Dictionary (A-G)

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

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.

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: The date on which checks payable at local or non-local banks are considered to be collected and available for customers' 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 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:

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

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.

C

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

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.

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.)

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.

Consumer Credit Counseling Service: A service which specializes in working with consumers who are overextended with debts and need to make arrangements with creditors.

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.

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 consumer-reporting agency or credit-reporting agency.)

Credit card account agreement: A written agreement that explains the

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 card issuer: Any financial institution that issues bank cards to those who apply for them.

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 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 FICOŽ 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.

D

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.

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.

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.

E

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.

F

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 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.

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.

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 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:

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.

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:

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.

G

Garnishment: A court order to an employer to withhold all or part of an employee's wages and to send the money to the court or to the person who won a lawsuit against the employee. (Also called a levy.)

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.







Copyright 2007 by Mark McCracken , All Rights Reserved