Laws and Agencies that Provide Financial Safeguards Consumer Protection Laws and Agencies that Provide Financial Safeguards

Consumer Protection Laws Who provides these laws? Federal, state and local laws provide safeguards for personal finances Laws are monitored and enforced by different government organizations Securities and Exchange Commission (SEC) Federal Trade Commission (FTC) Consumer Product Safety Commission (CPSC)

Credit C.A.R.D. Act 2009 C ard A ccountability R esponsibility D isclosure Also called : “Credit Cardholders Bill of Rights”

Credit C.A.R.D. Act 2009

C.A.R.D. ACT PROVISIONS Card issuers will be prohibited from marketing credit cards on campus (1,000 ft. barrier) (can not be at college sponsored events) bans card issuers from offering pizza, T-shirts, hats and other freebies in exchange for signing up for a credit card Under age 21 must have co-sign OR proof of ability to pay ………………………………..BUT………… They can still send mail offers to students living on college campus They can still offer “freebies” IF it does not require signing up for the card

CARD ACT PROVISIONS Do Not need to know the following provisions Can no longer raise rates - *unless for specified reasons under the law More advance notice of rate hikes – was 15 days , now 45 days Fee restrictions Under age 21 must have co-sign OR proof of ability to pay must send statements 21 days before a payment is due. Current law requires a mere 14 days' notice.

The Securities and Exchange Commission (SEC) regulates the financial markets (stocks/bonds etc) and strives to create a fair and orderly market environment. The SEC is a law enforcement agency What would be a violation or criminal activity that the SEC would investigate? Misrepresentation or omission of important information about stocks   Manipulating the market prices of securities (stocks)   Stealing customers' funds or stocks   Insider trading (violating a trust relationship by trading on material, non-public information about a security)   Selling unregistered stocks

Insider trading is the buying or selling of a security by someone who has access to material nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still nonpublic; trading while having special knowledge is unfair to other investors who don't have access to such knowledge. Illegal insider trading includes tipping others when you have any sort of nonpublic information. Legal insider trading happens when directors of the company purchase or sell shares, but they disclose their transactions legally. The Securities and Exchange Commission (SEC) has rules to protect investments from the effects of insider trading.

Congress saw the need for substantial reform of the banking system, which eventually came in the Banking Act of 1933, or the Glass-Steagall Act. separated commercial banking from investment banking. Senator Glass was the driving force behind this provision. Basically, commercial banks, which took in deposits and made loans, were no longer allowed to deal in securities, while investment banks, which dealt in securities,  were no longer allowed to have close connections to commercial banks

Following the passage of the act, institutions were given a year to decide whether they would specialize in commercial or investment banking. Only 10 percent of commercial banks’ total income could stem from securities Another important provision of the act created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money collected from banks. 1999 the Gramm-Leach-Bliley Act repealed the provisions of the Banking Act of 1933 that restricted affiliations between banks and securities firms.

The Glass-Steagall Act's repeal in 1999 is believed in some circles to have contributed to the 2008 global credit crisis. Commercial banks, around the world, were saddled with billions of dollars in losses due to the excessive exposure of their investment banking arms to derivatives and securities that were tied to U.S. home prices.

'Sarbanes-Oxley Act Of 2002 - SOX‘- was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards. What did they do wrong? - these companies lied about their profits and misled investors about the value of the stocks. to protect investors from the possibility of fraudulent accounting activities by corporations. The SOX Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. The SOX Act was created in response to accounting malpractice in the early 2000s, when public scandals such as Enron Corporation, Tyco International plc, and WorldCom shook investor confidence in financial statements and demanded an overhaul of regulatory standards.

Federal Trade Commission Provide financial safeguards Includes the Bureau of Consumer Protection Protects consumers against unfair, deceptive or fraudulent practices Enforces consumer protection laws enacted by Congress Regulates financial practices

The Federal Trade Commission (FTC) is an independent federal agency whose main goals are to protect consumers and to ensure a strong competitive market by enforcing a variety of consumer protection and antitrust laws. These laws guard against harmful business practices and protect the market from anti-competitive practices such as large mergers and price-fixing conspiracies.

Federal Trade Commission Originally created as a way for the federal government to engage in “Trust Busting” Still enforces antitrust regulations Protects consumers from fraud

Consumer Product Safety Commission Issues recalls on products available for purchase NOT food (FDA) Publishes information about product safety Publishes annual list of “safe holiday toys”

Other Organizations Allows a person to: Better Business Bureau Ohio Consumer’s Council “Residential utilities consumer advocate” Educates consumers about utility issues Acts as a representative for Ohio residents in court against utility companies Electric, Water, Natural Gas, Telephone Allows a person to: Research companies File a complaint about a company Provide information about types of scams Is both national and local – Cleveland has a branch