Banking and Finance
What Are Banking and Finance?
The banking and finance industry is large and wide-reaching. It includes smaller banks and individual depositors as well as large corporate and investment banks. It includes financial transactions, lending, credit, securities, taxes, and several types of financial institutions.[1]
Important Banking and Finance Laws
Banking and finance are regulated at the federal and state level. Many laws cover a wide range of financial institutions and transactions. This is one of the most complicated and far-reaching areas of the law. These are just some of the most important federal laws that govern banks, transactions, securities, lending, and other areas of banking and finance:
The Banking Act of 1933
This important law created the Federal Deposit Insurance Corporation (FDIC). The FDIC is a federal insurance program that protects the money you deposit with a bank. The insured limit per depositor is $250,000.
The Community Reinvestment Act of 1977
This law encourages bank investment in communities. It requires banks to invest money in those areas they serve and to help deposits with lower salaries. Banks must make records of community investment available to the public.
The Right to Financial Privacy Act of 1978
Following a 1976 Supreme Court ruling, Congress passed this law to extend privacy protections to bank records. The Court ruling found that bank customers did not have a right to privacy regarding the information banks held.
The Dodd-Frank Act of 2010
After the financial crisis of 2008, this act created hundreds of new laws and regulations to control and reform the banking industry. Congress rolled back some of these restrictions in 2018.
The Fair Debt Collection Practices Act
This is an important law for individual consumers. It covers a range of debts and regulates how collectors can act. It outlaws collection at certain times and harassment by debt collectors. If you have a lawyer, the collector must contact them.[2]
Bankruptcy
Bankruptcy laws allow businesses and individuals to reduce or eliminate debts. Several types of bankruptcy exist to help individuals and companies get out from under debt. Most include restructuring of debt and repayment plans.[3]
Tax Laws
The lengthy and complicated tax code regulates the filing and collection of taxes by the Internal Revenue Service. Several legal issues can arise when you file taxes as an individual or a business owner. The code covers tax filing mistakes, penalties, garnishment, tax liens, and more.
Securities Laws
Several federal laws regulate investments. These include the law that created the Securities Exchange Commission, laws that require that investors receive accurate information about investments, and ethical guidelines for financial advisors, among many others.
Several government agencies are responsible for enforcing finance and banking laws that protect consumers and businesses. These include the FDIC, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the Federal Reserve, which regulates currency and interest and inflation.
Why Are Banking and Finance Laws Important?
These and many other laws regulate an industry that history has shown can devolve into unethical, harmful activities. As recently as the financial crisis of 2008, the activities of financial institutions had a lasting, often devastating effect on individuals, businesses, and the economy.
Banking and financing laws and regulations are important for reigning in these institutions and for other reasons. There are several things the laws do:
- Give consumers greater transparency in financial matters and for financial products and banking services
- Take some of the risks out of investments and other financial products and transactions
- Prevent illicit activities in banking and financial institutions, such as fraud or money laundering
- Prevent abuse of the financial system
- Open up banking to more Americans
- Make lending fair for consumers
- Give consumers the ability to dispute charges or unfair practices
- Make debt collection uniform and fair
- Provide consumers a way out of problematic debt
Areas of Banking and Finance Legal Practice
Many individual consumers never need the services of a banking and finance lawyer. You may have a legal issue that arises with respect to your finances, or you may be a business owner or looking to start a business. In these cases, you may need a lawyer. Banking and finance legal practice usually fall into a few different categories:
- Bank lending. This includes many types of personal or business loans.
- Property or real estate finance. A mortgage is a type of loan that finances the purchase or construction of a personal or business property.
- Project finance. This includes long-term loans used to complete complex projects, for instance, a public infrastructure project.
- Acquisition finance. This covers laws related to loans a business uses to acquire and buy another business.
- Assets finances. Businesses use large loans to acquire major assets, like machinery. The lending institution takes security over those assets.
- Financial services regulation. Business owners rely on lawyers specializing in this area of the law for advice and guidance in investment and financial activities.
- Islamic finance. If you are Muslim, you are bound by religious laws and may need a specialized lawyer to help structure loans and other financial products.
Banking and finance are hugely complex industries and areas of the law. If you have any concerns about related legal issues, don’t hesitate to talk to a lawyer who can provide advice and represent you in disputes.