
|
helps to repay or rebuild your home and to replace personal possessions lost to theft, fire, storm, or other disasters
property insurance pays for losses to homes and personal injury
liability insurance pays for losses from negligence resulting in bodily injurt or property damage to others for which the policyholder is responsible
|
|
Department of Agriculture (USDA)
|
began in 1862 under Ab Lincoln
back then 48% of people were farmers who needed good seeds and info to grow crops
today, less then 2% of people live on farms so the USDA reaches out and broadened its info to include all segments of the population
responsible for the safety of meat, poultry and egg products
|
|
Environmental Protection Agency
|
mission is to protect the human health and the environment
estb. in 1970
led by the administrator, who is appointed by the president of the US
|
|
Divorce Planners
|
--one who is trained to focus on who gets the assets in divorces and who works alongside attorneys who handle legal documents and child custody issues.
-about 1000 certified planners today
-mostly women
|
|
State Department of Insurance
|
insurance is regulate at the state level
each state has an insurance commissioner
The National Association of Insurance Commissioners and the states have enacted rules and guidelines which sometimes have served to help consumers
|
|
What are consumer protection laws?
|
federal and state statutes and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices.
|
|
Bankruptcy options:
Chp.7 vs Chp. 13
|
most people want to choose chp.7 but bc of changes most are steered towards chp.13 now.
chp.7 is known as "straight liquidation chapter" bc in return for elminating debts the debtor agrees to turn over nonexempt assets and pay as much possible to creditors
chp. 13 allows debtors to repay some of the debt they ower and in return they get to keep most of their property (usually this type of debtor is a person with regular income)
chp.13 looks better on your credit report, debts have to be paid between 5-7 years
|
|
What are some problems with consumer protection?
|
consumers may not want protection
ex: sister wives (under investigation but is this the govt business?)
false sense of security
ex)for the most part products are relatively safe so consumers expect that all products are safe. when people buy meat at kroger they dont inspect it carefully usually like smelling it. could be bad though and the consumer is caught off guard
costs may be greater than benefits
ex: grisly discovery of decaying corpses on the grounds of Tri-State crematory led legislators to pass regulations to ensure that consumers never again receive urns filled with powdered cement
however, under GA's new law, crematories must employ embalmers even though crematories have no need for their services. conusmers will pay higher prices.
how safe is safe?
low labeling
ex: manufacturers label products in order to avoid paying for consumer dissatisfaction
ex: if a product says dry clean only and you hand wash it and it shrinks you cannot complain b/c they warned you.
|
|
Budget and Net Worth Statements:
|
A budget is a financial plan based on income and expenditures in a month.
to develop a budget you need financial records from the past and organized paperwork
fixed expenses: rent
variable expenses: food/entertainment
net worth: assets - liabilities
|
|
what areas are targeted most for fraud and what group of people?
|
Sunbelt: FL, CA, HI
tourist areas
and elderly people
|
|
what does the avg customer to the National Foundation for Credit Counseling look like?
|
-35.4 years old
-married women with children
-has low to middle income
-owes several thousands of dollars to over 10 creditors.
|
|
For something to be insurable it must meet the following criteria:
|
a probability or risk can be established
a financial loss can be determined
the event will NOT affect everyone insured
*** natural disasters are often not covered by private insurance companies
|
|
Certificate Deposits
|
A certificate of Deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank" (CDs are insured by the FDIC for banks or by the NCUA for credit unions). They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation.
|
|
shopbot
|
internet intelligent agents that personally assit you when shopping
ex: rent the runway can search based on color of the dress, the price, the size, whats in stock, designer, etc.
helps you narrow down your choices and find exactly what you are looking for.
ex: expedia, travelocity --> compare many sites to find exactly what you are looking for
|
|
biometrics
|
using peoples unique physical traits such as their fingerprints to verify their identity.
ex: omni
uga cafeterias, dorm entry
--the problem is managing a database of 300 million americans
--can also mean facial/eye senors
--one in a billion chance that 2 people will have the same fingerprint
--In japan biometrics is common on cell phones, atms, for point of purchase credit card purchases
|
|
endorsement:
|
an addition to an insurance policy
--are going to be higher in certain regions of the country: (higher in FL then in UT)
|
|
Whats in your trash?
|
pre-approved credit card offers
loan applications
bank statements
checks
**always put important documents through a shredder
|
|
Savings
|
provide a safety net and are helpful for saving money for the future
provide a sense of comfort and security
an emergency fund: 3-6 months of salaries set aside as savings is recommended as a financial goal.
should be kept in a liquid interest-bearing account such as a money mkt fund, short term certificates of deposit, or a savings account.
americans saving rate has dropped to 0%.
|
|
Mutual Funds
|
enables consumers to diversify ones investments
these funds are LIQUID ( meaning that the consumer can sell shares of the mutual fund and obtain money easily though there may be a fee to pay)
over 100 million americans own mutual funds
come in different types such as growth, international, and value.
not insured by the FDIC
|
|
Horizontal mergers
Vertical mergers
mkt extension merger
product extension merger
conglomerate merger
|
Horizontal merger: combines direct competitiors in the same product lines and mkts. ex: 2 department stores in the same town merging
Vertical Merger: combines supplier and company ex: a producer of raw material also manufactures and wholesales the material
market extension merger: combines firms selling the same products in different mkts. ex: one grocery store distributor buys another increasing the area to which it distributes
product extension merger: combines firms selling different but related products in the same market. ex: when a soft-drink company buys out a snack company thus expanding the product line
conglomerate merger: combines with none of the previously mentioned relationships or similarities ex: a beer manufacturer joining with a furniture company
sherman antitrust act: purpose is to oppose monopolies from forming
|
|
nongovernmental proconsumer groups
|
enlightened companies and consumer protection
ex: Society of Consumer Affairs Professionals International (SOCAP) which is an organization of people who work in business in the area of consumer affairs and customer services.
SOCAP began in 1974. members are often the conusmers voice within a company.
consumer publications
ex: Consumers Union: which is a private organization which does product testing and published consumer reports
ex: National Consumers League is the oldest consumer organization in the US and works to provide info to consumers
ex: Consumer Federation of America is a large national advocacy organizaiton and is often the voice of consumers in the media
|
|
Bankruptcy steps to follow:
|
when people declare bankruptcy they file petitions and schedules with the clerks office of the federal bankruptcy court
in the petition there will be a list of assets, income sources, liabilities, living expenses
lenders may show up in court and after the court case will try to talk to the debtors and their attorney for their money
Attorneys help: advise, complete forms, attend the first meeting of creditors with the debtor with is called the 341 meeting, represent debtor in the courtroom
process takes between 4-6 months to complete
**over a million bankruptcies are filed each year
|
|
debts
|
--amount that is owed
--can be in the form of bonds, notes, mortgages, and other forms of paper evidence amounts owed and payable on specified datets or on demand
-a debtor is a person who owes money
|
|
Types of investments:
|
Stocks: consumer has part ownership in a corporation
bonds: consumer is lending money to the company or govt selling the bond
Mutual Funds: groups of investments where consumers buy into the fund which in turn invests in may different types of stocks and/or bonds
|
|
Life Insurance
|
purpose of life insurance is to replace lost income for anyone who depends on you for financial support
parents usually need it the most if they have young children
70% of adults have life insurance policies.
Two types: term and whole
Term: for a fixed time period such as 5-10 years and has to be renewed at the end. does not have a savings feature and is recommended most by financial planners bc it provides more protection
whole: has a savings feature but with a very low interest rate.
|
|
Adjuster:
|
a person who determines the amt of claim, loss, or damage payable under a contract and should be properly licensed.
|
|
Regulation
Deregulation
|
Regulation: an attempt by the govt to control the mktplace
Deregulation: removes or reduces the govt intervention. This is so the competition in any industry will drive down prices and create a more efficient market
ex: In CA, deregulated the electric utility industry to hopefully create competition and drive down prices, but what happened instead was that heat waves generated huge demands for electricity and companies responded by increasing residents bills by 200%
|
|
Childrens Online Privacy Protection Act (COPPA)
|
enforced by the FTC
requires commercial web site operators to get parental consent before collecting personal information from kids under 13
|
|
Sunk Cost Fallacy
|
the desire to use something you have already paid for
ex: paying for season uga football tickets, you are gonna wanna go since they cost you money vs. if a friend gave you thier season pass you would not feel as bad if you missed a game
|
|
one in ____ dollars flowing in the US economy is connected to the insurance industy.
over ___ of Americans own stocks through mutual funds and their retirement plans
|
12
1/2
|
|
Special interests: Dietary Supplements
|
1993: FDA wanted to add regulations
Health food stores lobbied congress
1994: passed dietary an supplement and Health education act, when exempted dietary supplements from most regulation
|
|
Govt Protection and Special Interests
|
some consumer protection efforts are hindered when politicians or regulators are influenced by special interest groups
what are special interest groups? Those determined to encourage or prevent changes in public policy w/o trying to be elected.
|
|
How much do consumers spend a year on food/beverages, toys, clothing/entertainment/personal care?
|
$30 billion
|
|
What are 2 financial counseling services?
|
National Foundation for Credit Counseling
Consolidated Credit Counseling Service
|
|
How fast are health care costs increasing compared to the general inflation rate?
How fast is the cost of prescription drugs rising per year?
What is the annual percent increase in health care costs to employers today? what was it in 2000?
What percent
|
20% faster,
20%
2000: 12% Today: over 20%
5.3%
52 million
1 out of 5 has either medicare or medicaid
|
|
FCIC : federal consumer info center
|
provides information to consumers about a wide variety of products
center also tells consumers whom to contact for help with problems
located in colorado
|
|
Identity Theft and Assumption Detterence Act of 1998
|
makes it a federal crime if someone knowingly transfers or uses without lawful authority a means of identification of another person with the intent to commit or to aid or abet any unlawful activity that constitutes a violation of federal law, or that constitutes a felony under any applicable state of local law.
a conviction of identity theft carries fines and prison sentences of up to 15 years
|
|
What is the main benefit of credit cards?
|
convenience
**credit cards came into being in 1973
--allows people the cash now aspect with the promise to repay in the future.
|
|
environmental impact of the internet
|
reduced the use of paper is the world of e-commece
but online transactions must be as secure and trusted as paper transactions and should always be encrypted.
the US represents 24% of the worlds primary energy consumption
more people are working/buying/selling online so fuel is saved saving the environment
the full impact though has YET to be determined
|
|
How many people in the US call themselves financial planners?
|
500,000
**This is an industry that is largely unregulated so let "the buyer beware"
|
|
Why do we need govt protection?
|
mkts have grown large and more specialized
difficult for consumers to get honest information
consumers are seperated from sellers logistically and sometimes ethically.
|
|
Bad thing about joint credit cards
|
--you are both liable for the debt even if the relationship dissolves
--credit card document trumps divorce decree
--if your name is on the credit card its your debt too
|
|
What is the nations third most common form of unintentional death?
|
posioning, most of it from food sources
|
