Headlines
- Texas Attorney General Charges Home Loan Servicer With Violating State Debt Collection Laws
North Texas e-News 31 Aug 2010
Texas Attorney General Greg Abbott has charged American Home Mortgage Servicing Inc. (AHMS) with using illegal debt collection tactics and improperly misleading struggling homeowners. According to investigators, AHMS agents used aggressive and unlawful tactics to collect payments and failed to credit homeowners who remitted payments on time. AHMS agents also have been accused of falsely claiming that homeowners did not make payments on time in order to justify profitable late fees or escrow accounts. They also reportedly failed to properly credit homeowners after withdrawing funds from the homeowners' checking accounts. This unlawful conduct often led to homeowners defaulting on their loans, which led to foreclosure proceedings. The attorney general has charged AHMS with multiple violations of the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act (DTPA), and the state is seeking civil penalties of up to $20,000 per violation of the DTPA.
- Be Skeptical of Health-Care Credit Cards
Washington Post 31 Aug 2010
Thousands of dentists are offering health-care credit cards with tempting payment options, but many of the card companies and some of the practitioners who offer the cards are under scrutiny for deceptive and sometimes fraudulent practices. New York Attorney General Andrew Cuomo has initiated an investigation into the health-care lending industry after receiving hundreds of complaints, and Minnesota Attorney General Lori Swanson sued two clinics last year for signing patients up for credit cards without their consent and charging for services not yet provided. A California law that took effect in January, meanwhile, prohibits dentists from charging fees before services are performed. According to patient advocates and investors, people often are unaware that they are applying for a credit card; and more unpleasant surprises arrive when they get they card. Consumers who do not pay off the debt within the specified time frame often are slapped with interest charges exceeding 25 percent on the entire amount, and some have discovered charges for work that had not been done yet. Teaser and promotional rates are still allowed under the new credit card regulations, which also do not address the issue of charging prior to the completion of services. More people are struggling to cover medical bills as health care costs continue to rise, and the best option is the simplest: as for an extended payment plan, which many providers will offer without high interest rates.
- Board Reconsiders Stand Against Payday Loans
Sun Herald 30 Aug 2010
In Missouri, some members of the Jackson County Board of Supervisors have been persuaded by payday lending advocates, legislators, and state financial officials to reconsider their stand against the payday industry. Speaking on behalf of a state association for quick-cash lenders, Scott Putnam told the board that restricting the high amount of interest a fast-money store could charge would put them out of business, ultimately destroying 4,000 jobs across Mississippi. He touted the loans as a cheaper option than repeated overdraft fees and said people who are trying to shutter them simply do not understand them. The supervisors had voted to ask that the Legislature allow laws to sunset that support high-interest loans and then cap annual interest rates at 36 percent, but they rescinded that vote and plan to look at the issue more thoroughly. Still, Supervisor Melton Harris described the peril of cyclical debt often caused by repeated use of payday loans and urged his fellow supervisors to not change their minds on the issue.
- Furor Erupts Over Colorado Payday-Lending Regulations
Denver Post 30 Aug 2010
Controversy has arisen in Colorado surrounding recently passed payday lending regulations, as two Democratic lawmakers behind the overhaul accuse the Republican attorney general's staff of favoring lenders when it comes to fees. A.G. John Suthers' office is tasked with devising regulations that cap what lenders can charge on six-month loans; and Democrat Stan Garnett, who is engaged in an election bid against Suthers, has accused Suthers of improperly accepting campaign donations from lenders. Sen. Rollie Heath (D-Boulder) is defending Suthers' office, saying that the legislation is exactly as it was intended to be. Denver Democrats Rep. Mark Ferrandino and Sen. Chris Romer, who sponsored the bill, disagree. Their original intent with the legislation was to require lenders to refund a portion of the loan-origination fee to borrowers who repay their loans on time, but the modified and final version of the bill said the fee would not be refundable. The whole of the legislation became tough to decipher as a result of contradicting amendments that were added in the final days.
- 2 New Federal Programs to Help Borrowers Pay Their Mortgages
New York Times 30 Aug 2010
The Federal Housing Administration in the next few weeks will launch a refinancing program to help struggling borrowers pay their home loans and also offer an emergency loan initiative to help jobless homeowners to stay put. Record foreclosures have swollen the supply of for-sale homes, causing residential prices to slide. Meanwhile, lower prices and favorable borrowing costs have not been able to rejuvenate the market for new homes. "We are going to continue to make sure folks have access to home ownership," Housing Secretary Shaun Donovan said of the new efforts. However, he added that it is too soon to say whether the Obama administration would revive the $8,000 tax credit for first-time home buyers that expired on April 30. However, Florida Gov. Charlie Crist -- whose state has one of the highest rates of foreclosure in the nation -- argued that bringing back the tax incentive would "help enormously" in the campaign to mitigate foreclosures and perk up the economy. Both men made their remarks on CNN's "State of the Union" program.
- Late Payments on Auto Loans Fall in 2nd Quarter
Associated Press 30 Aug 2010
TransUnion reports that the rate of auto loan payments 60 days or more past due slipped to 0.53 percent of outstanding auto loans in the second quarter, compared to 0.73 percent a year ago. The drop in the auto loan delinquency rate mirrors declines in late credit card and mortgage payments. Separately, new loans written during the second quarter rose 18.7 percent, reflecting an uptick in car purchases and a move on buyers' parts to take advantage of automakers' aggressive sales promotions. Delinquency rates rose in three states but were below the national average in 28 states and the District of Columbia. According to Peter Turek, automotive vice president in TransUnion's financial services group, the lingering effects of the recession will have a bigger impact in some regions given the close correlation between unemployment and auto loan payments. TransUnion expects the auto delinquency rate to rise to about 0.6 percent by year-end.
- State Payday Loan Fight a Madigan Family Affair
Chicago Sun-Times 30 Aug 2010
Efforts to crack down on payday lending in Illinois were rewarded last spring with the passage of a law setting new limits on the interest rates lenders charge and expanding the state's tracking system to ensure that consumers are not borrowing more than they can repay. At the forefront of the legislation were members of the Madigan family: state Attorney General Lisa Madigan, whose staff drafted the measure; her father, House Speaker Michael Madigan (D-Chicago), the Illinois Democratic Party chairman, who endorsed the bill and voted for it; and lobbyist Jordan Matyas, who helped the A.G.'s staff write the legislation and has since married the speaker's daughter. Now, Matyas' client, Veritec Solutions, which will track payday loans and other unsecured loans for the state of Illinois, stands to make a large profit. The company expects its business to grow by as much as 900 percent after the new legislation takes effect on March 21. Payday lenders have circumvented previous restrictions on interest rates by lengthening the terms of the loans -- meaning they could charge more and also did not have to report to Veritec -- and Veritec hired Matyas to help address this loophole. The new legislation will create two new kinds of short-term consumer loans, set new caps on interest rates, and require short-term consumer lenders to report all of their loans to Veritec in order to help state officials ensure that consumers do not borrow more than 25 percent of their gross monthly income.
- Credit-Card Law Is Working Well
Wall Street Journal 29 Aug 2010
Rep. Carolyn Maloney (D-N.Y.) defends the integrity of credit card reforms she introduced, in a letter to the editor published in the New York Times. The changes, she writes, have helped lower defaults in the six months since they were enacted. She adds that consumers are paying off their credit card debt, spurred by new rules requiring statements to indicate how long it will take to pay off balances. Maloney declares that the reforms both protect consumers and foster competition among lenders by banning retroactive rate hikes on existing balances, providing advance notice of rate increases so that consumers can comparison shop, and restricting fine-print tactics deemed "unfair," "deceptive," and "anticompetitive" by the Federal Reserve.
- Beware Of That New Credit-Card Offer
Wall Street Journal 29 Aug 2010
Synovate reports a 256 percent surge in mailings for "professional" credit cards to 47 million in the first quarter from the same period in 2009. These small business or corporate accounts now are being offered to ordinary consumers, and consumer advocates are urging them to use caution because professional cards are not covered by the Card Act. As such, issuers can apply payments to low-rate balances first, hike rates on existing balances if consumers fall behind in payments to another creditor, impose large fees for exceeding credit limits, and alter card terms without advance notice, among other things. In a move to shift customers away from cards that are protected under the new reforms and toward unprotected cards, issuers have eased requirements for professional cards; the Ink From Chase Cash Business Card, for instance, now asks applicants to check a box stating "Yes, I am a business owner" or "Yes, I am a business professional with business expenses" instead of requiring the company's name, address, and federal employer identification number. Center for Responsible Lending senior researcher Josh Frank says, "By pushing professional cards to consumers who otherwise wouldn't want them, card issuers can get around some of the provisions of the Card Act." And Beverly Harzog of Cardratings.com warns that "a lot of consumers really don't know the difference, and some of the wording on the offers can be ambiguous."
- The New Consumer Bureau: a To-Do List
Wall Street Journal 28 Aug 2010
The new Consumer Financial Protection Bureau must quickly begin writing rules to regulate checking accounts, credit cards, and education and home loans if it hopes to stave off critics. The bureau will first have to study reverse mortgages, private education-loan practices, why consumers who buy credit scores get numbers different from the ones lenders get, and whether arbitration is the right way to settle financial disputes, according to congressional mandates. Experts have suggested that since those topics could take years to examine, the bureau should consider addressing credit report errors and the process consumers must use to correct them. Consumer advocates say the credit reporting agencies do not play referee and simply defer to lenders, and creditors that often disagree with complaints force consumers to take further action. Other topics that should be addressed include extending built-in protections against fraudulent charges to prepaid cards, not just credit and debit cards; improving the transparency of student loans; speeding up complaint response times related to financial issues; and other protections against other financial practices.
