New Bank Law
The new "Check 21" banking law will go into effect this fall. Check 21 will pave the way for major changes in the way small firms do business - not only with banks, but with customers and suppliers as well.

The law was designed to facilitate the way banks move checks around the country. Currently, some 40 billion paper checks are shuttled between banks each year by airplane and ground transportation, before being cleared and returned to check writers in the mail. Check 21 will let these lenders transfer and print electronic facsimiles of the checks instead - otherwise known as "substitute checks" or "image-replacement documents."

When the law takes effect Oct. 28, it could theoretically cut the time it takes a check to clear from days to hours.

Businesses will begin to have quicker access to revenue from customers who pay by check. At the same time, however, it means the checks these same businesses write to their own suppliers may also clear more quickly - decreasing the so-called float time that many businesses depend on.

Then there's the matter of paper storage. Under Check 21, businesses (and consumers) are no longer entitled to get back their original checks, which can be destroyed. Businesses can obtain "substitute checks," legal copies about the same size of a business check, or let banks store the copies electronically and only request one when it is needed to settle a dispute. Additional fees will be charged for these services.

New services for small businesses will become available. By year's end, many banks will offer small-business clients the option of "remote deposit" for their checks. This means, for example, an apartment complex manager or florist could sit in her office and use a separate terminal - akin to a credit-card swiping machine - to scan customers' checks directly for deposit, rather than bringing them to the bank. The bank would then move that electronic information instantly.

There are several possible effects of such a scenario. In addition to depositing funds faster, business owners could also get quicker feedback on bad checks.
Initial rollout of new Check 21 technology is expected to start slowly because banks aren't required to electronically process checks under Check 21, only to process and accept substitutes for the original. That means smaller banks may wait before investing heavily in new equipment needed to accomplish truly expedited check processing. But even so, check processing will speed up; instead of shipping paper checks across the country, for instance, a bank will be able to electronically transmit facsimiles to a printing center near the destination bank and the "substitute" checks would arrive sooner.

Meantime, business owners should make a point to ask their local bank about the law, how it will affect them, and any fees they might be charged.

California's new Paid Family Leave insurance program now in effect.

In 2002, legislation was enacted to extend disability compensation to cover individuals who take time off of work to care for a seriously ill child, spouse, parent, or domestic partner, or to bond with a new child. Senate Bill 1661 established the Paid Family Leave insurance program, also known as Family Temporary Disability Insurance program, to be administered by the State Disability Insurance (SDI) program. An estimated 13 million California workers who are covered by the SDI program will also be covered for Paid Family Leave insurance benefits commencing on or after July 1, 2004.

There are also new requirements and benefits under Paid Family Leave (PFL). The Employment Development Department (EDD) has developed a Paid Family Leave brochure (DE 2511) offering details of the program. The law requires employers to provide this brochure to all employees hired on or after January 1, 2004, and to all employees who leave work on or after July 1, 2004, to care for a seriously ill family member or to bond with a new child.

All California workers who are covered by SDI are also covered for PFL benefits. The PFL insurance program provides a maximum of six weeks of Paid Family Leave benefits in a 12-month period. Benefits can be paid for claims that begin on or after July 1, 2004.

State To Enforce Workers' Compensation - Real Estate Brokers Beware
California has indicated it will be taking aggressive action against any real estate broker that does not carry workers' compensation insurance on its salespersons, even if they are independent contractors.

For enforcement purposes, California will access and compare databases of those brokers carrying workers' compensation insurance against a list of all real estate licensees.

Penalties for not carrying workers' compensation insurance on covered workers include: A misdemeanor punishable by up to one year in jail and up to $10,000 in fines, issuance of a stop order prohibiting further operation of the business or use of "employee labor", and other actions based on other statutes.

Credit Scores
For many years, a person's credit report determined if one would be able to obtain a mortgage or auto loan. That's not the case anymore. We are now in the age of the credit score. A credit score measures the likelihood that you will repay the loan, and it is based on the information in your credit report.

The new credit score approach is presumably more reliable than the old subjective methods. It's based on real data and statistics and treats everyone objectively. The previous method was completely subjective. The same credit report could have been reviewed by five different people, each coming up with a different result. If you were lucky, the individual reviewing your credit report didn't care about a few late payments. Now, your credit score would be the same no matter who handles your application.

Information about you - your bill paying history, the number of credit card accounts you have, late payments, collection actions, and how old your outstanding balances are - is obtained from your credit application and credit report. A statistical program is then used to compare your information to the credit history of consumers with similar profiles as yours. Points are given for each factor, which then helps to predict who is most likely to repay a debt. Your credit score is the total number of points you receive from this analysis.

A California company, Fair Isaac Company (FICO) created this credit scoring model. All three of the major credit reporting agencies utilize this model. They each, however, have given their credit score a different name. Equifax uses BEACON, Trans Union uses EMPIRACA and Experian uses TRW/FICO. But no matter the name, it's your FICO score.

In general, credit scores range between 375 and 900. In mortgage lending, 650 to 675 is considered very good. A score of 620 to 650 is not bad, but the lender may require more documentation. A score that is under 620 may be approved but the interest rate will likely be higher, or more of a down payment may be required.

Here are some things you can do to raise your credit score.

Review your credit reports from all three credit bureaus at least once a year and at least two or three months before applying for a loan. If you find an error, notify all three credit report agencies immediately. It can take 30 days to three months, sometimes longer, to change a mistake. To obtain copies of your credit report, you can contact each agency:

Equifax - www.equifax.com (800)-685-1111
Trans Union - www.TUC.com (800)-888-4213
Experian - www.experian.com (888)-397-3742

or you can check out some web sites that offer all three credit reports.

It is always a good practice to pay your bills on time. It is especially critical that you make timely payments before applying for a loan. A late or missed payment in the last few months most likely will lower your score far more than a missed payment several years ago.

A major part of your credit score is the outstanding balance on credit cards as compared to the total credit limit. Jeanne Kelly, founder of the Kelly Group which helps clients improve their credit scores, says it's a good idea to keep your balances at or below 25 percent of the credit card limit.

Moving debt around does not increase your credit score. Many people wrongly believe that paying off one credit card by transferring the balance to another will increase their score. It actually can have the opposite effect.

Don't close unused credit card accounts near loan time. If you have several active credit card accounts along with some that you don't use, the scoring is based on the total credit limit of all of the accounts. By closing the unused accounts you reduce your total credit available and increase the ratio of outstanding debt to the total available credit. For example, if your total credit limit is $10,000 and your outstanding balance is $3,000, your ratio is 30%. If the credit available on the unused accounts is $4,000 and you closed those accounts, you would reduce your total available credit to $6,000. Now that outstanding balance of $3,000 creates a ratio of 50% which would lower your credit score.

On the other hand, don't open new accounts prior to applying for a loan. A new account may lower your score, since you don't have a history of payments on that account. In addition, a new account lowers the average age of all of your accounts, which also reduces your score.

It will take some time to improve your credit score significantly. However, concentrate on paying bills on time, paying down outstanding balances, and not increasing debt.