Regulatory Squabbles Threaten Financial Reform

From MarketWatch.com:

The initial confrontation before the Senate Banking Committee didn’t come from the expected parties, Sheila Bair of the Federal Deposit Insurance Corp. or Treasury Secretary Timothy Geithner. It was between Geithner deputy Neal Wolin and the committee chairman.

The issue: Would Geithner be a good-faith participant with other regulators?

The answer was Geithner would, Wolin said. Moreover, he will head the council of regulators when it meets for the first time Friday. This seemed important to Sen. Christopher Dodd, D-Conn., who noted that the infighting and lack of communication between agencies was partly responsible for the regulatory breakdown that failed to forecast and address the financial crisis.

“There has to be a change in how we operate,” Dodd told the panel.

Committee officials and Treasury Department officials told MarketWatch that Geithner wasn’t invited, while Wolin was. They also said all of the agencies have been cooperating.

The New Overdraft and Debit Laws Explained

According to reports, in the year 2006 overdraft fees accounted for approximately 6% of banking revenue in this country. Fortunately, on August 15^th a handful of new laws went into affect to protect consumers in this country from excessive banking fees. However, in addition to targeting overdraft fees and debit cards, the new rules also have a significant impact on gift card practices in this country. To help all of my readers understand the full affect of the new laws, I have put together the following article explaining the most important new overdraft and gift card rules.

I. Overdraft Protection Laws

What is overdraft protection?

Before the new law was passed, banks could automatically enroll customers in overdraft protection, which would allow you to charge more than you had in your checking account. Instead of declining the transaction, the bank would approve it, and then charge you with a $20-40 overdraft fee.

Opt in or out

Starting August 15th, banks were forced to discontinue overdraft protection services unless customers sign up for it. This means you can decide whether or not you want your card to get approved when you have insufficient funds.

Disclosure mailers

As part of the new laws, financial institutions have been required to notify customers of how overdraft protection will affect their bank account. This is because of new disclosure laws that aim to increase consumer transparency in the banking industry, and also explains why you have probably received extra mail from your bank over the past few weeks.

Checks and bills

According to the new law, banks can still charge overdraft fees for checks or automatic withdrawals from your account that are higher than your available balance. The overdraft fee rules only apply to ATM debit and check card transactions. You bank may have an option to turn off all overdraft options, but you should ask your financial institution for more information.

Alternative overdraft protection

There are other ways to protect yourself from having your debit card declined than enrolling in overdraft protection. If your bank offers online banking then you could make a habit of checking your balance every day to make sure you do not overspend. Some financial institutions also offer cell phone alerts when your balance is low.

II. Gift Card Laws

Fees

Until now, the gift card industry has gone relatively unregulated. However, the new overdraft and debit laws also have implications on gift cards. As of August 15^th, companies that issue gift cards cannot charge excessive fees that lower the card’s available balance. The new law limits the number of fees that can be charged to a one-time fee when the card is purchased, and only one additional charge per month. Additionally, inactivity fees cannot be charged at all unless the card has not been used for over a year.

Expiration

The new law states that gift cards cannot expire for at least five years. Prior to this new rule, some gift cards would expire in as little as a year.

Disclosure

Much like the new bank laws, companies who offer gift cards must now disclose fees and expiration dates to customers. For gift cards, the disclosure must be on the card itself, along with a toll-free number or website to find more information if need be.

Prepaid debit and phone cards

Unfortunately the new gift card laws do not apply to prepaid debit cards or prepaid phone cards; the rules only apply to gift cards.

Moving Your Money? Then Try a Credit Union

From The HuffingtonPost.com:

We applaud the call for folks to move their money to local financial institutions; we just think that call should also include credit unions.

Credit unions, not-for-profit, member-owned financial institutions, have been widely recognized for their prudent business practices and great service. A key reason for this is that "profits" are returned to members in the form of lower fees and competitive rates.

This investment has paid off: Today, credit unions serve approximately 92 million members.

Federal credit unions also offer great rates on all types of loans, including automobiles, cars, credit cards, and mortgages. Credit card interest rates and other loans cannot exceed 18 percent at federal credit unions and usually average much lower. You can go to www.nafcu.org/dailyrates and compare rates between credit unions and banks.

In addition, while banks were tightening their commercial lending, credit unions member business loans have increased nearly 17 percent since Sept. 2008. In fact, through the third quarter of 2009, credit unions provided over 139,000 loans for a total of nearly $28 billion to their members.

Why You Shouldn't Commingle Business and Personal Funds

When it comes to owning a business, you should always tread carefully when spending and saving your hard earned cash. However, it is essential that you keep your personal and business funds separate. Check out the following article on why it is so important courtesy of LLC Made Easy.

After all the hard work it takes to create a product or sell your service, the last thing most of use want to do is have more administrative hassles. Particularly after you've gone through the effort of forming an LLC.

When you finally make that sale, and collect that check (if you've ever been in business, you know the difference between making a sale and collecting the money), you want to spend it.

I understand.

But, for several reasons, you want to get your ducks in a line first and keep your business and personal accounts separate to avoid commingling of funds.

What exactly is "commingling"?

Commingling of funds means that you are treating your business's money as your own. Some ways to commingle funds are:

• Depositing checks made payable to your business into your personal bank account
• Making withdrawals from your business checking account to pay obviously personal expenses without documentation
• Using the same bank account for your business and personal needs.
• Writing business checks for obviously personal expenses
• Moving money back and forth between your business and personal accounts without documentation

Continue reading here…