Credit · Lesson Plan

Your Credit Rights and Responsibilities

Borrowing money is a two-sided deal: the lender decides whether to say yes, and federal law decides what each side may then do about it. This lesson covers both. Students judge three loan applications on the three C’s — working out debt-to-income so that “capacity” becomes a number rather than a word — then match real situations to the laws that protect them, and finish with the case that makes the difference concrete: a stolen wallet, and what federal law says the victim owes on a credit card versus a debit card.

Grades 9–12 Lesson Plan 45–60 minutes Free Lesson

Your Credit Rights and Responsibilities illustration

For Teachers

Lesson at a glance

Topic: Credit
Grade Level: Grades 9–12
Resource Type: Lesson + Worksheet
Estimated Time: 45–60 minutes
Format: Case studies + worksheet
Materials: Worksheet, calculators, whiteboard or projector

What Students Learn

Learning objectives

Explain the three C’s a lender uses to judge an application — capacity, character, and collateral
Calculate debt-to-income and use it to assess whether a borrower can afford a payment
Recognize that lenders trade the three C’s off against one another, so applicants with the same income can get different answers
Identify the key federal consumer-credit laws — the Truth in Lending Act, Fair Credit Reporting Act, Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Billing Act, and CARD Act
Apply those laws to specific consumer-credit problems
Compare the liability limits for unauthorized charges on a credit card and a debit card, and explain why reporting speed matters
Describe the responsibilities a borrower owes a lender in return

Materials

What you’ll need

Printed copies of the worksheet (one per student)
Calculators
Whiteboard or projector for the case discussions
Pens or pencils

Key Terms

Vocabulary

Capacity: Whether a borrower’s income can carry the payment — the first of the three C’s, usually measured with debt-to-income.
Character: Whether a borrower has repaid reliably before, judged mostly from credit history.
Collateral: Something of value pledged to a lender, which the lender may take if the loan is not repaid.
Debt-to-income: Monthly debt payments divided by monthly income, as a percentage. Lenders generally grow uncomfortable above about 36%.
Truth in Lending Act: Federal law requiring a lender to disclose the APR and total cost of credit before the borrower signs.
Fair Credit Reporting Act: Federal law giving you the right to see your credit report and have errors on it investigated.
Equal Credit Opportunity Act: Federal law prohibiting credit denial on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
Fair Debt Collection Practices Act: Federal law limiting how and when a debt collector may contact you.
Fair Credit Billing Act: Federal law letting you dispute billing errors and capping what you owe for unauthorized credit card charges.
Unauthorized charge: A transaction made on your account by someone who had no permission to make it.

For Teachers

Lesson plan

Estimated time: one 45–60 minute class period.

Lesson sequence

Warm-up (5 min). Ask: if you lent a classmate $50, what would you want to know about them first? Collect answers on the board. They will produce the three C’s almost every time, in their own words, before you name them.
The three C’s (15 min). Work Part 1. Have students calculate debt-to-income before discussing anything — capacity stops being an opinion once it is a percentage. The three applicants are built so that no one of them wins on all three C’s: A has a perfect record and no room in the budget, B has the most money left over and a history of paying late, C has a clean budget and no history at all. Draw out that “never missed a payment” and “never had a payment” are not the same thing — C is the position most students will be in.
Which law protects you (10 min). Work Part 2. Read the six laws aloud, then let students match the situations independently before taking answers. Question 4 (a card nobody applied for) is worth arguing about — two answers are defensible.
When the card is stolen (15 min). Work Part 3. Give the class the liability caps: a credit card is capped at $50 however long it takes to notice; a debit card is capped at $50 if reported within two business days, $500 within sixty days, and not capped at all after that. On $1,240 of charges, that is the difference between owing $50 and owing all of it. Make the second point too: with a debit card the money leaves your account first and comes back later, which matters if rent is due.
Your side of the deal (5 min). Part 4. Every right above has a responsibility facing it. Close on the list students produce.

Assessment

Assess the completed worksheet, with particular attention to the debt-to-income calculations and question 11, and participation in the applicant discussion.

Extension

Have students request their own free credit report from the federally authorized source and identify the features listed on it — or, if that is not practical, examine the sample report in the classroom printables and find one error to dispute.

This lesson is for educational purposes only. Legal protections are summarized for teaching, and this is not legal or financial advice.

Discussion

Discussion questions

Applicant A has never missed a payment; Applicant C has never had one. Why might a lender treat those two very differently?
Debt-to-income turns “can they afford it?” into a number. What does that number miss about a person’s finances?
Why would a lender accept a borrower with weak credit history if collateral is offered?
The same wallet held a credit card and a debit card. Explain why federal law treats them so differently.
Which of the six laws do you think does the most for an ordinary borrower, and why?
Every right on this worksheet has a responsibility facing it. What does a lender have a right to expect from you?

Printable Worksheet