You can borrow money from anyone but ideally, traditional money lending and banking has lots of rules and regulations to follow. All lenders must abide by these laws that are specifically designed by the state and federal government to protect the consumers from any unfair practices.
Lending money in the United States follows a hybrid of state and federal statutory law and these laws govern the banks as well as the bank accounts. Any consumer or business can open a bank account in any bank of their choice or any savings association that is chartered under the state or federal law.
The mix of state and federal law under which the bank is chartered typically regulates all operations of that particular bank as well as the transactions made by the customers of that specific bank.
Uniform Commercial Code
Uniform Commercial Code is the most significant law that regulates the banks and other lending organizations to facilitate loans and make sure that it reaches to the persons who really need it and that too without them having to face much of a difficulty. The UCC is adopted by various states and provides several protections to the consumers.
• Article 3 of UCC governs all transactions involving checks and other negotiable instruments.
• Article 4 of the Uniform Commercial Code oversees all bank deposits and collections.
• The code also looks after the rights and responsibilities of the depository and collecting banks along with those banks that are responsible for the payment of any check.
Apart from these, there are a few other provisions of the Uniform Commercial Code that are relevant to banking and lending law as well. This includes:
• Article 4A that is related to funds transfers
• Article 5 that relates to letters of credit
• Article 8 that involves securities and
• Article 9 that is related to secured transactions.
When you apply for a loan there is a long process that your loan application undergoes right from its scrutiny to the handing over of the check. Even if you apply for a loan online through different sites such as Liberty Lending or others, the loaning process is never simple.
There are a large number of rules to follow that governs a check while it passes through different stages of the Federal Reserve System. These rules and regulations are specifically designed to govern the following:
• The access and availability of funds to any depositor of a bank in his or her account
• The delay between the times the bank receives any deposit and the time the funds are made available
• The process to follow for disbursement of checks and
• The process to follow when a particular check gets dishonored for non-payment.
Just like the banks and lenders are protected, the Federal law also provides a proper layer of protection to customers of the banks as well.
It is said that the federal government formed the Federal Deposit Insurance Corporation prompted by the banking crises experienced way back in the 1930s. This government body insures all bank accounts of individual customers as well as lending institutions in amounts up to $100,000.
Different laws passed There are a large number of laws passed by the federal government that governs banks, banking, and lending. A brief list of these rules is as follows:
• National Bank Act of 1864 that involves banking systems and chartering of national banks.
• Federal Reserve Act of 1913 established for the Federal Reserve System
• Banking Act of 1933 or Glass-Steagall Act for the Federal Deposit Insurance Corporation that was originally intended to be a temporary law
• Banking Act of 1935 for the FDIC as a permanent agency
• Federal Deposit Insurance Act of 1950 that consolidated and revised the previous laws governing FDIC
• Bank Holding Company Act of 1956 that set forth the requirements of establishing bank holding companies
• International Banking Act of 1978 for foreign banks to work within the federal regulatory framework
• Financial Institutions Regulatory and Interest Rate Control Act of 1978 specially designed for the Federal Financial Institutions Examination Council that establishes restriction on and reporting requirements for any insider transactions of banks and also the modified version of the provisions that governed transfers of electronic funds
• Depository Institutions Deregulation and Monetary Control Act of 1980 to eliminate ceilings on interest rates of savings and other accounts and also to raise the insurance ceiling of the insured account holders to $100,000.
• Depository Institutions Act of 1982 also called Gar-St. Germain Act that increased the powers of the FDIC and eliminated the ceilings on interest rates further.
• Competitive Equality Banking Act of 1987 that set new standards for availability of accelerated funds with further expansion of FDIC authority.
• Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to reform, revise and design the loaning model to raise the level of trust in the savings
• Crime Control Act of 1990 that increased the power of the federal regulators to deal with frauds in financial institutions
• Federal Deposit Insurance Corporation Act of 1991 to considerably expand the power and authority of the agency in the fields of banking and lending
• Housing and Community Development Act of 1992 designed to combat money laundering as well as provide some regulatory relief to the financial institutions
• Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 that allowed the adequately managed and capitalized bank holding companies to acquire banks in any state
• Economic Growth and Regulatory Paperwork Reduction Act of 1996 with a lot of changes related to the amendments of regulation of financial institutions
• Gramm-Leach Bliley Act of 1999 with changes including the ceiling of disclosure of nonpublic customer information by any financial institutions and provided penalties for someone who acquires such nonpublic customer information from any financial institution using false pretenses and
• Riegle Community Development and Regulatory Improvement Act of 1994 for Community Development Financial Institutions Fund to offer assistance.
All these disseminate regulations to banks, banking, lending, FDIC, Federal Reserve Board, National Credit Union Administration, General Accounting Office, and Treasury Department. As technology further develops loaning, banking law will see changes even more.
I hope you enjoyed this blog post about how the banking and lending laws are diverse and protective of lenders and customers.
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