2. Banks cannot lend more than 15% of capital to one borrower. 3. Most banks cannot hold securities rated below grade”. “investment 4. Regulators impose minimum liquidity requirements. VIII. Consumer Protection Regulations. A. Loan Rate Ceilings. 1. No federal rate ceilings. 2. Loan rate ceilings or limits” vary widely among states. “usury 3. ceilings usually apply to mortgage or consumer credit. B. Truth-in-Lending Act of 1969 (Reg Z). Lending institution must accurately detail— 1. Effective annual percentage rate interest on unpaid balance and 2. Total cost of financing. C. Fair Credit Billing Act of 1974. Lending institution must detail— 1. Method of computing finance charges. 2. Customer’s rights and remendies. 3. Procedures for disputing bills. D. Equal Credit Act of 1974; 1976. No discrimination in lending based on 1. gender 2. marital status 3. race 4. age 5. national origin 6. receipt of public assistance E. Community Reinvestment Act of 1977. Depository institutions must make and publicly document efforts to serve all potential customers in their geographical area. 1. No refusing to make loans in certain zones or neighborhoods. “redlining”—no 2. Permission to merge or branch often depends on satisfactory CRA rating. 3. File” always available to public and regulators. “CRA F. Fair Credit Reporting Act of 1970/Fair &Accurate Credit Transactions Act of 2003 1. Consumers entitled to 1 free credit report per year. 2. Consumers must be told when adverse credit information is reported them. 3. Consumers must be told when of credit are less favorable. 4. Consumers have rights and remedies concerning error correction and security. IX. Regulatory Agencies charter and regulate state-chartered institutions. A. State regulators 1. However, most state-charted institutions are also regulated in some way by a. The FDIC (deposit insurance) and b. The Federal Reserve (reserve requirements, holding companies, letter- series Regs) 2. State regulators may also regulate in-state branches of out-of-state institutions. 3. Any bank also has at least one Federal agency examining it— a. the FDIC if it is not a member of the Federal Reserve;
2. Banks cannot lend more than 15% of capital to one borrower. 3. Most banks cannot hold securities rated below “investment grade”. 4. Regulators impose minimum liquidity requirements. VIII. Consumer Protection Regulations. A. Loan Rate Ceilings. 1. No federal rate ceilings. 2. Loan rate ceilings or “usury limits” vary widely among states. 3. ceilings usually apply to mortgage or consumer credit. B. Truth-in-Lending Act of 1969 (Reg Z). Lending institution must accurately detail— 1. Effective annual percentage rate interest on unpaid balance and 2. Total cost of financing. C. Fair Credit Billing Act of 1974. Lending institution must detail— 1. Method of computing finance charges. 2. Customer’s rights and remendies. 3. Procedures for disputing bills. D. Equal Credit Act of 1974; 1976. No discrimination in lending based on 1. gender 2. marital status 3. race 4. age 5. national origin 6. receipt of public assistance E. Community Reinvestment Act of 1977. Depository institutions must make and publicly document efforts to serve all potential customers in their geographical area. 1. No “redlining”—no refusing to make loans in certain zones or neighborhoods. 2. Permission to merge or branch often depends on satisfactory CRA rating. 3. “CRA File” always available to public and regulators. F. Fair Credit Reporting Act of 1970/Fair &Accurate Credit Transactions Act of 2003 1. Consumers entitled to 1 free credit report per year. 2. Consumers must be told when adverse credit information is reported them. 3. Consumers must be told when of credit are less favorable. 4. Consumers have rights and remedies concerning error correction and security. IX. Regulatory Agencies A. State regulators charter and regulate state-chartered institutions. 1. However, most state-charted institutions are also regulated in some way by a. The FDIC (deposit insurance) and b. The Federal Reserve (reserve requirements, holding companies, letter- series Regs) 2. State regulators may also regulate in-state branches of out-of-state institutions. 3. Any bank also has at least one Federal agency examining it— a. the FDIC if it is not a member of the Federal Reserve;
Ch16%20Regulation%20of%20Financial%20Institutions.docx