How Laws Have Impacted Commercial Lending Essay

How Laws Have Impacted Commercial Lending - Essay Example In relation to this paper, the introduction of The Community Reinvestment Act (CRA-REG BB) and Regulation B (Equal Credit Opportunity Act) altered commercial activities landscape for lending institutions. Brown (3) indicates that Acts have had impacts on business and commercial related activities for the past thirty years since they were established. Part 1 CRA was an Act put to place to ensure equity in access to financial services regardless of individual’s background. This Act lays outs steps necessary when settling commercial lending legal issues. EOA was established to provide guidelines and enforce civil liability on lending institutions that offered services in segregation. This law has ensured accessibility of financial services to all legible citizens (Brown 42). Over the 30 years the introductions of commercial lending laws have altered the business environment. This paper evaluates the impacts of CRA and ECOA on commercial lending institutions and society. CRA and E COA acts have achieved more positive benefits as opposed to the challenges they have brought. Before these Acts were in place lending institutions targeted the high income market for their services, preferably big business and white collar companies. This shift was realized when policies forced them to provide their services in line with societal demands for their financial rights (Brown 11). CRA and ECOA have also impacted on businesses negatively by reducing their owner’s authority in dealing with fiscal policy matters. There have been conflicts involving the government and lending institution on what is considered ethical when conducting businesses. Imperfect information is obtained by lending institutions from borrowers due to restrictions interfering with record keeping by financial institutions. There was a backlog of legal issues concerning lending institutions and the new clients of commercial banks. According to Brown (10), laws facilitate effective running of busine ss whereby client’s interests are safeguarded when seeking commercial services. These Acts provide clear channels for use when sorting financial disputes.CRA made financial institutions put measures in place that correspond with community’s interests. Institutions have delved on markets initially neglected thus increasing their customer base resulting in healthy business competition. The Acts have led to societal well being by catering for its clients needs. Commercial institutions that tapped on new markets such as the marginalized communities realized growth in their profit margin. Good ethical practices by commercial banks adhering to CRA and ECOA acts have promoted fairness and equity to the world of business. Financial institutions have altered their mode of obtaining information from people of different social backgrounds. Unfortunately prejudices have led to collapse of businesses where clients boycott discriminatory organizations. In the current years commercia l banks are being forced to respect the rights of minorities when transacting businesses with them. Banks have expanded the operations venturing into neglected territories when capturing the untapped markets. Part 2 The five essential elements of credit include character, capital, collateral, cash-flow and capacity (Larson & Harms 38). As a commercial lender I will minimize the risks involved safeguarding my business. Banks should seek expertise from other professionals like