Wall Street Bill Changes for Banks and Credit Cards

As we have mentioned in our last post. Washington recently passed a Wall Street Reform Bill that is designed to place more restrictions on lending and create more spending protection for consumers and merchants.  Last week we covered some of the changes happening to loans; today we will look at some of the changes you can expect in your banking and credit/debit card use.

Banking
1) The FDIC has raised the insured individual deposits from $100,000 to $250,000.  This change is effective immediately.

2) Overdraft fees are going to be much more restricted. Banks are no longer going to be able to automatically charge you $30 for a $3 overdraft.  You will have to “opt-in” or agree to the overdraft charges.  You may start to see letters coming from your bank explaining their overdraft policies and asking your permission (to opt-in) to apply their policy to your account.

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3) Check your bank statements for new fees. Revenue for banks is going to be hit with the bill, so they may start looking elsewhere to make up for the loss.  Make sure you check your statements for new fees such as charges for checking accounts and online banking.

Credit/Debit Cards
1) The Federal Reserve is going to try and make sure the Credit and Debit card companies’ fees are reasonable in proportion to the cost to run transactions for merchants.  This may result in discounts for cash payments and possibly lower prices in general as retailers pass their saving on to the customer.

2) The use of credit and debit cards may be limited in certain transactions. Merchants will be allowed to reject a transaction if it is not profitable.  For example, buying a 50 cent candy bar with your debit card may cost the merchant more than the transaction is worth, so the merchant may now choose to refuse the payment method.

One other change that we will see is that taxpayer bailouts are no longer allowable.  If institutions gamble and fail, the taxpayers will no longer be a source to repair the company.

If you have any questions about these changes feel free to contact us.

*Information for this post is adapted from the Tax Update 2010 Tax Tips Newsletter.

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The Wall Street Reform Bill Changes Rules for Loans

You may or may not be aware that Washington recently passed a Wall Street Reform Bill that is designed to place more restrictions on lending and create more spending protection for consumers and merchants.  The bill is about 2300 pages long, so we are going to spend the next few posts talking about the changes you can expect to see with this bill.  Hopefully we can provide you with a solid breakdown of some of the things that may affect you directly.

We are going to start with changes that we will be seeing in the various types of Loans.

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1) Home Mortgages will be going through a lot of changes.  Prepayment fees will be eliminated.  Lenders will now have to make sure the applicant can pay for the loans they sell.  Lenders will not be able to try to steer applicants toward more expensive lending options.  Refinancing fees will be lowered.  And complex mortgage products will have to pass through the new Consumer Protection Bureau.

2) Credit score reports will now be available for free if you are refused for a mortgage.  Until now you were only able to see your credit report for free once a year.

3) If you buy a car, you need to read the sales contract very closely.  Car lender practices are not examined by the Consumer Protection Bureau.  This means car lenders can get away with extra fees and higher interest rates.

4) The bill provides for emergency bridge loans for qualified individuals who have become unemployed and are likely to find re-employment.  The bridge loans will assist these individuals make mortgage payments until employment is found.

Again, these are only a few of the changes that we may see with this new bill, and we will be talking about more changes in the coming weeks.  If you are concerned about how you will be affected personally, contact your tax professional or feel free to contact us.

*Information for this post is adapted from the Tax Update 2010 Tax Tips Newsletter.

Problems with that Homebuyer Tax Credit

Continuing with with our Homebuyer Credit topic, there is a little more news that you should be aware of.  You will remember that our first bit of news was that the filing deadline was extended to September 30th, 2010.  We have more news that is a bit more comical but serious still.  Apparently, the IRS is having trouble effectively regulating claim approvals for the homebuyer credit.  Multiple credits have been approved for the same residence.  For example, five homes were claimed by 256 filers.

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Other questionable claims include claims by prisoners that slipped through the cracks and were approved.  There were also many questionable amended returns in need of additional investigation but were never examined.  And some inspectors discovered that nearly 100 IRS employees filed questionable claims for the homebuyer credit.  Those employees are now under internal investigation.

Agency officials promise they’ll “plug the leaks” and do better at monitoring all claims for the credit.  But what does this mean for those who claimed the credit?  It means that the IRS is going to be looking more closely at the returns that claimed the homebuyer credit.  We don’t anticipate any trouble with our clients, but if you receive any kind of letter from the IRS about the credit, please don’t panic, but contact us so we can help you figure out exactly what the IRS wants from you.

There is still time to file for the tax credit, so if you are still wondering if you qualified for the tax credit, here are the guidelines for the tax credit as found on irs.gov.

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

  • Applies only to homes used as a taxpayer’s principal residence.
  • Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

Homebuyer Tax Credit Deadline Extended to Sept. 30th

You may be aware that this past year the Federal Government offered an $8000 tax credit for first time homebuyers.  In these economic conditions, you can bet that an $8000 credit caused quite a stir, and many people, including our clients, applied for the credit.  Things seem to be running smoothly, but there is some news that you should be aware of if you applied for the tax credit or if you were going to but may have missed the deadline.

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The first bit of news is for those who may have been trying to get the tax credit but missed the deadline.  Previously, the deadline for filing was June 30, 2010.  But on Friday July 2, 2010, President Obama signed a three-month extension for the deadline, so first-time homebuyers now have until September 30, 2010 to qualify for the credit.  Important to note is that in order to qualify, you must have entered into a contract by April 30th of this year.  It is estimated that this will allow 180,000 more people to file that were not eligible because their mortgage paper work was caught up in the congested application process.

For those of you who may be wondering if you qualified for the tax credit, here are the guidelines for the tax credit as found on irs.gov.

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

  • Applies only to homes used as a taxpayer’s principal residence.
  • Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

We’ll have more on this topic next week!

You can see the June 25th edition of the Kiplinger Newsletter for more information as well.