1. Business Law Essential Standard 4.00
Objective 4.01
Understand financial, credit, and bankruptcy law.

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

3. 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

4. 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.
BB30 Business Law 4.01 Summer 2013

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

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

12. Credit Basic Terms Credit Creditor Debtor
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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

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

23. 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

24. 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

25. 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
BB30 Business Law 4.01 Summer 2013

26. 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

27. 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

28. 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:
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)
BB30 Business Law 4.01 Summer 2013

29. 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

30. 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
BB30 Business Law 4.01 Summer 2013

31. 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

32. 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
BB30 Business Law 4.01 Summer 2013

33. Chapter 13 Bankruptcy
Form of bankruptcy that allows an individual to submit a plan to repay debts in 3 to 5 years.
BB30 Business Law 4.01 Summer 2013