CFMP US laws and regulations 15% Flashcards
Regulation
A governmental order having the force of law
List the five regulators.
Fed: bank holding companies and members of state banks
FDIC: state commercial banks which are not fed members and state savings associations
OCC: national banks
NCUA: credit unions
OTS: federal charter savings and loans
Regulation B
Equal credit opportunity
Reg B was implemented to an unequivocally forbid banks and other entities that are creditors to discriminate on a prohibited basis. These provisions apply to the banks activities before, during, and after the extension of credit. This would include prohibition on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant’s income is derived from public assistance, and because the applicant has exercised a right under the consumer credit protection act.
The marketer must be cautious not to do anything that would discourage any particular group from applying for bank loans.
This regulation requires banks to preserve all written or recorded information connected with an application for 25 months, 12 months for business credit, after the date on which the bank informed the applicant of action taken on an application or of incompleteness of an application. This also applies when a bank makes an offer of credit to potential customers
Regulation C
Home mortgage disclosure act: HMDA
The regulation requires lending institutions to report public alone data as a mechanism to ensure lawful lending it activity. Analysis of this data can assist regulators and those that follow financial institutions to determine whether financial institutions are serving the housing needs of their communities, whether public officials are distributing public-sector investments so as to attract private investment to areas where it is needed, and identify possible discriminatory lending patterns
Regulation C affects marketing by requiring that advertising practices encompass all areas of the banks service footprint and that banks neither purposefully nor incidentally restrict credit access to certain segment of our community.
Regulation DD
Truth in savings
The Federal Reserve Board regulation that implements the truth in savings act. The purpose of Reg DD is to ensure that consumers have comparable and consistently formatted information with which to make informed decisions about accounts at depository institutions.
Regulation R
GLBA push out rules
The SEC and the Federal Reserve Board into 2007 adopted rules that implement the bank broker provisions of the Gramm Bliley act of 1999. These joint rules, codified as regulation R, accommodate the business practices of banks while protecting investors. Reg Rs restriction on the way banks advertise is intended to prevent a bank from operating a brokerage business out of this custody, safekeeping, or trust and fiduciary departments. Under these restrictions banks may advertise trust and fiduciary responsibilities services, but the ads must not single out securities brokerage services that are provided in connection with the services. A bank cannot advertise on a standalone basis that it offers securities brokerage services through its trust department, it must list all services it provides trust customers.
Regulation Q
Interest on deposits
The Federal Reserve Board regulation that prohibits paying interest on demand deposits sets rules for advertising deposit accounts, and until recently set the maximum rate banks could pay on savings and time deposits. The depository institutions Deregulation and monetary control act of 1980 mandated the gradual phasing out of interest rate ceilings between 1980 and 1987.
This regulation does not apply to premiums or bonuses that are not connected in anyway, directly or indirectly to either the balance in or the duration of a demand deposit.
Bonuses are premiums exceeding the minimum requirements set by Iris a reportable to customers as interest on a 1099 INT. In addition IRS regulations require that banks aggregate bonus amounts with interest earned. For example, if a customer receives a five dollar bonus and earns $30 in interest on an account the entire amount of $35 is reportable as interest on the 1099 form.
Regulation Z
Truth in lending
The Federal Reserve Board regulation governing the advertising of credit services. The purpose of rags he is to help consumers make informed decisions about credit by requiring banks to disclose in consistent and uniform ways the terms and cost of credit. Applies to open and closed and credit.
Greg is the affects the marketer who advertises and markets any loan product or service. A marketer must clearly disclose certain facts, present information in a consistent and compliant manner, and ensure that all marketing and advertising media used meet the regulatory requirement.
Gramm-Leach-Bliley act
Legislation enacted in 1999 that, among other things, gives banking institutions the ability to offer any financial product or service and prohibits non-bank entities from owning and operating a banking institution
Truth in savings act
A law governing the disclosure of rates and terms on interest bearing deposit accounts. It was implemented through Federal Reserve Board regulation DD on June 21, 1993.
What is the fair credit reporting act
The fair credit reporting act FCRA contains rules governing prescreening, the practice of searching the files of credit reporting agency is our credit bureaus for names and addresses of individuals who meet certain credit requirements. Marketers commonly use prescreening to generate mailing list for promoting credit or insurance products to consumers. FCRA specifies the process that a bank or other creditor must follow in order to have access to a consumers credit file for pre-screening purposes.
The fair and accurate credit transactions act, facta, added a new section that limits the availability of affiliated companies to use shared consumer report data for marketing purposes
Do not call
Legislation enacted in 2002 creating a national do not call directory that prohibits firms from calling individuals who have listed their names and phone numbers. Most states have also enacted a state do not call legislation and directory list
What is RESPA
RESPA was passed by Congress in 1974 and stands for real estate settlement procedures act. It was created to address problems in the real estate settlement process including abusive practices that increased cost to homebuyers, lack of consumer understanding about the settlement process and costs.
McFadden act
A federal law and acted in 1927 that prohibits banks from establishing branches across state lines
Community reinvestment act
A 1977 law requiring financial institutions to meet the credit needs of low and moderate income segments of communities they serve, to inform the target market of their availability, and to report on the extent of their investment in the areas they serve. A 1989 policy statement expanded the way regulators evaluate Bank CRA programs
Can Spam act
Legislation and acted in 2003 that requires unsolicited commercial email messages to be labeled and to include opt out instructions and the sender’s physical address. Can Spam stands for controlling the assault of non-solicited pornographic and marketing.
Define the USA patriot act
Legislation enacted in 2001 that contains strong measures to prevent, detect, and prosecute terrorism and international money laundering.
Deregulation
The removal or liberalization of legal restrictions to promote competition. This may include price deregulation which is the removal of interest-rate ceilings, product deregulation which is the regulatory approval allowing Banks to offer more diversified products and services, and geographic deregulation which removes the restrictions that prohibited expansion across state lines.
Check 21
Legislation enacted into 2003 that establishes a uniform understanding of and process for electronic check clearing
Consumerism
A movement originating in the early 1960s to protect consumers from bad products, poor service, and misrepresentation by businesses about their products and warranties.
What type of accounts does the truth in savings act apply to?
The truth in savings act only applies to consumer deposit accounts.
Name three trigger terms. ***
Profit: never use the word profit to refer to interest paid on an account
Free: if an account has any maintenance or activity fees that could be assessed the word free or no cost cannot be used in an advertisement for the account.
APY: if APY is used in the ad, then annual percentage yield must also be used someplace in the ad copy. If APY is used we must also quote the minimum balance required, term if a time deposit, details about the requirements to receive the bonus if any, when the bonus would be provided unless given at account opening, if the APY can change, minimum deposit required to open the account it’s different from the minimum balance required to receive the APY, the date for which the APY is current as of, penalties for early withdrawal if time deposit, and statement of fees that could reduce earnings it’s maintenance or activity fees could apply. If the advertisement is in broadcast form such as TV radio or Internet and the APY is disclosed and only the first three checkered disclosures above need to be included in the advertisement including minimum balance required, term if time deposit, details about the requirements to receive the bonus if any.
Captive finance company
A credit granting subsidiary whose principal business is to finance consumer purchases of the parent company’s products such as automobiles or major appliances.
What four things must a bank inform someone about non-deposit investment products?
Not a deposit
not insured by the FDIC or any other federal government agency
not guaranteed by the bank
subject to investment risk and may go down in value
Use of the word bonus meaning premium, gift, award, or other consideration worth more than $10 triggers the following disclosures
Annual percentage yield using that term, time requirement to obtain the bonus, minimum balance required to obtain the bonus, minimum balance required to open the account if it is greater than the minimum balance necessary to obtain the bonus, when the bonus would be provided. Note: waiting at the is not a bonus
Captive financing
Financing offered by the manufacturer and related entities directly through the dealer.
Overdraft program disclosures must include
No misleading or inaccurate statements, fees for paying overdraft, listing of all types of transactions for which an overdraft fee may be imposed, time. Permitted to repay or cover an overdraft, any circumstances that would prevent a particular item from being paid through the overdraft program
Define compliance
The interpretation and application of banking laws, regulations, and guidelines.
Define external Publics
The people outside an organization who have an indirect impact on the organization’s ability to do business and achieve its objectives are. For example, the investment community, community organizations, consumer groups, the general public, the media. The organization does not have control over the reception of its communications to external Publics.
Define internal Publics
The people who have a direct impact on the organization’s ability to do business and achieve its objectives. For example: employees, directors, customers, shareholders, where the organization has some control over the reception of its communications to them.
Define interstate banking
The establishment of a banking presence in another market across state lines for the purpose of taking deposits
Define non-bank bank
A financial institution owned by a non-baking company such as an insurance company or brokerage firm that avoids being defined as a bank holding company for regulatory purposes by limiting the activity of its bank to only one of the two functions that define a commercial bank that is, it either except Amanda posits or makes commercial loans, but not both. Such things can compete with commercial banks while their parent company is engaging activities for bidden to bank holding companies such as underwriting corporate securities, underwriting insurance, managing mutual funds, and so on
Define redlining
The illegal practice of intentionally or unintentionally eliminating residents of certain geographic areas from eligibility for credit such as mortgage or loans because the area is considered poor risk
Define regional banking
The establishment of a banking presence in nearby states by merger, acquisition, or new charter. Regional banking occurs when reciprocal laws are passed allowing bank holding companies in one state to acquire or establish a bank in another.
What does UDAAP stand for
Unfair deceptive abusive acts and practices
Under UDAAP written disclosures in the text or FinePrint of a footnote May be insufficient to correct a misleading headline
A bank is required to retain evidence of compliance with regulation DD for how many years?
Two years
Your bank is developing its website, which you have been asked to review. You should advise the developers that, according to regulation DD, the term member FDIC must appear on which pages
Only Pages that explain bank deposit products
May not be used on loan products or risk based products or insurance Pages
How is a lottery determined
A lottery is determined by “valuable consideration “
Customer privacy protections and disclosures are part of which act?
GLBA. Gramm Leach Bliley
Your bank is developing its website, which you have been asked to review. You should advise the developers that, according to Reg. DD, the term “Member FDIC “ must appear on:
a. only those pages that discuss any type of loan products
b. only those pages that explain bank deposit products
c. only those pages that explain the bank’s investment products
d. all pages except those that advertise non-deposit products or insurance
b. only those pages that explain bank deposit products
A 1977 law requiring financial institutions to meet the credit needs of low and moderate income segments of communities they serve, to inform the target market of their availability, and to report on the extent of their investment in the areas they serve.
CRA
Equal credit opportunity
Reg B
Home mortgage disclosure act: HMDA
Reg C
Truth in savings
Reg DD
Interest on deposits
Reg Q
Truth in lending
Reg Z
GLBA push out rules
Reg R
Legislation that contains strong measures to prevent, detect, and prosecute terrorism and international money laundering.
Patriot Act
A law governing the disclosure of rates and terms on interest bearing deposit accounts.
Reg DD / Truth in Savings Act
What was created to address problems in the real estate settlement process including abusive practices that increased cost to homebuyers, lack of consumer understanding about the settlement process and costs.
RESPA
A credit granting subsidiary whose principal business is to finance consumer purchases of the parent company’s products such as automobiles or major appliances.
Captive finance company
Financing offered by the manufacturer and related entities directly through the dealer.
Captive financing
