Safeguards for Electronic Banking
In banking as in so many other areas, the trend is clear: We continue to move steadily away from traditional paper transactions toward high-tech means of conducting our business. It will not happen overnight, though, and even the most technophobic among us should be assured that there are some federal laws and regulations in place that will make the transition easier and more secure.
Electronic Fund Transfer Act
The methods for electronic fund transfers (EFTs) are already commonplace for many bank customers. They include ATMs, debit or check cards, preauthorized deposits and withdrawals, and telephone transfers. The federal Electronic Fund Transfer Act answers some basic questions about using EFT services. The Act is especially important when things go wrong, providing rules for the correction of errors and dealing with loss or theft.
Thoughts on our New Federal Bankruptcy Law
On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Six months after that date (October 19, 2005) it will become fully effective. You will be hearing a great deal about BAPCA in the next several months. My prediction is that most of what you will hear will be coming from the consumer advocate opponents of this bill, however they are a little late and they never were a real match for the lobbying efforts of the major financial institutions and credit card companies that successfully changed our bankruptcy law as we have known it–while dramatically improving their bottom lines.
Business Alert: New Overtime Regulations
The Department of Labor recently issued sweeping new regulations on the eligibility of workers, especially “white-collar” employees, for overtime pay. Federal law requires that overtime be paid for nonexempt employees at a rate of one and one-half of regular pay for all hours worked over 40 hours in a week. To be “exempt” is to be ineligible for overtime. Employers should update their employee handbooks to reflect the new law on overtime pay.
Withdrawal Rules for Inherited IRAS
The IRS has established rules for determining the minimum amount that must be withdrawn each year from an inherited traditional IRA. When an individual inherits an IRA, the rules differ somewhat depending on whether the individual was the decedent’s spouse. In any case, there is a substantial incentive for following the rules, because the failure to take minimum withdrawals results in a stiff penalty equal to 50% of the shortage. Since complying with the rules can be a convoluted process and a mistake could be costly, it makes sense to be guided by professional advice.
IRS Gets Tough on Estate Tax Fraud
Prosecutions for filing a false Form 706, the federal estate tax return, have been rare. Recently, a federal prosecutor announced a guilty plea by an individual charged with estate tax fraud. The guilty plea may well be a harbinger of a new “get tough” policy by the IRS in an area that up until now has not had a reputation for vigorous criminal enforcement.
The defendant in this case was the executor of her mother’s estate. She admitted that she intentionally filed a Form 706 that omitted assets worth about $400,000 that should have been included in the estate. The executor could face a term of imprisonment, followed by a term of supervised release, and a large fine.
Technology and the Law
Lost Database Is Not Insured
“If you can’t reach out and touch it, it is not insured.” That was the gist of a court’s ruling in a lawsuit brought by a company that lost a large amount of electronically stored data when an employee inadvertently pressed the “delete” key on a keyboard. The company looked to its insurer to cover the expenses for restoring the data and to recover lost income caused by the disruption. The insurer denied coverage on the basis of policy language that limited coverage to a “direct physical loss of or damage to” covered property.
Estate Planning and Your Highly Appreciated Residence
The absolute basics on one’s estate planning are to have a valid living Trust, a backup Will for that Trust and a Medical Durable Power of Attorney. These documents allow for a predictable handling of one’s estate and the avoidance of the expense, delays and public exposure involved in a Probate. A Medical Durable Power of Attorney allows one to avoid unnecessary medical care and expense if a loved one determines that one cannot return to a decent and respectable life following a serious medical condition.
“Cybersmear” Lawsuits
The free-wheeling give and take in various online forums is leading to more defamation claims by individuals and businesses. Given that so many online speakers are anonymous, however, Internet service providers sometimes become trapped between the speaker and his offended subject. Before the alleged victim can seek redress, the perpetrator must be identified, and providers often resist divulging such information. Courts are still in the early stages of setting rules for these legal contests.
Homeowner’s Insurance: The Devil Resides in the Details
Reading and understanding all of the language in a homeowners’ insurance policy are not formalities to be skipped over while searching for the signature line. As with any contract, the fine print can have real and lasting consequences, and its contents will control over any contradictory verbal assurances. Taking the time to understand the terms of their policies might have headed off bad outcomes for homeowners in two recent cases.
Capped Commissions
As a sales representative for a computer software company, Richard received an annual salary and sales commissions as determined by a compensation plan that was part of his contract. There was a specific formula for how commissions were to be calculated, but language in the plan gave the company broad authority to make a final decision about compensation and to change the plan at any time. For sales commissions, in particular, the employer reserved the right to review any transaction generating a commission beyond a salesman’s annual quota and to determine the “appropriate treatment” of it.
