business law essential standard 4.00
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Business Law Essential Standard 4.00. Objective 4.01 Understand financial, credit, and bankruptcy law. Financial Law. Objective 4.01 Understand financial, credit, and bankruptcy law. Federal Deposit Insurance Corporation (FDIC). - PowerPoint PPT PresentationTRANSCRIPT
FINANCIAL LAWObjective 4.01Understand financial, credit, and bankruptcy law.
BB30 Business Law 4.01 Summer 2013
Federal Deposit Insurance Corporation (FDIC)
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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.
BB30 Business Law 4.01 Summer 2013
Credit Basic Terms
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
Protects consumers right to attain, use, and maintian credit by monitoring and enforcing credit laws
Fair Credit Reporting Act
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
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
BB30 Business Law 4.01 Summer 2013
Creditworthiness or financial responsibility should be based factors such as: Income Expenses Debits Credit history
Fair Debt Collection Practices Act
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
Requires creditors to provide consumers with the terms and cost of credit: Annual percentage rate Finance charge Credit limit Minimum payment amount
Usury Law
BB30 Business Law 4.01 Summer 2013
Sets the maximum amount of interest that can be charged for a loan.
Fair Credit Billing Act
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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
BB30 Business Law 4.01 Summer 2013
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 Act of 2009
BB30 Business Law 4.01 Summer 2013
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
Credit Card Act of 2009
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
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
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
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
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
Chapter 12 Bankruptcy
BB30 Business Law 4.01 Summer 2013
Form of bankruptcy that allows family farmers and fishing business owners to recover from debt
Repayment plan is created for the business