E. She is correct.
“Trick or Treat?” Penny has significant credit card debt following her diving trip with
her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more
than she expected, and these extra expenses were unforeseen. Penny recently took a
business law class and thought that she might be able to find a way out of her troubles.
She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B.
She also owed $2,000 to the local dive shop for diving equipment she purchased for the
trip. Penny is in negotiations with the dive shop over that amount because she had a
problem with a mask fogging on the trip and had to replace it while on the trip at a
charge of $100. While the mask issue did not significantly interfere with the trip, Penny
thought that she should get at least some deduction on the overall bill. Penny called
Credit Card Company A and told them that she was a poor student and could not afford
to pay the entire $3,000 she owed. The representative of Credit Card Company A, who
was working her last day, told Penny just to pay $50, and that would be considered
payment in full. The representative sent Penny an e-mail to that effect. Penny was very
pleased and went right out and quit her job at the campus bookstore because she did not
really like dealing with student problems and thought that with the reduction from
Credit Card Company A, she would have no problem in regard to having extra money.
Although her parents supplied her with a large monthly allowance, Penny had the job at
the bookstore so that she would have more money for clothes shopping and fun
activities. In relation to Credit Card Company B, Penny called up and once again pled
her case as a poor student. She talked Credit Card Company B into taking a used car
with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie
about the value of the car, but she made it sound as good as possible. Transfer details
regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a
check for $1,000 marked “paid in full.” Much to her surprise and pleasure, the dive
shop did indeed cash the check. Penny, however, was distraught to find that within 30
days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent
her a bill for $3,000; and from the dive shop she received a check for $1,000 along with
a bill for $2,000. Faced with all these claims, Penny decided to look for work. She
ended up two weeks later with a job selling beauty products that she liked much better
than the bookstore job. It did not require dealing with pesky students. Assume all credit