Worth Noting

"Cash for clunkers" receives additional funding

The Car Allowance Rebate System (popularly known as "cash for clunkers") was almost a victim of its own success. The program, which provides $3,500 or $4,500 vouchers that can be used toward the purchase or lease of a fuel-efficient new vehicle when an old "gas guzzler" is traded in, burned through its initial $1 billion funding well short of its projected expiration of November 1, 2009. On Friday, President Obama signed legislation that provides an additional $2 billion in funding for the program, an amount estimated to be enough to sustain current activity levels through the end of August.

The IRS also issued an alert advising dealerships that funds received under the program are includible in their gross income.

For up-to-date information on the Car Allowance Rebate System, see http://www.cars.gov/.

SEC rule on short selling

The SEC has made permanent a rule requiring that short sellers complete a trade within four days. Aggregated information on short positions in individual stocks will become available on self-regulatory organizations' web sites (such as FINRA) within a month of the trade, but short positions taken by individual money managers, such as hedge funds, will not be disclosed. And twice a month, the SEC also will disclose failed short trades, in which stock involved in a short sale is supposedly borrowed but never replaced. Failed short trades have raised questions about a possible connection to abusive so-called "naked" short selling (selling short without actually borrowing the stock) which may have contributed to the demise of Lehman Brothers last year.

A full explanation can be found here.

New Income-Based Repayment (IBR) plan for federal student loans

On July 1, the federal government's new Income-Based Repayment (IBR) plan for federal student loans went into effect. Under this program, a borrower's monthly student loan payments will be based on his or her income and family size. More specifically, annual loan payments will be 15% of the difference between a borrower's gross income and 150% of the federal poverty level (the latter depends on family size and state of residence). Monthly payments are then calculated as one-twelfth of that amount. After 25 years of qualifying payments, the principal loan balance may be forgiven.

The program is open to graduates who have a Stafford, Graduate PLUS, or consolidation student loan made under either the William D. Ford Federal Direct Loan or Federal Family Education Loan programs. The loans could be for undergraduate, graduate, or professional studies, as well as for job training. To enroll in the plan, borrowers should contact their lender.

Details are available on the studentaid.ed.gov website.

--see disclaimer below--

The Consumer Assistance to Recycle and Save (CARS) Act of 2009

President signs the Consumer Assistance to Recycle and Save (CARS) Act of 2009

On June 19, 2009, as part of a military appropriations bill, Congress passed the Consumer Assistance to Recycle and Save (CARS) Act of 2009. President Obama signed the bill on June 24, 2009.

The CARS Act of 2009, also known as the Cash for Clunkers bill, provides consumers with an incentive (in the form of a $3,500 or $4,500 voucher) to trade in an old gas guzzler (foreign or domestic) against the purchase or lease price of a more fuel-efficient new vehicle. The purchase or lease must be made between July 1 and November 1, 2009. To qualify, a new vehicle lease must be for at least a 5 year period. The National Highway Traffic Safety Administration (NHTSA) is referring to this program as the "Car Allowance Rebate System" at their website www.cars.gov.

To be eligible for trade in, a vehicle must

• Be in drivable condition,
• Have been continuously insured to the same owner for not less than a year at the time of trade,
• Have been manufactured after 1984,
• Generally, have a combined fuel economy value of 18 mpg or less.

The new vehicle must retail for less than $45,000 and must have a combined fuel economy value of at least 22 mpg for cars (18 mpg for category 1 trucks, which generally include SUVs, minivans, and pickup trucks, under 6,000 pounds).

Under the terms of the program, an electronic voucher will be issued directly to participating dealers that may be used to offset the purchase or lease price. The voucher will be worth:

• $3,500 if the combined fuel economy value of the new vehicle is at least 4 mpg higher than that of the eligible trade-in (if the new vehicle is a category 1 truck, the combined fuel economy value must be at least 2 mpg higher than that of the eligible trade-in vehicle)
• $4,500 if the combined fuel economy of the new vehicle is at least 10 mpg greater than that of the trade-in car (if the new vehicle is a category 1 truck, the combined fuel economy value must be at least 5 mpg higher than that of the eligible trade-in vehicle).

Since the dealer accepting the trade-in must destroy the vehicle, the only trade-in value of the vehicle will be the voucher value. As a result, the owner of a vehicle with a trade in value greater than the voucher amount will not benefit from the program.

Note: Special rules apply to heavier categories of trucks.

--See Disclaimer Below--