Regulations That Protect Consumers
Regulation B - Equal Credit Opportunity
Regulation B prohibits creditors from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied.
The regulation prohibits creditors from discrimination against applicants on the basis of age, race, color, religion, national origin, sex, marital status, or receipt of income from public assistance programs.
Model credit application forms are provided in the regulation to facilitate compliance. By properly using these forms, creditors can be assured of being in compliance with the application requirements.
The regulation also requires creditors to give applicants a written notification of rejection of an application, a statement of the applicant's rights under the Equal Credit Opportunity Act, and a statement either of the reasons for the rejection or of the applicant's right to request the reasons. Creditors who furnish credit information, when reporting information on married borrowers, must report information in the names of each spouse.
The regulation establishes a special residential mortgage credit monitoring system for regulatory agencies by requiring that lenders ask for and note the race, national origin, sex, marital status, and age of residential mortgage applicants. The regulation covers all credit transactions (unlike other regulations that may cover only consumer credit), with some modifications applicable to certain classes of transactions. Full Text of Regulation B
Regulation C - Home Mortgage Disclosure
Regulation C requires certain mortgage lenders to disclose data regarding their lending patterns.
The regulation carries out the Home Mortgage Disclosure Act of 1975, providing citizens and public officials with data to help determine whether lenders are meeting the credit needs of their communities and complying with fair lending laws.
The regulation applies to banks, savings and loans, credit unions and mortgage companies that have offices in Metropolitan Statistical Areas and that meet certain other criteria relating to asset size and volume of lending. These institutions must record and make available to the public data on mortgage loans that they originate or purchase, and also on applications for such loans. In many instances, the race or national origin, gender, and income of the applicant must be reported, as well as the location of the property and the type of loan.
The Board may exempt from Regulation C any institution complying with substantially similar state laws. Full Text of Regulation C
Regulation D - Reserve Requirements
Regulation D imposes uniform reserve requirements on all depository institutions with transaction accounts or non-personal time deposits. Also, the regulation defines such deposits and requires reports of deposits to the Federal Reserve.
This regulation sets uniform reserve requirements for all depository institutions. The reserve requirements are based on various deposit account classifications and are important to consumers because they define transaction, savings and time deposit account categories.
Transaction accounts are:
- checking accounts
- negotiable orders of withdrawal(NOW) accounts
- share draft accounts at credit unions
- automatic transfer service (ATS) accounts.
Savings accounts are:
- share accounts at credit unions
- passbook savings accounts
- statement savings accounts
- money market deposit accounts.
Time deposits are:
- certificates of deposits (CDs)
- certain "club" accounts
- share certificates at credit unions.
Full Text of Regulation D
Regulation E - Electronic Fund Transfers
Regulation E establishes the rights, liabilities, and responsibilities of parties in electronic fund transfers (EFT) and protects consumers using EFT systems, such as ATMs and debit cards.
Regulation E establishes the rules for solicitation and issuance of EFT cards; governs consumers' liability for unauthorized electronic fund transfers (resulting, for example, from lost or stolen cards); requires institutions to disclose certain terms and conditions of EFT services; provides for documentation of electronic transfers; sets up resolution procedures for errors; and covers notice of crediting and stoppage of pre-authorized payments from a customer's account.
Stored-value cards (also known as "smart cards") and home banking by personal computer is also subject to Regulation E because the act governs electronic fund transfers. Full Text of Regulation E
Regulation H - Membership of State Banking Institutions in the Federal Reserve System
Regulation H is important for consumers because it requires lenders to disclose information regarding flood hazard areas and requires borrowers to purchase additional insurance if their property is located in a designated flood area.
The regulation also sets forth the procedures for state-chartered banks to become members of the Federal Reserve Bank System, and states the privileges and requirements of membership. Full Text of Regulation H
Regulation M - Consumer Leasing
Regulation M implements the consumer leasing provisions of the Truth in Lending Act.
Regulation M applies to leases of personal property with a term greater than 4 months for personal, family, or household use. It requires leasing companies to disclose in writing the cost of a lease, including a security deposit, monthly payments, license, registration, taxes and maintenance fees and, in the case of an open-end lease, whether a 'balloon payment' may be applied. It also requires written disclosure of the terms of a lease, including insurance, guarantees, responsibility for servicing the property, standards for wear and tear, and if there is an option to buy. Full Text of Regulation M
Regulation Q - Prohibition against Payment of Interest on Demand Deposits
Regulation Q prohibits member banks from paying interest on demand deposits. The prohibition of payment of interest on demand deposits is designed to address the lack of uniformity that contributed to bank failures during the Depression. The prohibition prevents either strong institutions or troubled institutions from creating a bidding war for funds. Full Text of Regulation Q
Regulation Z - Truth in Lending
Regulation Z establishes uniform methods of computing the cost of credit, disclosure of credit terms, and procedures for resolving errors on certain credit accounts. It also gives consumers the right to cancel certain transactions involving their principal residence.
The credit provisions of the regulation apply to all persons who extend consumer credit more than 25 times a year or, in the case of consumer credit secured by real estate, more than 5 times a year. Consumer credit is generally defined as credit offered or extended to individuals for personal, family, or household purposes, where the credit is repayable in more than four installments or for which a finance charge is imposed.
The major provisions of the regulation require lenders to:
- provide borrowers with meaningful, written information on essential credit terms, including the cost of credit expressed as an annual percentage rate (APR)
- respond to consumer complaints of billing errors on certain credit accounts within a specific period
- identify credit transactions on periodic statements of open-end credit accounts
- provide certain rights regarding credit cards
- provide good faith estimations of disclosure information before consummation of certain residential mortgage transactions
- provide "early" disclosure of credit terms to consumers interested in adjustable rate mortgages (ARMS) and home equity lines of credit
- comply with special requirements when advertising credit.
Full Text of Regulation Z
Regulation AA - Unfair or Deceptive Acts or Practices
Regulation AA establishes consumer complaint procedures and defines unfair or deceptive acts or practices of banks in connection with extensions of credit to consumers.
Under the regulation, a consumer complaint concerning either an alleged unfair or deceptive practice, or an alleged violation of law or regulation by a state member bank, will be investigated by the Federal Reserve. Complaints regarding institutions other than state member banks will be referred to the appropriate federal agency:
- To file a consumer complaint concerning a national bank, contact the local Office of the Comptroller of the Currency ('OCC').
- To file a consumer complaint concerning a state member bank (a bank that is a member of the Federal Reserve System), contact the local Federal Reserve Bank.
- To file a consumer complaint concerning a non-member bank or a savings bank (a bank that is not a member of the Federal Reserve System), contact the local Federal Deposit Insurance Corporation ('FDIC') office.
- To file a consumer complaint concerning a savings and loan, contact the local Office of Thrift Supervision ('OTS').
- To file a consumer complaint concerning a credit union, contact the local National Credit Union Administration ('NCUA').
Regulation AA also prohibits the use of certain consumer contract provisions, an accounting practice known as 'pyramiding' (charging a late fee on an unpaid late fee) and misrepresentation of cosigners liability. Full Text of Regulation AA
Regulation BB - Community Reinvestment
Regulation BB implements the Community Reinvestment Act (CRA) and is designed to encourage banks to help meet the credit needs of their communities.
Regulation BB requires each bank office to make available for public inspection a statement of the types of credit the bank is prepared to extend within the communities served by that office and provide a map of its communities. Also, each bank must maintain a file of public comments relating to its CRA statement. The Federal Reserve, in examining a state member bank, must assess its record in meeting the credit needs of the entire community, particularly low- and moderate-income neighborhoods, and must take into account the bank's record in considering certain bank applications. In addition, the act requires public disclosure of a bank's CRA rating and CRA performance evaluations. Full Text of Regulation BB
Regulation CC - Availability of Funds and Collection of Checks
Regulation CC implements the Expedited Funds Availability Act (EFA) and governs the availability of funds and the collection and return of checks.
This regulation establishes the availability schedules, as provided in the EFA, under which depository institutions must make funds deposited into transaction accounts available for withdrawal. The regulation also provides that depository institutions must disclose their funds availability policies to their customers. In addition, Regulation CC establishes rules designed to speed the collection and return of checks and imposes a responsibility on banks to return unpaid checks expeditiously. The provisions of Regulation CC govern all checks, not just those collected through the Federal Reserve System. Full Text of Regulation CC
Regulation DD - Truth in Savings
Regulation DD requires depository institutions to disclose the terms of deposit accounts to consumers and applies to all consumer deposit accounts except those offered by credit unions, which are governed by rules of the National Credit Union Administration.
The major provisions of the regulation require institutions to:
- provide consumer account holders with written information about important terms of an account, including the annual percentage yield
- provide fee and other information on any periodic statement sent to consumers
- use certain methods to determine the balance on which interest is calculated
- comply with special requirements when advertising deposit accounts.
Full Text of Regulation DD
Fair Credit Reporting Act
This act defines a credit reporting agency and adopts procedures for meeting the needs of lenders while maintaining fair and equitable use of consumer credit information.
The act establishes procedures for correcting mistakes on a consumer's credit report and requires that a consumer's record only be provided for legitimate business purposes. It also requires that the record be kept confidential. A credit record may be retained seven years for judgements, liens, suits, and other adverse information except for bankruptcies, which may be retained for ten years. If a consumer is denied credit, a free credit report may be requested within 30 days of denial. Full Text of the Fair Credit Reporting Act
Fair Debt Collection Practices Act
This act defines which financial institutions are subject to the act and prohibits abusive debt collection practices.
The purpose of this act is to eliminate abusive, deceptive, and unfair debt collection practices. It applies to third-party debt collectors or to those who use a name other than their own in collecting debts. Most financial institutions collect debts in their own name and, therefore, the act applies to only a few of them. Complaints regarding debt collection practices should generally be filed with the Federal Trade Commission. Full Text of the Fair Debt Collection Practices Act
Fair Housing Act
The Fair Housing Act (FHA) prohibits discrimination on the basis of race, color, sex, religion, handicap, familial status or national origin in the financing, sale or rental of housing.
It was implemented as part of Title VIII of the Civil Rights Act of 1968 and applies to the sale and rental of housing, as well as residential real estate-related lending transactions.
The FHA provides that it is unlawful for any person or entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction. Such discrimination cannot be based on race, color, religion, sex, handicap, familial status, or national origin.
The FHA and the Equal Credit Opportunity Act (ECOA) prohibit pre-screening or discouraging loan applicants. Individuals should be encouraged to apply, regardless of whether an individual lender believes the loan will or will not be approved. Under the prohibition, banks should ensure their advertising and underwriting policies and procedures do not have the effect of inadvertently discouraging or pre-screening potential applicants. Additionally, loan officers are prohibited from discriminating against persons who exercise their right under the Consumer Credit Protection Act.
Use of excessive and burdensome credit qualifying standards for certain groups of persons is prohibited under FHA. It is also illegal to impose on minority loan applicants less favorable interest rates or terms and conditions such as late charges and penalties, or more arduous foreclosure proceedings. Full Text of the Fair Housing Act
Right to Financial Privacy Act
This act establishes procedures for the release of financial records of consumers to government authorities.
This act provides customers of financial institutions the right to expect that their financial activities will have a reasonable amount of privacy from federal government scrutiny. The act establishes specific procedures and exceptions concerning the release of customer financial records to the federal government. Full Text of the Right to Financial Privacy Act
Real Estate Settlement Procedures Act
This act requires lenders to provide consumers with information concerning the costs involved in residential mortgages before they obtain their loan.
One of the provisions of this act requires that consumers be provided with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. The act also protects consumers against certain abusive practices, such as kickbacks, and sets limitations on the use of escrow accounts, and requires disclosures for mortgage escrow accounts at closing and each year thereafter. Disclosures are required to itemized charges paid by the borrower and what is paid by the servicer from escrow account. Full Text of the Real Estate Settlement Procedures Act
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