Friday Grab Bag: Long Arm of the Law Edition

It's Friday again, and that means it's time for the weekly SpendOnLife grab bag! This week we focus on Congress' Go-Go-Gadget arm that is reaching out further and further to protect consumers from the big bad financial industry. It started with the CARD Act, but now extends to regulating debit card fees, creating a new financial protection agency, and requiring full disclosure when data breaches happen.

I'm all for keeping credit card companies in check, but at what point do we say enough government involvement is enough? At what point must consumers be expected to fend for ourselves? After all, we don't want to use the money we save on credit card fees to simply be transferred into Uncle Sam's pockets come tax time.

Here are a few major initiatives headed through Congress now:

Federal Reserve to ban overdraft fees

The Fed will prohibit banks from charging overdraft fees on ATM and debit cards, beginning in July of next year. Unless a customer has explicitly agreed to pay extra for the privilege of exceeding an account balance, the bank will no longer be able to charge one. As Fed Chairman Ben Bernanke says, "The final overdraft rules represent an important step forward in consumer protection." In addition to this edict from the Fed, two separate bills are working their way through Congress to restrict bank overdraft fees. You can view those bills here and here.

The Consumer Financial Protection Agency of 2009

This newly created agency would continue work where the CARD Act left off. The creation of a financial watchdog agency was originally conceived by Elizabeth Warren back in 2007, when the sub-prime mortgages started to fall like dominoes. The proposed bill for a Consumer Financial Protection Agency (or CFPA) was introduced to Congress this past July. This agency would protect consumers from deceptive practices from the mortgage, credit, and banking industry. Those against the bill say that there are already plenty of laws in place to protect consumers; do we really need to create a new group that may actually bring about more foul play from the financial industry (as the CARD Act has)?

Comes down to party lines

We all know that credit card companies have been implementing blatant interest rate hikes in anticipation of having their hands tied by the CARD Act next year. So Senator Chris Dodd (D-Conn) proposed freezing interest rate and fee hikes now, until the full protection of the CARD Act kicks in. When it came time for a vote, Senator Thad Cochran (R-Miss) stood up to say, "On behalf of several senators on this side of the aisle, I object." And that was that.

National Data-Breach Notification Bill in the works

This newly proposed bill would require any business engaged in interstate commerce (including government agencies) whose sensitive data has been breached to notify all persons affected, as soon as possible. Data breaches occur when hackers get a hold of a company's sensitive and personal data they store from their customers, like what happened to Heartland. Once these hackers have millions of credit card number, names, and other personal information, they can sell them on the black market to other identity thieves. Those whose data was stolen run the high risk of a wrecked credit rating or fraudulent credit card charges. This bill requires companies to notify you immediately if your sensitive data is no longer safe so you can have time to do something about it, such as enroll in a credit monitoring service or be more vigilant for fraudulent activity on your bank statements. 

Drama over Federal Reserve regional bank presidents

Should Congress get involved in choosing Federal Reserve bank presidents? Currently, private-sector banks choose two-thirds of presidents, and the Fed’s Washington-based governors choose one-third. Says a former Fed official: "The way the board members of the regional banks are chosen is really an anachronism" dating back to 1913 when the law that created the Federal Reserve was passed. "I don’t see any great danger in modernizing it." Many predict that this issue will become an intensely heated battle over the next few months.

Ron Paul's "Audit the Fed" Bill making progress

Congressman Paul's bill would give the Government Accountability Office the power to conduct a thorough audit of the Fed's entire $2 trillion balance sheet to see  exactly what it’s doing with taxpayer money. The Federal Reserve Transparency Act of 2009 (H.R. 1207) will go to vote shortly after the Thanksgiving holiday.