Financial Law

1. Financial Law Objective 4.01 Understand financial, credit, and bankruptcy law. BB30 Business Law 4.01 Summer 2013

2. 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 BB30 Business Law 4.01 Summer 2013

3. Electronic Fund Transfer Act • Protects 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. BB30 Business Law 4.01 Summer 2013

4. Home 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 BB30 Business Law 4.01 Summer 2013

5. Home 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 BB30 Business Law 4.01 Summer 2013

6. Home 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 BB30 Business Law 4.01 Summer 2013

7. Right 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 BB30 Business Law 4.01 Summer 2013

8. Thrift 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 BB30 Business Law 4.01 Summer 2013

9. Bank 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 BB30 Business Law 4.01 Summer 2013

10. Credit Laws and Bankruptcy Objective 4.01 Understand financial, credit, and bankruptcy law. BB30 Business Law 4.01 Summer 2013

11. Credit 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 BB30 Business Law 4.01 Summer 2013

12. Credit 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 BB30 Business Law 4.01 Summer 2013

13. Federal Trade Commission • Protects consumers right to attain, use, and maintian credit by monitoring and enforcing credit laws BB30 Business Law 4.01 Summer 2013

14. Fair 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) BB30 Business Law 4.01 Summer 2013

15. Fair 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 BB30 Business Law 4.01 Summer 2013

16. Equal 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 BB30 Business Law 4.01 Summer 2013

17. Equal Credit Opportunity Act • Creditworthiness or financial responsibility should be based factors such as: • Income • Expenses • Debits • Credit history BB30 Business Law 4.01 Summer 2013

18. Fair 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 BB30 Business Law 4.01 Summer 2013

19. Fair Debt Collection Practices Act • Restricts credit collection agencies from: • Calling at inconvenient times to collect debt • 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 BB30 Business Law 4.01 Summer 2013

20. Truth in Lending Law • Requires creditors to provide consumers with the terms and cost of credit: • Annual percentage rate • Finance charge • Credit limit • Minimum payment amount BB30 Business Law 4.01 Summer 2013

21. Usury Law • Sets the maximum amount of interest that can be charged for a loan. BB30 Business Law 4.01 Summer 2013

22. Fair 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 BB30 Business Law 4.01 Summer 2013

23. Fair 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 BB30 Business Law 4.01 Summer 2013

24. Fair Credit 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 • TransUnion BB30 Business Law 4.01 Summer 2013

25. Credit 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 BB30 Business Law 4.01 Summer 2013

26. Credit Card Act of 2009 • 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 BB30 Business Law 4.01 Summer 2013

27. Credit Card Act of 2009 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: BB30 Business Law 4.01 Summer 2013

28. Bankruptcy Legal proceeding for a person or business unable to pay an outstanding debt Provides the debtor with an opportunity to recover from debt BB30 Business Law 4.01 Summer 2013

29. Chapter 7 Bankruptcy Requires the debtor to liquidate (sell) nonexempt property to repay creditors Non-exempt property includes money from bank accounts, stocks, and bonds State laws determine exempt property BB30 Business Law 4.01 Summer 2013

30. 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 BB30 Business Law 4.01 Summer 2013

31. Chapter 12 Bankruptcy • Form of bankruptcy that allows family farmers and fishing business owners to recover from debt • Repayment plan is created for the business • 3 to 5 years BB30 Business Law 4.01 Summer 2013

32. Chapter 13 Bankruptcy Form of bankruptcy that allows an individual to submit a plan to repay debts in 3 to 5 years. Keep assets Overseen by the courts Smaller debt limit than Chapter 12 BB30 Business Law 4.01 Summer 2013