financial law

Financial LawFinancial Law

Objective 4.01

Understand financial, credit, and bankruptcy law.

Objective 4.01


BB30 Business Law 4.01 Summer 2013

Federal Deposit Insurance Corporation (FDIC)

Federal Deposit Insurance Corporation (FDIC)

Independent agency of the federal government created by Congress in 1933

Created to maintain the publics confidence in banks and encourage stable banking practices

FDIC pays a depositor up to $250,000 per account, if an insured bank fails

Independent agency of the federal government created by Congress in 1933

Created to maintain the publics confidence in banks and encourage stable banking practices

FDIC pays a depositor up to $250,000 per account, if an insured bank fails


Electronic Fund Transfer ActElectronic Fund Transfer Act

Provides consumers against unauthorized electronic fund transactions including: Debit and credit card purchases

ATM withdrawals

Automatic bank account withdrawals

Permits consumers to challenge billing errors and have them corrected within a 60-days

Limits consumer liability on lost cards to $50 if the reported as lost within 2 business days.

Provides consumers against unauthorized electronic fund transactions including: Debit and credit card purchases

ATM withdrawals

Automatic bank account withdrawals

Permits consumers to challenge billing errors and have them corrected within a 60-days

Limits consumer liability on lost cards to $50 if the reported as lost within 2 business days.


Home EquityHome Equity

The current market value of a home minus the remaining mortgage balance

Home Equity Line of Credit

Allows consumers to borrow money while using their home as collateral

The current market value of a home minus the remaining mortgage balance

Home Equity Line of Credit

Allows consumers to borrow money while using their home as collateral


Home Equity Consumer Protection ActHome Equity Consumer Protection Act

Requires creditors to disclose the conditions, rates, and terms of home equity loan plans

If creditors change the terms, the consumer has the right to refuse to open the plan and full refund of application fees

Requires creditors to disclose the conditions, rates, and terms of home equity loan plans

If creditors change the terms, the consumer has the right to refuse to open the plan and full refund of application fees


Home Equity Consumer Protection ActHome Equity Consumer Protection Act

When the consumer receives the loan application, it must include:

Annual percentage rate

Payment terms

Miscellaneous fees

Information concerning variable interest rates

When the consumer receives the loan application, it must include:


Payment terms

Miscellaneous fees

Information concerning variable interest rates


Right to Financial Privacy ActRight to Financial Privacy Act

Grants consumers’ personal financial records a reasonable amount of privacy from federal government searches

This act created Fourth Amendment protection for bank records

Requires government agencies to give banks and time to object the search of consumer personal records

Grants consumers’ personal financial records a reasonable amount of privacy from federal government searches

This act created Fourth Amendment protection for bank records

Requires government agencies to give banks and time to object the search of consumer personal records


Thrift and Bank Fraud ActThrift and Bank Fraud Act

Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 increased the government’s ability to combat bank fraud

Increased the prison time and penalties for people found guilty of bank fraud

Increased the FDIC’s power to enforce actions against unsafe banking practices

Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 increased the government’s ability to combat bank fraud

Increased the prison time and penalties for people found guilty of bank fraud

Increased the FDIC’s power to enforce actions against unsafe banking practices


Bank FraudBank Fraud

The act of obtaining credit, assets, money, funds, or securities under the custody of a financial institution through false pretenses

Penalty for bank fraud:

Fined up to $1,000,000

Prison term up to 30 years

Both fine and prison

The act of obtaining credit, assets, money, funds, or securities under the custody of a financial institution through false pretenses

Penalty for bank fraud:

Fined up to $1,000,000

Prison term up to 30 years

Both fine and prison


Credit Laws and BankruptcyCredit Laws and Bankruptcy

Objective 4.01


Objective 4.01



Credit Basic TermsCredit Basic Terms

Credit

A contractual agreement in which one party receives something of value now and agrees to pay the lender in the future

Creditor

Person or business providing credit

Debtor

Person or business that receives the credit

Free / Grace Period

Creditors must mail out bill 14 days before due in order for time to pay

Credit

A contractual agreement in which one party receives something of value now and agrees to pay the lender in the future

Creditor

Person or business providing credit

Debtor

Person or business that receives the credit

Free / Grace Period

Creditors must mail out bill 14 days before due in order for time to pay


Credit Basic TermsCredit Basic Terms

Credit Report

Report that summarizes a consumer’s financial history including number of credit cards, payments to credit cards, and number of late payments (if any)

Creditors use this report to determine a credit applicant is “creditworthy” or a good credit risk

Credit Report

Report that summarizes a consumer’s financial history including number of credit cards, payments to credit cards, and number of late payments (if any)

Creditors use this report to determine a credit applicant is “creditworthy” or a good credit risk


Federal Trade CommissionFederal Trade Commission

Protects consumers right to attain, use, and maintian credit by monitoring and enforcing credit laws

Protects consumers right to attain, use, and maintian credit by monitoring and enforcing credit laws


Fair Credit Reporting ActFair Credit Reporting Act

Consumers have the right to receive an accurate, up-to-date credit report

Consumers have the right to know who requests to view their report over the past year (two years for employer requests)

Consumers have the right to receive an accurate, up-to-date credit report

Consumers have the right to know who requests to view their report over the past year (two years for employer requests)


Fair Credit Reporting ActFair Credit Reporting Act

If credit report is incorrect:

Consumers have the right to file a dispute with credit report agency, and the person or business that provided the credit information

Both parties must investigate the dispute

If the dispute is not resolved to the consumer’s satisfaction, the consumer has the right to add explanation to the report

If credit report is incorrect:

Consumers have the right to file a dispute with credit report agency, and the person or business that provided the credit information

Both parties must investigate the dispute

If the dispute is not resolved to the consumer’s satisfaction, the consumer has the right to add explanation to the report



Equal Credit Opportunity ActEqual Credit Opportunity Act

Credit application can only be judged on the basis on financial responsibility not the applicant’s gender, race, martial status, age, national origin, or receipt of public assistance

If credit is denied, consumers have to right to know why

Credit application can only be judged on the basis on financial responsibility not the applicant’s gender, race, martial status, age, national origin, or receipt of public assistance

If credit is denied, consumers have to right to know why

Equal Credit Opportunity ActEqual Credit Opportunity Act

Creditworthiness or financial responsibility should be based factors such as:

Income

Expenses

Debits

Credit history

Creditworthiness or financial responsibility should be based factors such as:

Income

Expenses

Debits

Credit history


Fair Debt Collection Practices ActFair Debt Collection Practices Act

Prohibits unfair, abusive, and deception methods of collecting debt

Applies to family, individual, and household debts derived from: Credit card accounts

First and second mortgages

Medical care

The purchase of a vehicle

Retail financing

Prohibits unfair, abusive, and deception methods of collecting debt

Applies to family, individual, and household debts derived from: Credit card accounts

First and second mortgages

Medical care

The purchase of a vehicle

Retail financing


Fair Debt Collection Practices ActFair Debt Collection Practices Act

Restricts credit collection agencies from:

Calling at inconvenient times to collect debt

Call you at work if you tell them they are not allowed to call

Telling third parties, such as co-workers, neighbors, or employer, about the debt

Using racial slurs, insults or profane language

Making false accusations or representations, such as, using a fake name or falsely declaring to file a lawsuit

Restricts credit collection agencies from:

Calling at inconvenient times to collect debt

Call you at work if you tell them they are not allowed to call

Telling third parties, such as co-workers, neighbors, or employer, about the debt

Using racial slurs, insults or profane language

Making false accusations or representations, such as, using a fake name or falsely declaring to file a lawsuit


Truth in Lending LawTruth in Lending Law

Requires creditors to provide consumers with the terms and cost of credit:


Finance charge

Credit limit

Minimum payment amount

Requires creditors to provide consumers with the terms and cost of credit:


Finance charge

Credit limit

Minimum payment amount


Usury LawUsury Law

Sets the maximum amount of interest that can be charged for a loan.

Sets the maximum amount of interest that can be charged for a loan.


Fair Credit Billing ActFair Credit Billing Act

Provides consumers with a means to dispute a billing error on open-ended credit accounts (credit and charge cards).

Law does not apply to installment loans

Consumer must notify creditor in writing within 60 days from the statement date

Provides consumers with a means to dispute a billing error on open-ended credit accounts (credit and charge cards).

Law does not apply to installment loans

Consumer must notify creditor in writing within 60 days from the statement date


Fair Credit Billing ActFair Credit Billing Act

Creditor must acknowledge consumer’s letter within 30 days

Creditor must explain the reason for the charge or fix the mistake within 90 days

Creditor must acknowledge consumer’s letter within 30 days

Creditor must explain the reason for the charge or fix the mistake within 90 days


Credit Reporting ActCredit Reporting Act

Allows consumers to obtain a free copy of their credit report one time every 12 months from each credit reporting agency:

Equifax

Experian

Trans Union

Allows consumers to obtain a free copy of their credit report one time every 12 months from each credit reporting agency:

Equifax

Experian

Trans Union


Credit Card Act of 2009Credit Card Act of 2009

Credit Card Accountability Responsibility and Disclosure Act of 2009

Amends the Truth-in-Lending Act

Requires creditors to notify consumers in writing of significant changes to credit terms within 45 days

Credit Card Accountability Responsibility and Disclosure Act of 2009

Amends the Truth-in-Lending Act

Requires creditors to notify consumers in writing of significant changes to credit terms within 45 days



Requires that credit applicants under the age of 21 have a cosigner

Legal guardian, parent, spouse, or person 21 or older able to repay debt of the applicant

Requires creditors to provide clear and simple minimum payment information

Requires that credit applicants under the age of 21 have a cosigner

Legal guardian, parent, spouse, or person 21 or older able to repay debt of the applicant

Requires creditors to provide clear and simple minimum payment information



If you make no additional charges using this card

and each month you pay…

You will pay off the balance shown on this statement in

about…

And you will end up paying an estimated total

of…

Only the minimum payment

21 years $5,936

$95 3 years $3,411

(Savings = $2,483)


Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take longer to pay off your balance. For example:


BankruptcyBankruptcy

Legal proceeding for a person or business unable to pay an outstanding debt

Provides the debtor with an opportunity to recover from debt

Legal proceeding for a person or business unable to pay an outstanding debt

Provides the debtor with an opportunity to recover from debt


Chapter 7 BankruptcyChapter 7 Bankruptcy

Requires the debtor to liquidate (sale) nonexempt property to repay creditors

Non-exempt property includes money from bank accounts, stocks, and bonds

Requires the debtor to liquidate (sale) nonexempt property to repay creditors

Non-exempt property includes money from bank accounts, stocks, and bonds


Chapter 11 Bankruptcy Chapter 11 Bankruptcy

Form of bankruptcy that allows businesses to create a plan to “reorganize” and pay off their debts over time.

Examples of reorganization:

Closing stores

Reducing size of workforce

Stop selling certain product lines

Form of bankruptcy that allows businesses to create a plan to “reorganize” and pay off their debts over time.

Examples of reorganization:

Closing stores

Reducing size of workforce

Stop selling certain product lines


Form of bankruptcy that allows family farmers and fishing business owners to recover from debt

Repayment plan is created for the business

Form of bankruptcy that allows family farmers and fishing business owners to recover from debt

Repayment plan is created for the business




Form of bankruptcy that allows an individual to submit a plan to repay debts in 3 to 5 years.

Requires the debtor to have $250,000 in unsecured debt.

Form of bankruptcy that allows an individual to submit a plan to repay debts in 3 to 5 years.

Requires the debtor to have $250,000 in unsecured debt.

financial law

Documents

summer 2013bb30 business

ratesbb30 business law

collateralbb30 business

prisonbb30 business

bankruptcy law

business days

insured bank

bank fraud prosecution