Account Agreement:
The contract governing your open-end
credit account, it provides information on changes that may occur to the
account.
Account History:
The payment history of an account over
a specific period of time, including the number of times the account was past
due or over limit.
Account Holder:
Any and all persons designated and
authorized to transact business on behalf of an account. Each account holder's
signature needs to be on file with the bank. The signature authorizes that
person to conduct business on behalf of the account.
Accrued Interest:
Interest that has been earned but not
yet paid.
Acquiring Bank:
In a merger, the bank that absorbs the
bank acquired.
Adjustable-Rate Mortgages (ARMS):
Also known as variable-rate mortgages.
The initial interest rate is usually below that of conventional fixed-rate
loans. The interest rate may change over the life of the loan as market
conditions change.
There is typically a maximum (or ceiling)
and a minimum (or floor) defined in the loan agreement. If interest rates rise,
so does the loan payment. If interest rates fall, the loan payment may as well.
Adverse Action:
Under the Equal Credit Opportunity Act,
a creditor's refusal to grant credit on the terms requested, termination of an
existing account, or an unfavorable change in an existing account.
Adverse Action Notice:
The notice required by the Equal Credit
Opportunity Act advising a credit applicant or existing debtor of the denial of
their request for credit or advising of a change in terms considered
unfavorable to the account holder.
Affidavit:
A sworn statement in writing before a
proper official, such as a notary public.
Alteration:
Any change involving an erasure or
rewriting in the date, amount, or payee of a check or other negotiable
instrument.
Amortization:
The process of reducing debt through
regular installment payments of principal and interest that will result in the
payoff of a loan at its maturity.
Annual Percentage Rate (APR):
The cost of credit on a yearly basis,
expressed as a percentage.
Annual Percentage Yield (APY):
A percentage rate reflecting the total
amount of interest paid on a deposit account based on the interest rate and the
frequency of compounding for a 365-day year.
Annuity:
A life insurance contract sold by
insurance companies, brokers, and other financial institutions. It is usually
sold as a retirement investment. An annuity is a long-term investment and can
have steep surrender charges and penalties for withdrawal before the annuity's
maturity date. (Annuities are not FDIC insured.)
Application:
Under the Equal Credit Opportunity Act
(ECOA), an oral or written request for an extension of credit that is made in
accordance with the procedures established by a creditor for the type of credit
requested.
Appraisal:
The act of evaluating and setting the
value of a specific piece of personal or real property.
Authorization:
The issuance of approval, by a credit
card issuer, merchant, or other affiliate, to complete a credit card
transaction.
Automated Clearing House (ACH):
A computerized facility used by member
depository institutions to electronically combine, sort, and distribute
inter-bank credits and debits. ACHs process electronic transfers of government
securities and provided customer services, such as direct deposit of customers'
salaries and government benefit payments (i.e., social security, welfare, and
veterans' entitlements), and preauthorized transfers.
Automated Teller Machine (ATM):
A machine, activated by a magnetically
encoded card or other medium, that can process a variety of banking
transactions. These include accepting deposits and loan payments, providing
withdrawals, and transferring funds between accounts.
Automatically Protected:
As of May 1, 2011, up to two months of
Federal benefits such as Social Security benefits, Supplemental Security Income
benefits, Veteran’s benefits, Railroad Retirement benefits, and benefits from
the Office of Personnel Management that are direct deposited to an account may
be protected from garnishment. The amount automatically protected will depend
upon the balance of the account on the day of review.
Automatic Bill Payment:
A checkless system for paying recurring
bills with one authorization statement to a financial institution. For example,
the customer would only have to provide one authorization form/letter/document
to pay the cable bill each month. The necessary debits and credits are made
through an Automated Clearing House (ACH).
Availability Date:
Bank's policy as to when funds
deposited into an account will be available for withdrawal.
Availability Policy:
Bank's policy as to when funds
deposited into an account will be available for withdrawal.
Available Balance:
The balance of an account less any
hold, uncollected funds, and restrictions against the account.
Available Credit:
The difference between the credit limit
assigned to a cardholder account and the present balance of the account.
B
Balance Transfer:
The process of moving an outstanding
balance from one credit card to another. This is usually done to obtain a lower
interest rate on the outstanding balance. Transfers are sometimes subjected to
a Balance Transfer Fee.
Bank Custodian:
A bank custodian is responsible for
maintaining the safety of clients' assets held at one of the custodian's
premises, a sub-custodian facility or an outside depository.
Bank Examination:
Examination of a bank's assets, income,
and expenses-as well as operations by representatives of Federal and State bank
supervisory authority-to ensure that the bank is solvent and is operating in
conformity with banking laws and sound banking principles.
Bank Statement:
Periodically the bank provides a
statement of a customer's deposit account. It shows all deposits made, all
checks paid, and other debits posted during the period (usually one month), as
well as the current balance.
Banking Day:
A business day during which an office
of a bank is open to the public for substantially all of its banking functions.
Bankrupt:
A bankrupt person, firm, or corporation
has insufficient assets to cover their debts. The debtor seeks relief through a
court proceeding to work out a payment schedule or erase debts. In some cases,
the debtor must surrender control of all assets to a court-appointed trustee.
Bankruptcy:
The legal proceedings by which
the affairs of a bankrupt person are turned over to a trustee or receiver for
administration under the bankruptcy laws. There are two types of
bankruptcy:
·
Involuntary
bankruptcy-one or more creditors of an insolvent debtor file a petition having
the debtor declared bankrupt.
·
Voluntary
bankruptcy-the debtor files a petition claiming inability to meet financial
obligations and willingness to be declared bankrupt.
Beneficiary:
A person who is entitled to receive the
benefits or proceeds of a will, trust, insurance policy, retirement plan,
annuity, or other contract.
Billing Cycle:
The time interval between the dates on
which regular periodic statements are issued.
Billing Date:
The month, date, and year when a
periodic or monthly statement is generated. Calculations have been performed
for appropriate finance charges, minimum payment due, and new balance.
Billing Error:
A charge that appears on a periodic
statement associated with an extension of credit (e.g., credit card) that
·
was not authorized by
the cardholder or the cardholders' designee,
·
is not properly
identified, and
·
was not accepted by
the cardholder or the cardholder's designee.
A billing error can also be caused by a
creditor's failure to credit a payment or other credit to an account as well as
accounting and clerical errors.
Bond, U.S. Savings:
Savings bonds are issued in face value
denominations by the U.S. Government in denominations ranging from $50 to
$10,000. They are typically long-term, low-risk investment tools.
Business Day:
Any day on which offices of a bank are
open to the public for carrying on substantially all of the bank's business.
Canceled Check :
A check that a bank has paid, charged
to the account holder's account, and then endorsed. Once canceled, a check is
no longer negotiable.
Cashier's Check:
A check drawn on the funds of the bank,
not against the funds in a depositor's account. However, the depositor paid for
the cashier's check with funds from their account. The primary benefit of a
cashier's check is that the recipient of the check is assured that the funds
are available.
Cease and Desist Letter:
A letter requesting that a company
stops the activity mentioned in the letter.
Certificate of Deposit:
A negotiable instrument issued by a
bank in exchange for funds, usually bearing interest, deposited with the bank.
Certificate of Release:
A certificate signed by a lender
indicating that a mortgage has been fully paid and all debts satisfied.
Certified Check:
A personal check drawn by an individual
that is certified (guaranteed) to be good. The face of the check bears the
words "certified" or "accepted," and is signed by an
official of the bank or thrift institution issuing the check. The signature
signifies that
·
the signature of the
drawer is genuine, and
·
sufficient funds are
on deposit and earmarked for payment of the check.
Charge-off:
The balance on a credit obligation that
a lender no longer expects to be repaid and writes off as a bad debt.
Check:
A written order instructing a financial
institution to pay immediately on demand a specified amount of money from the
check writer's account to the person named on the check or, if a specific
person is not named, to whoever bears the check to the institution for payment.
Check 21 Act:
Check 21 is a Federal law that is
designed to enable banks to handle more checks electronically, which is
intended to make check processing faster and more efficient. Check 21 is the
short name for the Check Clearing for the 21st Century Act, which went into
effect on October 28, 2004.
Check Truncation:
The conversion of data on a check into
an electronic image after a check enters the processing system. Check
truncation eliminates the need to return canceled checks to customers.
Checking Account:
A demand deposit account subject to
withdrawal of funds by check.
ChexSystems:
The ChexSystems, Inc. network is
comprised of member financial institutions that regularly contribute
information on mishandled checking and savings accounts to a central location.
ChexSystems shares this information among member institutions to help them
assess the risk of opening new accounts.
ChexSystems only shares information
with the member institutions; it does not decide on new account openings.
Generally, information remains on ChexSystems for five years.
Closed-End Credit :
Generally, any credit sale agreement in
which the amount advanced, plus any finance charges, is expected to be repaid
in full by a specified date. Most real estate and automobile loans are
closed-end agreements.
Closed-End Loan:
Generally, any loan in which the amount
advanced, plus any finance charges, is expected to be repaid in full by a
specified date. Most real estate and automobile loans are closed-end
agreements.
Closing a Mortgage Loan:
The consummation of a contractual real
estate transaction in which all appropriate documents are signed and the
proceeds of the mortgage loan are then disbursed by the lender.
Closing Costs:
The expenses incurred by sellers and
buyers in transferring ownership in real property. The costs of closing may
include the origination fee, discount points, attorneys' fees, loan fees, title
search and insurance, survey charge, recordation fees, and the credit report
charge.
Collateral:
Assets that are offered to secure a
loan or other credit. For example, if you get a real estate mortgage, the
bank's collateral is typically your house. Collateral becomes subject to
seizure on default.
Collected Funds:
Cash deposits or checks that have been
presented for payment and for which payment has been received.
Collection Agency:
A company hired by a creditor to collect
a debt that is owed. Creditors typically hire a collection agency only after
they have made efforts to collect the debt themselves, usually through letters
and telephone calls.
Collection Items:
Items-such as drafts, notes, and acceptances-received
for collection and credited to a depositor's account after payment has been
received. Collection items are usually subject to special instructions and may
involve additional fees. Most banks impose a special fee, called a collection charge,
for handling collection items.
Collective Investment Funds (CIFs):
A Collective Investment Fund (CIF) is a
trust created and administered by a bank or trust company that commingles
assets from multiple clients. The Federal securities laws generally require
entities that pool securities to register those pooled vehicles (such as mutual
funds) with the SEC. However, Congress created exemptions from these
registration requirements for CIFs so long as the entity offering these funds
is a bank or other authorized entity and so long as participation in the fund
is restricted to only those customers covered by the exemption. If these
limitations are met, CIFs are exempt from SEC registration and reporting
requirements.
Co-Maker:
A person who signs a note to guarantee
a loan made to another person and is jointly liable with the maker for
repayment of the loan. (Also known as a Co-signer.)
Community Reinvestment Act:
The Act is intended to encourage
depository institutions to help meet the credit needs of the communities in
which they operate, including low- and moderate-income neighborhoods. It was
enacted by the Congress in 1977.
Consumer Credit Counseling Service:
A service which specializes in working
with consumers who are overextended with debts and need to make arrangements
with creditors.
Consumer Reporting Agency:
An agency that regularly collects or
evaluates individual consumer credit information or other information about
consumers and sells consumer reports for a fee to creditors or others. Typical
clients include banks, mortgage lenders, credit card companies, and other
financing companies.
Conventional Fixed Rate Mortgage:
A fixed-rate mortgage offers you a set
interest rate and payments that do not change throughout the life, or
"term," of the loan.
A conventional fixed-rate loan is fully
paid off over a given number of years-usually 15, 20, or 30. A portion of each
monthly payment goes towards paying back the money borrowed, the
"principal"; the rest is "interest."
Co-Signer:
An individual who signs the note of
another person as support for the credit of the primary signer and who becomes
responsible for the obligation. (Also known as a Co-maker.)
Credit Application:
A form to be completed by an applicant
for a credit account, giving sufficient details (residence, employment, income,
and existing debt) to allow the seller to establish the applicant's
creditworthiness. Sometimes, an application fee is charged to cover the cost of
loan processing.
Credit Bureau:
An agency that collects individual
credit information and sells it for a fee to creditors so they can make a
decision on granting loans. Typical clients include banks, mortgage lenders,
credit card companies, and other financing companies. Also commonly referred to
as a consumer reporting agency or a credit reporting agency.
Credit Card Account Agreement:
A written agreement that explains the
·
terms and conditions
of the account,
·
credit usage and
payment by the cardholder, and
·
duties and
responsibilities of the card issuer.
Credit Card Issuer:
Any financial institution that issues
bank cards to those who apply for them.
Credit Disability Insurance:
A type of insurance, also known as
accident and health insurance, that makes payments on the loan if you become
ill or injured and cannot work.
Credit Life Insurance:
A type of life insurance that helps
repay a loan if you should die before the loan is fully repaid. This is
optional coverage.
Credit Limit:
The maximum amount of credit that is
available on a credit card or other line of credit account.
Credit Repair Organization:
A person or organization that sells,
provides, performs, or assists in improving a consumer's credit record, credit
history or credit rating (or says that that they will do so) in exchange for a
fee or other payment. It also includes a person or organization that provides
advice or assistance about how to improve a consumer's credit record, credit
history or credit rating. There are some important exceptions to this
definition, including many non-profit organizations and the creditor that is
owed the debt.
Credit Report:
A detailed report of an individual's
credit history prepared by a credit bureau and used by a lender in determining
a loan applicant's creditworthiness.
Credit Score:
A number, roughly between 300 and 800,
that measures an individual's credit worthiness. The most well-known type of
credit score is the FICO® score. This score represents the answer from a
mathematical formula that assigns numerical values to various pieces of information
in your credit report.
Banks use a credit score to help
determine whether you qualify for a particular credit card, loan, or service.
Cut-Off Time:
A time of day established by a bank for
receipt of deposits. After the cut-off time, deposits are considered received
on the next banking day.
Debit:
A debit may be an account entry
representing money you owe a lender or money that has been taken from your
deposit account.
Debit Card:
A debit card allows the account owner
to access their funds electronically. Debit cards may be used to obtain cash
from automated teller machines or purchase goods or services using
point-of-sale systems. The use of a debit card involves immediate debiting and
crediting of consumers' accounts.
Debt Collector:
Any person who regularly collects debts
owed to others.
Debt Elimination Scheme:
A debt elimination scheme is a plan
that is advertised as a way for an individual to eliminate various types of
debt simply by paying someone a small fee compared to the amount of debt to be
eliminated. These schemes are fraudulent.
As a result of using a fraudulent
scheme, individuals will lose money, could lose property, will damage their
credit rating, and possibly incur additional debt. In addition, a creditor may
take legal action against an individual to resolve a fraudulent attempt to
eliminate debt. It is also possible for the victim to have identify theft occur
by participating in such a fraudulent scheme.
Debtor:
Someone who owes monies to another
party.
Debt-to-Income Ratio (DTI):
The percentage of a consumer's monthly
gross income that goes toward paying debts. Generally, the higher the ratio,
the higher the perceived risk. Loans with higher risk are generally priced at a
higher interest rate.
Decedent:
A deceased person, ordinarily used with
respect to one who has died recently.
Deferred Payment:
A payment postponed until a future
date.
Delinquency:
A debt that was not paid when due.
Demand Deposit:
A deposit of funds that can be
withdrawn without any advance notice.
Deposit Slip:
An itemized memorandum of the cash and
other funds that a customer presents to the bank for credit to his or her
account.
Derogatory Information:
Data received by a creditor indicating
that a credit applicant has not paid his or her accounts with other creditors
according to the required terms.
Direct Deposit:
A payment that is electronically
deposited into an individual's account at a depository institution.
Direct Dispute:
A dispute submitted directly to the
furnisher about the accuracy of information in your consumer report that
relates to an account or other relationship you have with the furnisher.
Disclosures:
Certain information that Federal and
State laws require creditors to give to borrowers relative to the terms of the
credit extended.
Draft:
A signed, written order by which one
party (the drawer) instructs another party (the drawee) to pay a specified sum
to a third party (the payee), at sight or at a specific date. Typical bank
drafts are negotiable instruments and are similar in many ways to checks.
Drawee:
The person (or bank) who is expected to
pay a check or draft when it is presented for payment.
Drawee bank:
The bank upon which a check is drawn.
Drawer:
The person who writes a check or draft
instructing the drawee to pay someone else.
Electronic Banking:
A service that allows an account holder
to obtain account information and manage certain banking transactions through a
personal computer via the financial institution's Web site on the Internet.
(This is also known as Internet or online banking.)
Electronic Check Conversion:
Electronic check conversion is a
process in which your check is used as a source of information-for the check
number, your account number, and the number that identifies your financial
institution. The information is then used to make a one-time electronic payment
from your account-an electronic fund transfer. The check itself is not the
method of payment.
Electronic Funds Transfer (EFT):
The transfer of money between accounts
by consumer electronic systems-such as automated teller machines (ATMs) and
electronic payment of bills-rather than by check or cash. (Wire transfers,
checks, drafts, and paper instruments do not fall into this category.)
Embezzlement:
In most States, embezzlement is defined
as theft/larceny of assets (money or property) by a person in a position of
trust or responsibility over those assets. Embezzlement typically occurs in the
employment and corporate settings.
Encoding:
The process used to imprint or inscribe
MICR characters on checks, deposits, and other financial instruments. [Magnetic
Ink Character Recognition (MICR) is a character-recognition technology adopted
mainly by the banking industry to facilitate the processing of checks. Each
check in encoded at the bottom with the dollar amount of the check. If that
information is entered incorrectly, there is an encoding error.]
Enforcement Action:
A regulatory tool that the OCC may use
to correct problems or effect change in a national bank.
Equal Credit Opportunity Act (ECOA):
Prohibits creditors from discriminating
against credit applicants on the basis of race, color, religion, national
origin, sex, marital status, age, or because an applicant receives income from
a public assistance program.
Error Resolution:
The required process for resolving
errors involving electronic transfers to and from deposit accounts.
Escheat:
Reversion of real or personal property
to the State when 1) a person dies without leaving a will and has no heirs, or
2) when the property (such as a bank account) has been inactive for a certain
period of time.
Escrow:
A financial instrument held by a third
party on behalf of the other two parties in a transaction. The funds are held
by the escrow service until it receives the appropriate written or oral
instructions-or until obligations have been fulfilled. Securities, funds, and
other assets can be held in escrow.
Escrow Analysis:
The periodic examination of escrow
accounts by a mortgage company to verify that monthly deposits are sufficient
to pay taxes, insurance, and other escrow-related items on when due.
Escrow Funds:
Funds held in reserve by a mortgage
company to pay taxes, insurance, and other mortgage-related items when due.
Estate Account:
An account held in the name of a decedent
that is administered by an executor or administrator of the estate.
Exception Hold:
A period of time that allows the banks
to exceed the maximum hold periods defined in the Expedited Funds Availability
Act.
Fair and Accurate Credit Transactions
Act of 2003 (FACT Act or FACTA):
The purpose of this Act is to help
consumers protect their credit identities and recover from identity theft.
One of the key provisions of this Act
is that consumers can request and obtain a free credit report once every 12
months from each of the three nationwide consumer credit reporting companies
(Equifax, Experian, and TransUnion). AnnualCreditReport.com provides consumers with the secure means to request their
free credit report.
Fair Credit Reporting Act (FCRA):
A Federal law, established in 1971 and
revised in 1997, that gives consumers the right to see their credit records and
correct any mistakes.
The FCRA regulates consumer credit
reporting and related industries to ensure that consumer information is
reported in an accurate, timely, and complete manner. The Act was amended to
address the sharing of consumer information with affiliates.
Fair Debt Collection Practices Act
(FDCPA):
The Fair Debt Collection Practices Act
is a set of United States statutes added as Title VIII of the Consumer Credit
Protection Act. Its purpose is to ensure ethical practices in the collection of
consumer debts and to provide consumers with an avenue for disputing and
obtaining validation of debt information in order to ensure the information's
accuracy. It is often used in conjunction with the Fair Credit Reporting Act.
Federal Deposit Insurance Corporation
(FDIC):
A government corporation that insures
the deposits of all national and State banks that are members of the Federal
Reserve System.
Federal Emergency Management Agency
(FEMA):
Federal agency responsible for the
emergency evaluation and response to all disasters, natural and man-made. FEMA
oversees the administration of flood insurance programs and the designation of
certain areas as flood prone.
Federal Reserve System:
The central bank of the United States.
The Fed, as it is commonly called, regulates the U.S. monetary and financial
system. The Federal Reserve System is composed of a central governmental agency
in Washington, D.C. (the Board of Governors) and twelve regional Federal
Reserve Banks in major cities throughout the United States.
You can divide the Federal Reserve's
duties into four general areas:
·
Conducting monetary
policy
·
Regulating banking
institutions and protecting the credit rights of consumers
·
Maintaining the stability
of the financial system
·
Providing financial
services to the U.S. government
Fiduciary:
Undertaking to act as executor,
administrator, guardian, conservator, or trustee for a family trust, authorized
trust, or testamentary trust, or receiver or trustee in bankruptcy.
Finance Charge:
The total cost of credit a customer
must pay on a consumer loan, including interest. The Truth in Lending Act
requires disclosure of the finance charge.
Financial Regulatory Agency:
An organization authorized by statute
for ensuring the safe and sound operation of financial institutions chartered
to conduct business under that agency's jurisdiction.
The primary regulators are the
following:
·
OCC (Office of the
Comptroller of the Currency)
·
FDIC (Federal Deposit
Insurance Corporation)
·
FRB (Federal Reserve
Board)
·
NCUA (National Credit
Union Administration)
·
State regulatory
agencies
First Mortgage:
A real estate loan which is in a first
lien position, taking priority over all other liens. In case of a foreclosure,
the first mortgage will be repaid before any other mortgages.
Fixed Rate Loan:
The interest rate and the payment
remain the same over the life of the loan. The consumer makes equal monthly
payments of principal and interest until the debt is paid in full.
Fixed Rate Mortgage:
A mortgage with payments that remain
the same throughout the life of the loan because the interest rate and other
terms are fixed and do not change.
Float:
1) The amount of uncollected funds
represented by checks in the possession of one bank but drawn on other banks.
2) The time that elapses between the day a check is deposited and the day it is
presented for payment to the financial institution on which it is drawn.
Flood Insurance:
Flood insurance protects against water
from an overflowing river or a hurricane's tidal surge and also covers damage
from water that builds up during storms.
Flood Plain:
A strip of relatively flat and normally
dry land alongside a stream, river, or lake that is covered by water during a
flood.
Foreclosure:
A legal process in which property that
is collateral or security for a loan may be sold to help repay the loan when
the loan is in default.
Foreign Transaction Fees:
A fee assessed by your bank for making
a transaction at another bank's ATM.
Forged Check:
A check on which the drawer's signature
has been forged.
Forgery:
The fraudulent signing or alteration of
another's name to an instrument such as a deed, mortgage, or check. The intent
of the forgery is to deceive or defraud.
Fraud Alert:
A key provision of the Fair and
Accurate Credit Transactions Act of 2003 is the consumer's ability to place a
fraud alert on their credit record. A consumer would use this option if they
believe they were a victim of identity theft.
The alert requires any creditor that is
asked to extend credit to contact the consumer by phone and verify that the
credit application was not made by an identity thief.
Freedom of Information Act (FOIA):
A Federal law that mandates that all
the records created and kept by Federal agencies in the executive branch of
government must be open for public inspection and copying. The only exceptions
are those records that fall into one of nine exempted categories listed in the
statute.
Frozen Account:
An account on which funds may not be
withdrawn until a lien is satisfied and a court order or other legal process
makes the account available for withdrawal (e.g., the account of a deceased
person is frozen pending a court order distributing the funds to the new lawful
owners).
An account may also be frozen when
there is a dispute regarding the true ownership of an account. The bank will
freeze the account to preserve the existing funds until legal action can
determine the lawful owner.
Furnisher:
An entity that provides information
about a consumer to a consumer reporting agency for inclusion in a consumer
report.
Garnishment/Garnish:
A legal process that allows a creditor
to remove funds from your bank account to satisfy a debt that you have not
paid. If you owe money to a person or company, they can obtain a court order
directing your bank to take money out of your account to pay off your debt.
Guaranteed Student Loan:
An extension of credit from a financial
institution that is guaranteed by a Federal or State government entity to
assist with tuition and other educational expenses. The government entity is
responsible for paying the interest on the loan and paying the lender to manage
it. The government entity also is responsible for the loan if the student
defaults.
Guarantor:
A party who agrees to be responsible
for the payment of another party's debts should that party default.
Hold:
Used to indicate that a certain amount
of a customer's balance may not be withdrawn until an item has been collected,
or until a specific check or debit is posted.
Home Equity Line of Credit (HELOC):
A line of credit secured by the equity
in a consumer's home. It can be used for home improvements, debt consolidation,
and other major purchases. Interest paid on the loan is generally tax
deductible (consult a tax advisor to be sure). The funds may be accessed by
writing checks against the line of credit or by getting a cash advance.
Home Equity Loan:
A home equity loan allows you to tap
into your home's built-up equity, which is the difference between the amount
that your home could be sold for and the amount that you still owe.
Homeowners often use a home-equity loan
for home improvements, to pay for a new car, or to finance their child's
college education. The interest paid is usually tax-deductible.
Because the loan is secured by your
home's equity, if you default, the bank may foreclose on your house and take
ownership of it.
This type of loan is sometimes referred
to as a second mortgage or borrowing against your home.
Inactive Account:
An account that has little or no
activity; neither deposits nor withdrawals having been posted to the account
for a significant period of time.
Index-linked Certificate of Deposit:
An index-linked CD is a deposit
obligation of the issuing bank and is often sold through bank branches and
affiliated and unaffiliated brokers. Index-linked CDs provide the investor the
ability to participate in the appreciation, if any, of a particular index, during
the term of the CD. Index-linked CDs may have complicated payout structures and
may not be suitable or appropriate for all investors. Investors should
carefully review the investment risk considerations detailed in the relevant
offering documents and disclosure statements. Index-linked CDs are not
securities and are not registered under securities laws.
Individual Account:
An account in the name of one
individual.
Individual Retirement Account (IRA):
A retirement savings program for
individuals to which yearly tax-deductible contributions up to a specified
limit can be made. The amount contributed is not taxed until withdrawn.
Withdrawal is not permitted without penalty until the individual reaches age 59
1/2.
Insufficient Funds:
When a depositor's checking account
balance is inadequate to pay a check presented for payment.
Insurance (Hazard):
Insurance to protect the homeowner and
the lender against physical damage to a property from sources such as but not
limited to fire, wind, or vandalism.
Insured Deposits:
Deposits held in financial institutions
that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) against
loss due to bank failure.
Interest:
The term interest is used to describe
the cost of using money, a right, share, or title in property.
Interest Rate:
The amount paid by a borrower to a
lender in exchange for the use of the lender's money for a certain period of
time. Interest is paid on loans or on debt instruments, such as notes or bonds,
either at regular intervals or as part of a lump sum payment when the issue
matures.
Interest Rate Index:
IA table of yields or interest rates
being paid on debt that is used to determine interest-rate changes for
adjustable-rate mortgages and other variable-rate loans.
Joint Account:
An account owned by two or more
persons. Either party can conduct transactions separately or together as set
forth in the deposit account contract.
Kiting:
Writing a check in an amount that will
overdraw the account but making up the deficiency by depositing another check
on another bank. For example, mailing a check for the mortgage when your
checking account has insufficient funds to cover the check, but counting on
receiving and depositing your paycheck before the mortgage company presents the
check for payment.
Late Charge:
The fee charged for delinquent payment
on an installment loan, usually expressed as a percentage of the loan balance
or payment. Also, a penalty imposed by a card issuer against a cardholder's
account for failing to make minimum payments.
Lease:
A contract transferring the use of
property or occupancy of land, space, structures, or equipment in consideration
of a payment (e.g., rent).
Lender:
An individual or financial institution
that lends money with the expectation that the money will be returned with
interest.
Lien:
Legal claim against a property. Once
the property is sold, the lien holder is then paid the amount that is owed.
Line of Credit:
A pre-approved loan authorization with
a specific borrowing limit based on creditworthiness. A line of credit allows
borrowers to obtain a number of loans without re-applying each time as long as
the total of borrowed funds does not exceed the credit limit.
Loan-to-Value Ratio (LTV):
The ratio of the loan principal (amount
borrowed) to the appraised value (selling price). For example, on a $100,000
home, with a mortgage loan principal of $80,000, the loan-to-value ratio is 80
percent. The LTV will affect programs available to the borrower; generally, the
lower the LTV, the more favorable the program terms offered by lenders.
Loan Contract:
The written agreement between a
borrower and a lender in which the terms and conditions of the loan are set.
Loan Fee:
A fee charged by a lender to make a
loan (in addition to the interest charged to the borrower).
Loan Modification Provision:
A contractual agreement in a loan that
allows the borrower or lender to permanently change one or more of the terms of
the original contract.
Loan Proceeds:
The net amount of funds that a lending
institution disburses under the terms of a loan, and which the borrower then
owes.
Local Check:
A check payable by, at, or through a
bank in the same check processing region as the location of the branch of the
depository bank. The depository bank is the bank into which the check was
deposited. As of February 27, 2010, the Federal Reserve consolidated its
checking processing centers into one processing center. Therefore, all checks
are now considered local.
Manufactured (mobile) home:
A structure, built on a permanent
chassis, transported to a site in one or more sections, and affixed to a
permanent foundation. The term does not include recreational vehicles.
Maturity:
The date on which the principal balance
of a loan, bond, or other financial instrument becomes due and payable.
Media:
Any organization in the business of
informing the public with news or commentary. The various forms of media
include print, television, internet, and radio.
Minimum Balance:
The amount of money required to be on
deposit in an account to qualify the depositor for special services or to waive
a service charge.
Minimum Payment:
The minimum dollar amount that must be
paid each month on a loan, line of credit, or other debt.
Missing Payment:
A payment that has been made but not
credited to the appropriate account.
Mobile home: To be eligible for coverage
under the National Flood Insurance Program, a mobile home must be on a
permanent foundation and meet specific anchoring requirements for it location.
See manufactured (mobile) home.
Money Market Deposit Account:
A savings account that offers a higher
rate of interest in exchange for larger than normal deposits. Insured by the
FDIC, these accounts have limits on the number of transactions allowed and may
require higher balances to receive the higher rate of interest.
Money Market Fund:
An open-ended mutual fund that invests
in short-term debts and monetary instruments such as Treasury bills and pays
money market rates of interest. Money market funds usually offer checkwriting
privileges. They are not insured by the FDIC.
Mortgage:
A debt instrument used in a real estate
transaction where the property is the collateral for the loan. A mortgage gives
the lender a right to take possession of the property if the borrower fails to
pay off the loan.
Mortgage Loan:
A loan made by a lender to a borrower for
the financing of real property.
Mortgagee:
The lender in a mortgage loan
relationship.
Mortgagor:
The borrower in a mortgage loan
relationship. (Property is used as collateral to make payment.)
Mutual Fund:
A fund operated by an investment
company that raises money from shareholders and invests it in stocks, bonds,
options, commodities, or money market securities. These funds offer investors
the advantages of diversification and professional management. To participate,
the investor may pay fees and expenses. (Mutual funds are not covered by FDIC
insurance.)
National Bank:
A bank that is subject to the
supervision of the Comptroller of the Currency. The Office of the Comptroller
of the Currency is a bureau of the U.S. Treasury Department. A national bank
can be recognized because it must have "national" or "national
association" in its name.
National Bank Examiner:
An employee of the Comptroller of the
Currency whose function is to examine national banks periodically to determine
the financial position of a bank and the security of its deposits. The examiner
also verifies that the bank maintains procedures consistent with Federal
banking laws and regulations.
National Credit Union Administration
(NCUA):
The Federal regulatory agency that
charters and supervises Federal credit unions. (NCUA also administers the
National Credit Union Share Insurance Fund, which insures the deposits of
Federal credit unions.)
National Flood Insurance Program
(NFIP):
The program of flood insurance coverage
and floodplain management administered under the Flood Disaster Protection Act
(FDPA or Act) and applicable Federal regulations found in Title 44 of the Code
of Federal Regulations, Subchapter B.
Negotiable Order of Withdrawal Account
(NOW):
A savings account from which
withdrawals can be made by negotiable orders of withdrawal (functional
equivalent of checks). This is an interest-bearing account for which the bank
must reserve the right to require the depositor to provide at least seven days
notice of his/her intent to withdraw funds.
Not Automatically Protected:
There are several types of Federal
benefits that are not automatically protected under 31CFR 212: Federal benefits
received by check rather than direct deposit; Federal benefits received more
than two months before the bank received the garnishment order or Federal
benefits that were transferred to another bank account. The benefits may be
exempt from garnishment but you will have to alert the court or creditor.
Official Check:
A check drawn on a bank and signed by
an authorized bank official. (Also known as a cashier's check.)
Offset, Right of:
Banks' legal right to seize funds that
a guarantor or debtor may have on deposit to cover a loan in default. It is
also known as right of setoff
Online Banking:
A service that allows an account holder
to obtain account information and manage certain banking transactions through a
personal computer via the financial institution's web site on the Internet.
(This is also known as Internet or electronic banking.)
Open-End Credit:
A credit agreement (typically a credit
card) that allows a customer to borrow against a preapproved credit line when
purchasing goods and services. The borrower is only billed for the amount that
is actually borrowed plus any interest due. (Also called a charge account or
revolving credit.)
Operating Subsidiary:
National banks conduct some of their
banking activities through companies called operating subsidiaries. These
subsidiaries are companies that are owned or controlled by a national bank and
that, among other things, offer banking products and services such as loans,
mortgages, and leases.
The Office of the Comptroller of the
Currency supervises and regulates the activities of many of these operating
subsidiaries.
Outstanding Check:
A check written by a depositor that has
not yet been presented for payment to or paid by the depositor's bank.
Overdraft:
When the amount of money withdrawn from
a bank account is greater than the amount actually available in the account,
the excess is known as an overdraft, and the account is said to be overdrawn.
Overdraw:
To write a check for an amount that
exceeds the amount on deposit in the account.
Overlimit:
An open-end credit account in which the
assigned dollar limit has been exceeded.
Participating Community:
A community for which the Federal
Emergency Management Agency (FEMA) has authorized the sale of flood insurance
under the National Flood Insurance Program (NFIP).
Passbook:
A book in ledger form in which are
recorded all deposits, withdrawals, and earnings of a customer's savings
account.
Past Due Item :
Any note or other time instrument of
indebtedness that has not been paid on the due date.
Payday Loans:
A small-dollar, short-term loan that a
borrower promises to repay out of their next paycheck or deposit of funds.
Payee:
The person or organization to whom a
check, draft, or note is made payable.
Paying (Payor) Bank :
A bank upon which a check is drawn and
that pays a check or other draft.
Payment Due Date:
The date on which a loan or installment
payment is due. It is set by a financial institution. Any payment received
after this date is considered late; fees and penalties can be assessed.
Payoff:
The complete repayment of a loan,
including principal, interest, and any other amounts due. Payoff occurs either
over the full term of the loan or through prepayments.
Payoff Statement:
A formal statement prepared when a loan
payoff is contemplated. It shows the current status of the loan account, all
sums due, and the daily rate of interest.
Payor:
The person or organization who pays.
Periodic Rate:
The interest rate described in relation
to a specific amount of time. The monthly periodic rate, for example, is the
cost of credit per month; the daily periodic rate is the cost of credit per
day.
Periodic Statement:
The billing summary produced and mailed
at specified intervals, usually monthly.
Personal Identification Number (PIN):
Generally a four-character number or
word, the PIN is the secret code given to credit or debit cardholders enabling
them to access their accounts. The code is either randomly assigned by the bank
or selected by the customer. It is intended to prevent unauthorized use of the
card while accessing a financial service terminal.
PITI:
Common acronym for principal, interest,
taxes, and insurance—used when describing the monthly charges on a mortgage.
Point of Sale (POS):
1) The location at which a transaction
takes place. 2) Systems that allow bank customers to effect transfers of funds
from their deposit accounts and other financial transactions at retail
establishments.
Power of Attorney:
A written instrument which authorizes
one person to act as another's agent or attorney. The power of attorney may be
for a definite, specific act, or it may be general in nature. The terms of the
written power of attorney may specify when it will expire. If not, the power of
attorney usually expires when the person granting it dies.
Some institutions require that you use
the bank's power of attorney forms. (The bank may refer to this as a Durable
Power of Attorney: The principal grants specific rights to the agent.)
Preauthorized Electronic Fund
Transfers:
An EFT authorized in advance to recur
at substantially regular intervals.
Preauthorized Payment:
A system established by a written
agreement under which a financial institution is authorized by the customer to
debit the customer's account in order to pay bills or make loan payments.
Preferred Risk Policy (PRP):
A policy that offers fixed combinations
of building/contents coverage or contents-only coverage at modest, fixed
premiums. The PRP generally is available for property located in B, C, and X
Zones in Regular Program Communities that meets eligibility requirements based
on the property’s flood loss history.
Prepayment:
The payment of a debt before it
actually becomes due.
Prepayment Clause:
A clause in a mortgage allowing the
mortgagor to pay off part or all of the unpaid debt before it becomes due.
Prepayment Penalty:
A penalty imposed on a borrower for
repaying the loan before its due date. (In the case of a mortgage, this applies
when there is not a prepayment clause in the mortgage note to offset the
penalty.)
Previous Balance:
The cardholder's account balance as of
the previous billing statement.
Principal Balance:
The outstanding balance on a loan,
excluding interest and fees.
Private Mortgage Insurance (PMI):
Insurance offered by a private
insurance company that protects the bank against loss on a defaulted mortgage
up to the limit of the policy (usually 20 to 25 percent of the loan amount).
PMI is usually limited to loans with a high loan-to-value (LTV) ratio. The
borrower pays the premium.
Real Estate Settlement Procedures Act
(RESPA):
Federal law that, among other things,
requires lenders to provide "good faith" estimates of settlement
costs and make other disclosures regarding the mortgage loan. RESPA also limits
the amount of funds held in escrow for real estate taxes and insurance.
Reconciliation:
The process of analyzing two related
records and, if differences exist between them, finding the cause and bringing
the two records into agreement. Example: Comparing an up-to-date check book
with a monthly statement from the financial institution holding the account.
Redlining:
The alleged practice of certain lending
institutions of not making mortgage, home improvement, and small business loans
in certain neighborhoods-usually areas that are deteriorating or considered by
the lender to be poor investments.
Refinancing:
A way of obtaining a better interest
rate, lower monthly payments, or borrow cash on the equity in a property that
has built up on a loan. A second loan is taken out to pay off the first,
higher-rate loan.
Refund:
An amount paid back because of an
overpayment or because of the return of an item previously sold.
Regular Program Community:
A community wherein a Flood Insurance
Rate Map is in effect and full limits of coverage are available under the Flood
Disaster Protection Act (FDPA or Act).
Release of Lien:
To free a piece of real estate from a
mortgage.
Renewal:
A form of extending an unpaid loan in
which the borrower's remaining unpaid loan balance is carried over (renewed)
into a new loan at the beginning of the next financing period.
Residual Interest:
Interest that continues to accrue on
your credit card balance from the statement cycle date until the bank receives
your payment.
For example, if your statement cycle
date was January 10 and the bank received your payment on January 20, there
were ten days for which interest accrued. This amount will be posted on your
next statement.
Return Item:
A negotiable instrument—principally a
check—that has been sent to one bank for collection and payment and is returned
unpaid by the sending bank.
Reverse Mortgage:
A reverse mortgage is a special home
loan product that allows a homeowner aged 62 or older the ability to access the
equity that has accumulated in their home. The home itself will be the source
of repayment. The loan is underwritten based on the value of the collateral
(home) and the life expectancy of the borrower. The loan must be repaid when
you die, sell your home, or no longer live there as your principal residence.
Revolving Credit:
A credit agreement (typically a credit
card) that allows a customer to borrow against a preapproved credit line when
purchasing goods and services. The borrower is only billed for the amount that
is actually borrowed plus any interest due. (Also called a charge account or
open-end credit.)
Right of Offset:
Banks' legal right to seize funds that
a guarantor or debtor may have on deposit to cover a loan in default. It is
also known as the right of set-off.
Right of Rescission:
Right to cancel, within three
business days, a contract that uses the home of a person as collateral, except
in the case of a first mortgage loan. There is no fee to the borrower, who
receives a full refund of all fees paid. The right of rescission is guaranteed
by the Truth in Lending Act (TILA).
Safe (or Safety) Deposit Box:
A type of safe usually located in
groups inside a bank vault and rented to customers for their use in storing
valuable items.
Safekeeping:
A service provided by banks where
securities and valuables are protected in the vaults of the bank for customers.
Satisfaction of Mortgage:
A document issued by a mortgagee (the
lender) when a mortgage is paid in full.
Service Charge:
A charge assessed by a depository
institution for processing transactions and maintaining accounts.
Signature Card:
A card signed by each depositor and
customer of a bank which may be used as a means of identification. The
signature card represents a contract between the bank and the depositor.
Special Flood Hazard Area (SFHA):
An area defined on a Flood Insurance
Rate Map with an associated risk of flooding.
Stale-Dated Check:
Presented to the paying bank 180 days
(6 months) or more after the original issue date. Banks are not required by the
Uniform Commercial Code to honor stale-dated checks and can return them to the
issuing bank unpaid. The maker of a check can discourage late presentment by
writing the words "not good after X days" on the back of the check.
State Bank:
A bank that is organized under the laws
of a State and chartered by that State to conduct the business of banking.
State Banking Department:
The organization in each State that
supervises the operations and affairs of State banks.
Statement:
A summary of all transactions that
occurred over the preceding month and could be associated with a deposit
account or a credit card account.
Stop Payment:
An order not to pay a check that has
been issued but not yet cashed. If requested soon enough, the check will not be
debited from the payer's account. Most banks charge a fee for this service.
Student Loan:
Loans made, insured, or guaranteed
under any program authorized by the Higher Education Act. Loan funds are used
by the borrower for education purposes.
Substitute Check:
A substitute check is a paper copy of
the front and back of the original check. A substitute check is slightly larger
than a standard personal check so that it can contain a picture of your
original check.
A substitute check is legally the same
as the original check if it accurately represents the information on the
original check and includes the following statement: "This is a legal copy
of your check. You can use it the same way you would use the original
check." The substitute check must also have been handled by a bank.
Substitute checks were created under
Check 21, the Check Clearing for the 21st Century Act, which became effective
on October 28, 2004.
Terms:
The period of time and the interest
rate arranged between creditor and debtor to repay a loan.
Time Certificate of Deposit:
A time deposit evidenced by a
negotiable or nonnegotiable instrument specifying an amount and maturity.
Time Deposit:
A time deposit (also known as a term
deposit) is a money deposit at a bank that cannot be withdrawn for a certain
"term" or period of time. When the term is over it can be withdrawn,
or it can be held for another term. The longer the term, the better the yield
on the money. Generally, there are significant penalties for early withdrawal.
Trust Account:
A general term that covers all types of
accounts in a trust department, such as estates, guardianships, and agencies.
Trust Administrator:
A person or institution that manages
trust accounts.
Truth in Lending Act (TILA):
The Truth in Lending Act is a Federal
law that requires lenders to provide standardized information so that borrowers
can compare loan terms. In general, lenders must provide information on
·
what credit will cost
the borrowers,
·
when charges will be
imposed, and
·
what the borrower's
rights are as a consumer.
Uncollected Funds:
A portion of a deposit balance that has
not yet been collected by the depository bank.
Uniform Commercial Code (UCC):
A set of statutes enacted by the
various States to provide consistency among the States' commercial laws. It
includes negotiable instruments, sales, stock transfers, trust and warehouse
receipts, and bills of lading.
Uniform Gift to Minors Account:
A UGMA provides a child under the age
of 18 (a minor) with a way to own investments. The money is in the minor's
name, but the custodian (usually the parent) has the responsibility to handle
the money in a prudent manner for the minor's benefit. The parent cannot
withdraw the money to use for his or her own needs.
Usury:
Charging an illegally high interest
rate on a loan.
Usury Rates:
The maximum rate of interest lenders
may charge borrowers. The usury rate is generally set by State law.
Variable Rate:
Any interest rate or dividend that
changes on a periodic basis.
Wire Transfer:
A transfer of funds from one point to
another by wire or network such the Federal Reserve Wire Network (also known as
FedWire).
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