Senate Passes the Financial Reform Bill - $250K Deposit Insurance Limit Will Be Permanent

POSTED ON THURSDAY, JULY 15, 2010 BY Ken Tumin

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.

Comments

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8 Comments.

Anonymous | Jul 15, 2010 | Comment #1

This is Great!

Anonymous | Jul 15, 2010 | Comment #2

Great, I don't think so. What about the depositors who were lied to about deposit insurance, but will still be not made whole. How come the government agencies can allow banks to run recklessly, back date deposits and cheat the American consumers out of their hard earned money, but not be made accountable? This is a start, but this also happened after that last financial crisis in the early 1930'w and was allowed to happen again in 2008. The government and banks must be held accountable. I am a depositors who is still waiting......

Anonymous | Jul 16, 2010 | Comment #5

Talk about ignorance… look into Freddy Mac and Fanny Mae if you are interested in why we had the financial crisis. Then look into who has been supporting them and pushing them to honor risky loans. It’s the Democrats for the most part and to a small degree the republicans. So it is not any surprise that that this Wall Street bill did nothing to curtail one of the primary problems…risky loans being sold to these two companies. Common get educated This Bill just adds more government layers which means more cost to us, and did nothing to fix what is at the heart of the problem. Look at who Freddy and Fanny donated money to and how much. As far as spending goes Obama is doing very serious damage to us. It’s like giving your teenager your credit card and then having them plan your retirement. You cannot spend your way out of a recession just look at the last two times the US tried that. Scary times we live in, so get educated.

rosie43 | Jul 16, 2010 | Comment #6

Thank you for this great post. Enjoy reading all the useful information and links. Your articles are so very helpful to us savers and spenders.

Anonymous | Jul 16, 2010 | Comment #7

great, now I have another "tool" to use as leverage when negociating a new CD when the old one matures. and I won't need to spread myself around as much which makes the 1099's a bit easier to deal with.

Anonymous | Jul 16, 2010 | Comment #8

this might be something that gets banks to actually raise their rates some even with out "uncle Ben" since now they know you don't have to stay with more than 2 or so and are able to consolidate.

Anonymous | Jul 16, 2010 | Comment #9

Does it mean that if the CD is opened in the name of a family trust with two trustees and two beneficiaries, the CD willbe insured to 1 million (250k per trustee per beneficiary) or ths applied only to the CDs under individuals only?

Anonymous | Jul 17, 2010 | Comment #10

Thank you, Ken, for this update. I have been hearing so many negative things about this banking bill overall . . . . . I actually forgot about this wonderful change until seeing it here. This is going to simplify my life so much . . . and I believe it will make me safer, too. It becomes more difficult as we age to keep track of everything. Now there will be less I have to keep track of. This is great!!

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