Sunday, February 26, 2012
Rules Governing Lenders
There are various laws introduced to have a check on the various Banks and Lending institutions such that there is a limit to the lenders rate and principle amount being lent.
According to the website enotes.com, the law governing the financial institution is a fusion of federal laws and laws governing the respective states. Article 3 of the Uniform Commercial Code involves negotiable instruments act, Article 4 of Uniform Commercial Code governs bank deposit and collections. Some of the laws governing the lenders and financial institutions are: a. National Banking System. b. Federal Reserve Act of 1913. c. Bank holding company act of 1956. International act of 1978, require foreign banks to fit within the federal regulatory and interest Rate Control Act of 1978, created Federal Financial institutions Examination Council d. Depositors institutions deregulation and monetary control act, this was implemented to remove the ceiling on interest rate e. Crime Control Act of 1990- this provided regulators to combat frauds. F. Housing and community development act of 1992-to combat money laundering g. Reigie-Neal interstate Banking and Branding efficiency Act of 1994, permitted bank holding companies that were adequately capitalized and managed to acquire bank in any state. H. Gramm-Leach Biley Act-restriction of disclosure of non-profitable customer information by financial institutions.
Article 9, which govern the Secured Transaction. Accordingly banks demand for a property or house to be used as security while advancing loans to a borrower. In the light wherein the borrower is not able to pay the loan amount the interest from the property is used by the bank to cover the loan amount, even if the borrower goes into bankruptcy the Bank uses the property to settle the loan amount.
Truth in lending: Part of the Consumer Credit Protection Act requires lenders to disclose the various conditions involved while advancing loans The various areas where the lenders must disclose are the following a. Total amount of principle being lent b. Payment due date’s c. Terms of loans d. Details of valuables used as security. e. Finance charges involved. f. Processing fees. g. Payment penalties. The various private institutions and lenders are supposed to abide by the various disclosure agreements such that the borrowers rights are protected.
These various sets of Acts and rules are actually a merger of both the federal laws and the various state laws. The state tries to implement and pass acts, which can protect the various local financial institutions and lending Banks.