For students who forget their belt, I have a white belt that a student of mine tie-dyed - but that became a problem for a particular student who wanted to wear the tie-dyed belt; after the second time he showed up without a belt in 3 classes, instead of being loaned the belt, his shirt was taped shut with medical tape (since without a belt it was coming open).
I have only taken a belt (rank) away from a student once. I have a student who is developmentally delayed (adult) who has been in my class for 5 or 6 years, and is perfectly capable of following the class rules when he feels like it. When I was out of town for a week last year, I left my senior student in charge of the class (she was 19 at the time, and not as forceful as perhaps she should have been - but the only other adult black belt in the class was at the same TKD camp I was). His behavior was so poor - particularly in his disrespect to a black belt who was instructing - that I took his green belt away and gave him a yellow one, and told him that any further problems, and it would become a white belt. This has had a very positive, and long-term, effect on his behavior - much better than making him sit out of class, which is the only other thing that really has an impact. However, it can only be used sparingly - if he gets put back down to white belt, there's nowhere left for him to go.
I have also taken belts away temporarily during class, usually for gross breaches of class rules. Students have to state clearly what the violation was, what a more appropriate action would be in the future, and then (if appropriate) will have their belt returned. The first time it happens in a class, the impact on students who have never seen it is immense. The impact on students who have seen another have to wait for the next class to see if the belt will be returned is even greater. Other than the student described above, all students have had their belts returned, usually the same class.