Legal & Regulatory Compliance Flashcards

Which U.S. law prohibits discrimination in credit transactions?

Answer: Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) is a U.S. federal law that prohibits creditors from discriminating against applicants based on race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract). It also prohibits discrimination because all or part of an applicant's income derives from any public assistance program. The ECOA ensures fair and equal access to credit for all consumers.

What is the purpose of the Bank Secrecy Act (BSA)?

Answer: To combat money laundering through reporting requirements

The Bank Secrecy Act (BSA) is a U.S. federal law that requires financial institutions to assist U.S. government agencies in detecting and preventing money laundering. It mandates that institutions keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000, and report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Its primary goal is to create a paper trail for large financial transactions to aid law enforcement.

Which regulation mandates disclosure of credit terms to consumers?

Answer: Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) is a U.S. federal law designed to promote the informed use of consumer credit by requiring disclosures about its terms and costs. It mandates that lenders provide clear and conspicuous information about key credit terms, such as the annual percentage rate (APR), finance charge, amount financed, and total payments. This enables consumers to compare credit offers more effectively and make educated borrowing decisions.

What does the Fair Credit Reporting Act (FCRA) govern?

Answer: Collection and use of consumer credit data

The Fair Credit Reporting Act (FCRA) is a federal law specifically designed to protect consumers' privacy and ensure the accuracy of information collected by credit reporting agencies. It governs how consumer credit data is collected, used, and disseminated by these agencies. This act grants consumers rights regarding their credit reports and helps maintain fairness in credit-related decisions.

Which agency enforces the Consumer Financial Protection Bureau (CFPB) regulations?

Answer: Consumer Financial Protection Bureau (CFPB)

The Consumer Financial Protection Bureau (CFPB) is a U.S. government agency established to protect consumers in the financial marketplace. As its name suggests, the CFPB is responsible for writing and enforcing regulations that govern financial products and services. Therefore, it is the primary agency that enforces its own regulations to ensure fair practices and protect consumers from abusive financial activities.

What is a key requirement of the USA PATRIOT Act for financial institutions?

Answer: Implementing anti-money laundering (AML) programs

The USA PATRIOT Act, enacted in response to the September 11th attacks, significantly strengthened measures to combat terrorism financing. A key requirement for financial institutions under this act is the implementation of robust Anti-Money Laundering (AML) programs. These programs mandate customer identification, transaction monitoring, and suspicious activity reporting to prevent illicit funds from entering the financial system.

Which law protects consumers from abusive debt collection practices?

Answer: Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) is a federal law specifically designed to protect consumers from abusive, deceptive, and unfair debt collection practices by third-party debt collectors. It sets clear guidelines on how collectors can interact with debtors, prohibiting harassment, false statements, and other unfair tactics. This act ensures that consumers are treated fairly and with respect during the debt collection process.

What is the role of the Office of the Comptroller of the Currency (OCC)?

Answer: Supervising national banks for compliance

The Office of the Comptroller of the Currency (OCC) is an independent bureau within the U.S. Department of the Treasury. Its primary role is to charter, regulate, and supervise all national banks and federal savings associations. The OCC ensures that these institutions operate in a safe and sound manner, provide fair access to financial services, and comply with all applicable laws and regulations.

Which regulation requires banks to reinvest in their local communities?

Answer: Community Reinvestment Act (CRA)

The Community Reinvestment Act (CRA) is a federal law enacted to encourage commercial banks and savings associations to meet the credit needs of the communities in which they are chartered, including low- and moderate-income neighborhoods. It requires federal banking regulators to assess how well banks are serving their communities. This assessment is considered when evaluating applications for mergers, acquisitions, and branch openings, promoting reinvestment in local areas.