Overview of Federal Laws and Regulations in Consumer Financial Services

This set includes vocabulary related to federal laws and regulations affecting consumer financial services, particularly in dealership compliance.

Consumer Leasing Act/ Reg M

•The purpose of the Consumer Leasing Act (“CLA”) and its implementing regulation, Regulation M (“Reg. M”), is to ensure that lessees of automobiles receive meaningful disclosures that enable them to compare lease terms with other leases and, where appropriate, with credit transactions. 

•The CLA and Reg. M also regulate the amount of default and early termination fees that may be charged, as well as require the accurate disclosure of lease terms in advertising.

Dodd-Frank Wall Street Reform and Consumer Protection Act

•The CFPB (Consumer Financial Protection Bureau)was created under these reforms and is authorized to take action to prevent a “covered person” or “service provider” from committing or engaging in an unfair, deceptive, or abusive act or practice (“UDAAP”) in connection with offering or providing a consumer financial product or service (RISC, Loan, etc.).

•There is no hard and fast rule for what constitutes a UDAAP violation, rather, the CFPB will consider a list of factors and take public policy considerations into account in determining prohibited acts and practices.

Fair Credit Reporting Act (FCRA)

A federal law that regulates the collection, dissemination, and use of consumer information, aiming to protect privacy and prevent identity theft.

Equal Credit Opportunity Act (ECOA)

A federal law that prohibits discrimination in any aspect of a credit transaction based on race, color, religion, national origin, sex, marital status, age, or public assistance.

Truth in Lending Act (TILA)

A federal law that requires clear disclosure of credit terms so consumers can make informed decisions regarding credit transactions.

Consumer Leasing Act (CLA)

A federal law that ensures meaningful disclosures to lessees of automobiles, allowing them to compare lease terms with other leases.

Gramm-Leach-Bliley Act (GLBA)

A federal law that governs the treatment of consumers' nonpublic personal information and establishes privacy requirements for financial institutions.

Military Lending Act

A federal law designed to protect active-duty military members and their dependents from predatory lending practices.

USA PATRIOT Act

A law enacted to help deter and punish terrorism by intercepting and obstructing terrorist financing.

UDAAP VS UDAP

UDAP: Unfair, Deceptive Acts Examples include misleading advertising, charging hidden fees, or taking advantage of vulnerable consumers. (based on state laws)

UDAAP:Acts or practices that are unfair, deceptive, or abusive towards consumers, as identified by the Consumer Financial Protection Bureau (CFPB).

example: everything UDAP covers + exploiting a customers confusion or lack of understanding, and unfairly taking advantage of their circumstances. (CFPD = Federal Law)

Hot Spot

A compliance hotspot is where things are most likely to go wrong — or get the company in trouble with regulators like the FTC, CFPB, IRS, OSHA, EPA, or others, depending on the industry.

FTC= Federal Trade Commission: Watches for false advertising, bait-and-switch tactics, deceptive financing terms, or misuse of customer data.

CFPB= Consumer Financial Protection Bureau: Oversees financing, disclosures, lending discrimination and consumer protections in financial services.

What is an Adverse Action Notice?

It’s a document that explains to the applicant:

1. That credit was denied (or other negative action was taken),

2. The main reasons for the denial or unfavorable terms, and

3. Their rights under federal law (usually under the Equal Credit Opportunity Act [ECOA] or Fair Credit Reporting Act [FCRA]).

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💬 When Must It Be Given?

• Within 30 days of receiving a completed credit application.

• Also required if:

  • Credit is offered on worse terms than requested.

  • An existing account is closed or credit is reduced.

IRS Cash Reporting Rule

The IRS Cash Reporting Rule requires businesses — including automobile dealerships — to file Form 8300 when they receive more than $10,000 in cash from a customer in a single transaction or in related transactions within 15 days of receiving the cash.

✅ Cash equivalents if under $10,000 and used in a transaction over $10,000:

• Cashier’s checks

• Money orders

• Bank drafts

• Traveler’s checks

❌ NOT cash:

• Personal checks

• Credit card payments

• Wire transfers

• Bank-financed loans

Acceleration Clause

An acceleration clause protects the creditor’s ability to recover funds quickly after a default — and it’s a standard part of most vehicle finance contracts.