The Senate passed the financial reform bill today. The bill will now go to the President who is expected to sign it next week. Those who have been waiting for the permanent increase in deposit insurance, it's finally here. The provision is in section 335 on page 438 of the 2,319-page bill. The standard deposit insurance limit will permanently increase from $100,000 to $250,000 for both banks and credit unions. Previously, the $250,000 limit was set to expire on December 31, 2013. In addition, the deposit insurance will take effect retroactively to January 1, 2008. This will cover depositors who lost uninsured deposits at IndyMac, ANB Financial and a few other banks that were closed in 2008 before the temporary $250K insurance coverage limit took effect.
One of this blog's readers lost about $15K in accrued interest that was uninsured when ANB Financial failed in May 2008. I reviewed how he lost this money in this post. Even though he lost the accrued interest, he was relieved he didn't lose any of his $400,000 of principal which was covered due to his diligence in making sure the bank properly titled his account. It'll be interesting to see how fast the FDIC will be sending checks.
There are not many other provisions of the bill that will directly help savers. This MSN's Smart Spending article has a few of them. Unfortunately, there are a few provisions that will likely end up hurting savers especially those who use reward checking accounts and cash-back credit cards. Here are three:
- The Federal Reserve will be able to cap the fees on debit cards (but not credit cards) to what is "reasonable and proportional to the cost incurred by the issuer with respect to the transaction"
- Retailers will be allowed to offer discounts to customers who pay with cash or with credit cards that carry lower transaction fees
- Retailers can set a $10 minimum for credit card purchases
Hopefully, the Federal Reserve will take their time in setting debit card fee caps. We'll have to wait and see how this affects reward checking.