Compliance Definitions

Truth in Lending Act (TILA) – Regulation Z:

TILA governs disclosures in consumer credit transactions. Reg Z is a regulation of the Federal Reserve Board that implements TILA. The purpose of this regulation is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. This applies only to personal credit transactions.


Fair Credit Reporting Act (FCRA):

The FCRA is enforced by the FTC. It gives specific rights to consumers dealing with credit reporting agencies (CRA’s). It protects consumers by requiring the credit bureaus to furnish accurate and complete information to businesses when they evaluate a consumer’s application for credit, insurance, or a job.


Equal Credit Opportunity Act (ECOA) – regulation B:

The ECOA is a federal law that prohibits credit discrimination based on sex, race, marital status, etc. Requires that you maintain credit applications for a minimum of 5 years. “Adverse Action” is an area where dealerships violate the ECOA. A creditor (dealership or bank) that denies a consumer credit based on adverse information must supply written notification to the consumer within 30 days of denial. Reg B is the Federal Reserve Board regulation that implements the ECOA.


Holder in Due Course (HDC):

A rule that protects a purchaser of debt, where the purchaser is assigned the right to receive the debt payments. The doctrine insulates the purchaser of debt, or other obligation to pay, against charges that either party to the original transaction might have had against the other. The rule is affirmed by the FTC.


Magnusson-Moss Warranty Act:

A federal law that governs warranties on consumer products. The purpose of the law is to make warranties on consumer products more readily understood and enforceable and to provide the FTC with means to better protect consumers against deceptive warranty practices. A written warranty must fully disclose the terms and conditions of the warranty rules of the FTC.


Consumer Leasing Act (CLA) – regulation M:

The CLA governs disclosures in consumer lease transactions. It applies to all leases exceeding four months primarily for personal, family, or household purposes. A part of the TILA. Reg M is the Federal Reserve Board regulation that implements the CLA.


Gramm-Leach-Bliley (GLB) Privacy Rule:

Requires financial institutions to provide each consumer with a privacy notice explaining the information collected about the consumer, where the information is shared, how the information is used, and how the information is protected. It is enforced by the FTC and relates to all customer non-public information.


Gramm-Leach-Bliley (GLB) Safeguarding Rule:

Requires financial institutions to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients’ non-public personal information. This rule is intended to make sure all clients are protected.

Red Flags Rule:

Created by the FTC to help prevent identity theft. The Red Flags Rule sets out how certain businesses and organizations must develop, implement, and administer their identity theft prevention programs. The program must include four elements: 1) Identify Relevant Red Flags – identify likely business-specific identity theft red flags 2) Detect Red Flags – define procedures to detect red flags in day-to-day procedures 3) Prevent and Mitigate Identity Theft – act to prevent and mitigate harm when red flags are identified 4) Update Program – maintain the red flag program, including educating staff


Money Laundering Statutes:

Are a result of the USA Patriot Act. States that all transactions involving over $10,000 in currency must be reported on a Form 8300 and reported to FinCEN (Financial Crimes Enforcement Network).


IRS Cash Reporting Rule:

The rule requires that cash payments of more than $10,000 be reported to the federal government by filing IRS/FinCEN Form 8300.


USA Patriot Act:

The intent of the law is to establish programs designed to deter terrorists, drug dealers, and money launderers activity. The act made major changes to the laws that apply to traditional and non-traditional financial institutions. Compliance is mandatory. Administered by FinCEN and has four major provisions: 1) Establish money laundering programs, 2) establish customer identification and verification process, 3) share information with federal government authorities, 4) transaction reporting for transactions over $10,000 cash.


Unfair and Deceptive Acts and Practices (UDAP):

Regulated by the FTC. A practice is defined as deceptive if it will likely mislead a consumer, acting reasonably under the circumstances, to the consumer’s detriment.


Do Not Call Rules (DNC):

The rule is intended to ensure consumer privacy and minimize telemarketing abuse. The rule is not aimed specifically at dealers but may touch on some of the marketing efforts that a dealer may be undertaking with existing and potential customers. There are specific periods in which you may contact customers who have done business with you and those who have just made an inquiry. Some state laws are more restrictive than the federal law.(example: federal law allows calls to consumers who make an inquiry for up to 90 days, IL restricts this to 30 days). In addition, calls can only be made between 8am and 9pm.



Enforced by the FTC. It regulates the national standards for the sending of commercial e-mails. Commercial e-mail is defined by the FTC as “any electronic mail message in which the primary purpose is the commercial advertisement or promotion of a commercial product or service.”


Telephone Consumer Protection Act (TCPA):

It restricts telephone solicitations and the use of automated telephone equipment. The TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages, and fax machines. It also specifies several technical requirements for fax machines, autodialers, and voice messaging systems