BUSINESS LAW ESSENTIAL STANDARD 4.00 Objective 4.01 Understand financial, credit, and bankruptcy law

BUSINESS LAWESSENTIAL STANDARD 4.00Objective 4.01Understand financial, credit, and bankruptcy law.

FINANCIAL LAWObjective 4.01Understand financial, credit, and bankruptcy law.

BB30 Business Law 4.01 Summer 2013

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

Electronic 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.

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

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

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

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

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

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

CREDIT LAWS AND BANKRUPTCYObjective 4.01Understand financial, credit, and bankruptcy law.


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

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

Federal Trade Commission


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

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)

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


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

Equal Credit Opportunity Act


Creditworthiness or financial responsibility should be based factors such as: Income Expenses Debits Credit history

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

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

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

Usury Law


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

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

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

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 Trans Union

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



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:


Bankruptcy

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 Bankruptcy

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

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



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 an individual to submit a plan to repay debts in 3 to 5 years.

Documents

BUSINESS LAW ESSENTIAL STANDARD 4.00 Objective 4.01 Understand financial, credit, and bankruptcy law