Home » Bankruptcy and Predatory Lending

Archive for the ‘Bankruptcy and Predatory Lending’ Category

« Older Entries
Monday, February 22nd, 2010

New Consumer Credit Card Rules Take Effect

Good news for credit card holders—the final set of provisions under the Credit Card Act of 2009 take effect today, offering some important consumer protections.

For those who use credit cards responsibly, the new laws will provide more time to pay bills and less likelihood for fees, penalties and interest rate changes. For those struggling with credit cards or facing bankruptcy, the laws may prevent fees from adding up and provide a little breathing room.

Here's a look at some of the key provisions that are now in effect:

  • Expanded Statements: Your monthly card statement will have a few new features, including broken down fees and penalties and a chart showing how long it will take to pay off the charges making only the minimum payment (and how much it will cost). Your statement will also arrive at least 21 days before the due date, a full week earlier.
  • 45 Day Notices: Your credit card issuer must give advance warning of any changes to your account, particularly interest rate changes. This will give you more time to consider the changes, negotiate with the credit card company, or, if necessary, pay off the balance and close the account.
  • No Rate Increases for 1 Year: The new law prohibits "arbitrary" rate increases for the first year you hold an account. Lawmakers hope this will curb "universal defaults", in which one card issuer raises interest rates due to late payment on a card issued by a different bank. Some actions could still trigger a rate increase, such as being more than 60 days delinquent.
  • Over-Limit Opt-in: You will only be charged over-limit fees if you agree to it. While this may seem like a blessing, it also means more transactions may be declined.

While these changes went into effect, many cardholders have seen changes to their account over the past year, since the law was introduced. Credit card companies have been preparing for the law to go into effect, and in many cases have not been acting in consumers' best interest.

Many credit card companies have been raising interest rates and introducing new annual fess (which are permitted in the new law) in order to prepare for the revenue losses that could come under the Credit CARD Act.

For more information, visit the Federal Reserve's credit card site.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , , ,
Posted in Bankruptcy and Predatory Lending, Credit and Bankruptcy | No Comments »

Saturday, December 5th, 2009

FDIC: One Quarter of Americans Unbanked or Underbanked

At the beginning of 2009, the Federal Deposit Insurance Corporation (FDIC) initiated an examination of the unbanked and underbanked people of the U.S. as part of Census data collection.

The report was released this week, and shows some worrying trends about financial institution usage, particularly among minority populations.

  • Unbanked: This term refers to people who have neither checking nor savings accounts, and who rely primarily on non-bank financial institutions (like check cashing services, payday lenders, refund anticipation loans, etc.) for their financial needs.
  • Underbanked: This refers to people who have either a checking or savings account, but rely on alternative financial sources at least once or twice a year.

The Banking Study

According to the executive summary of the report, its goal was to address a gap in reliable data on the number of unbanked and underbanked households in the U.S.

The issue matters because those without bank accounts lose out on access to lower-cost financial management. Bank use can also permit people to build credit histories and establish financial stability – in other words, it’s in the best interest of the U.S. as a whole to improve access to banks for everyone.

Here’s a look at the hard numbers:

  • 25.6 percent of American households (about 60 million adults) are unbanked or underbanked.
  • A breakdown by race shows that 43.3 percent of Hispanic households, 44.5 percent of American Indian/Alaskan households and nearly 54 percent of black households are unbanked or underbanked.
  • At least 71 percent of un- and underbanked households have incomes of $30,000 per year or less.
  • The most common reason people offered for not having a bank account was feeling that they did not have enough money to justify one.
  • About two thirds of unbanked households use one or more of these financial tools: non-bank money orders & check cashing, payday loans, pawn shops, rent-to-own agreements and refund anticipation loans.
  • About one quarter of unbanked households use none of the aforementioned services, which suggests that cash is their go-to commerce tool.

Opening and maintaining bank accounts is an important step toward financial stability for individuals and households. On a larger level, the high numbers of unbanked Americans can be seen as one symptom of our country’s varied economic woes.

Additional Resources

Full FDIC Report (PDF)

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , ,
Posted in Bankruptcy and Predatory Lending | 6 Comments »

Thursday, November 12th, 2009

Federal Reserve Sets Limits for Debit Card Fees

Debit card users will have to opt-in to overdraft fees for ATM withdrawals and one-time purchases, according to a new set of ruled unveiled by the Federal Reserve Board.

The measures, which will take effect July 1, 2010, are part of a series of decision issued by the nation's central bank to limit abusive practices by banks announced over the past year.

Authorizing Fees

Under the new rules, all debit card holders must be given notice of the bank's policies, including those on overdraft fees, in plain language. Cardholders can sign up to be charged fees or not, and banks cannot change the terms of service afterward.

Banks will still be allowed to charge overdraft fees for recurring debt card purchases, such as recurring utility bills that are automatically charged, as well as on bounced checks.

The measure is mainly aimed at one-time debit card purchases or ATM withdrawals that can often result in fees greater than the purchase amount.

Protecting Consumers

"The final overdraft rules represent an important step forward in consumer protection," said Federal Reserve Chairman Ben S. Bernanke in a press release. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."

Declining Transactions?

Of course, those who overdraw their bank accounts won't be given free money by their banks.

Overdraft protection allows banking customers to make payments even when their funds are limited, and are charged a fee for the convenience.

Those who opt-out of overdraft protection may instead see their transactions declined if they attempt debit card purchases when their accounts are low. However, any overdraft transactions approved by the bank cannot result in fees.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , ,
Posted in Bankruptcy and Predatory Lending, Financial Literacy | 6 Comments »

Saturday, October 17th, 2009

More Seniors Struggling with Debt

A recent Newsweek article highlights the problem of older Americans struggling with debt. It seems that those aged 55 and older have become the group most likely to file for bankruptcy.

Retirement and Debt

The reasons for senior citizens' financial struggles may not be immediately obvious, but they are telling. Consider these factors that can sap a nest egg:

  • Credit card debt. This comes as no surprise – many Americans are strapped with serious credit card debt. This is part of the reason why the Credit CARD Act of 2009 was passed.
  • Large mortgages & home equity loans. Those who refinanced their mortgages during the real estate boom – whether to redecorate, fund children’s education, or pay down other debts – may find themselves faced with massive mortgage payments. In some cases, seniors may owe more on a house than it’s worth.
  • Cash-strapped kids. Like it or not, you may be contributing to your parents’ financial woes. In many cases, parents try to help their children financially even when they can’t afford to do so. Or they may be too embarrassed to refuse a child’s request for aid.
  • An end to income. Once you stop working, the paychecks stop flowing in. This isn’t problematic if you’ve got enough money socked away for your golden years, but since the stock market’s crash, many nest eggs aren’t quite as hefty as they once were. And paying down debt without regular paychecks can be difficult.
  • Predatory lending products. Unfortunately, nobody is immune to financial disasters like payday loans. People on fixed incomes (like many senior citizens) can find such loans especially damaging, since sky-high interest rates make them difficult to repay.

Getting Help for Yourself or a Loved One

The good news is that helpful agencies are available to provide credit counseling or debt management to those in need.

The bad news is that many con artists are also out there, ready to take money from whomever they can.

Check out various credit counseling services in your area (The Association of Independent Consumer Credit Counseling Agencies has a searchable database of accredited firms) and visit the Better Business Bureau’s website to check out any operation you discover.

If you think an older person in your life may need debt assistance but not have access to online resources, consider offering your skills to that person.

Additional Resources

The Plastic Safety Net (PDF)

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , , ,
Posted in Bankruptcy and Predatory Lending | 2 Comments »

Tuesday, September 15th, 2009

FTC’s Ban on Robocalls in Effect

The FTC reported last week that its rule prohibiting automated phone calls about vehicle maintenance took effect September 1, 2009. What does that mean for you? Hopefully, one more way to prevent scammers from tricking you into giving away your money.

The Scam: Threats of Ending Car Warranty

According to the FTC, the scam worked like this:

  • Customers received pre-recorded phone calls suggesting that their vehicles’ warranties were about to expire.
  • Scammers then prompted victims to pay for pricey and unnecessary car service contracts unrelated to their original warranties.

Thanks to legal action taken by the Federal Trade Commission, such telephone calls are no longer legal, and the companies accused of setting them up could face criminal penalties.

Who’s Involved and the Penalties They’ll Face

The chief company named by the FTC is Transcontinental Warranty, Inc. It and its parent company have reportedly been banned from making any more prerecorded calls. The first of September was significant to this case because it marked the beginning of the FTC’s planned enforcement of the ban on prerecorded commercial calls enacted a year ago.

Some organizations are exempted from the prerecorded call ban, though. These include:

  • Groups delivering strictly informational messages
  • Politicians
  • Banks
  • Telephone Carriers
  • Most charitable organizations

Debtors should know that debt collection agencies fall under the "informational" group, and will still be allowed make make automated calls. Debtors may only be able to end these calls by making arrangements to repay the debt or by filing bankruptcy.

Groups that choose to ignore the restriction could face fines up to $16,000 per call.  Telemarketers may be able to place automated calls to customers who opt-in to receive them.

It seems that Transcontinental has temporarily been excused from paying the proposed settlement ($24 million) because the company lacks sufficient funds to make payments, but that information is subject to change.

Your Consumer Rights

The Federal Trade Commission and other government entities exist to protect you the consumer from deceptive and unfair business practices. If you suspect you have been victimized by an illegal scam, consider telling a lawyer or filing a complaint online with the FTC.

To learn more about what types of protection you can expect, check out this page on your consumer rights. Or speak with a local attorney about bankruptcy protections.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: ,
Posted in Bankruptcy and Predatory Lending, Financial Literacy | No Comments »

Saturday, August 8th, 2009

Watch out for the Door-to-Door Magazine Scam

The Better Business Bureau has recently warned about a door-to-door magazine sales scam affecting many areas of the country.

What You’ll See

The report indicates that the scam includes these elements:

  • High-school and college-age individuals traveling around neighborhoods offering subscriptions to various magazines.
  • High pressure or misleading sales pitches, which may include the assertion that the seller is trying to raise money for a school trip, a charity or for troops in Iraq.
  • Failure to deliver any magazines after the transaction is completed.

The BBB has reportedly received 1,100 complaints about such scams and has identified the companies Trinity Public Relations, Seedtime and Prestige Sales, LLC as involved with similar scams.

What to Do

If a door-to-door magazine salesperson entices you to purchase a subscription, act with caution.

Luckily, the BBB has several consumer protections in place to make sure you aren’t bilked out of hundreds of dollars:

  • Before writing a check or completing a magazine subscription form, you can check out the business in question for free at the BBB's Web site.
  • Thanks to the Fair Trade Commission’s three-day cooling-off rule, you can cancel purchases over $25 that you made at your home or a place other than the seller’s permanent business location within three days. Your receipt should come with a cancellation form, which you can fill out and return to the vendor. You should get a refund within 10 days of the company’s receipt of your cancellation notice.
  • If you think you’ve been victimized and you’re past the cooling-off period, consider filling out a complaint at the BBB’s Web site, which could prompt an investigation.
  • Know that some door-to-door companies already have “F” grades from the BBB. These include Omni Horizons Inc., Greater Image, Inc., True Visions Inc. and Fresh Start Opportunities.

And don’t think that your complaint won’t matter – the BBB takes such matters seriously.

It has found, too, that besides engaging in deceptive selling practices, some of the companies were mistreating their student workers by withholding wages, forcing them to work long hours and causing substandard living conditions.

--Has a scam resulted in you going broke? Consider the bankruptcy option.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: ,
Posted in Bankruptcy and Predatory Lending | No Comments »

Wednesday, July 29th, 2009

How to Not Get Bamboozled by Banks

Even though lenders are no longer throwing themselves at consumers and credit is a bit tighter than it was a couple years ago, I think it’s worthwhile to refresh everyone’s memory on warning signs of predatory lending.

Here's what to look out for when you're heading to purchase big-ticket items like cars, appliances and houses:

Warning #1:     Excessive Fees

Excessive fees can be disguised in a variety of ways, depending on what type of loan you’re seeking:

  • Credit cards: Account activation fees, membership fees, service charges, limit-extending fees, yearly fees – if your bill or credit card agreement is littered with similar costs, beware. This is a classic sign of predatory lending. In some cases, the fees charged greatly outstrip the cost of a given service.
  • Home loans: While some points and fees are standard procedure for home loans, exceeding the norm in such charges is considered predatory. To determine whether your lender is charging excessive fees, research typical fees in your area and take a look at your credit report or score (www.annualcreditreport.com).

Warning #2:     Prepayment Penalties

These are most common with mortgages, particularly subprime mortgages .

Generally, if you’re charged a penalty of some kind for repaying part of your loan before its due date, the loan is usually considered to be predatory.

Such penalties prevent you (the borrower) from saving money by minimizing the amount of interest you pay over the life of your loan.

Warning #3:     Out-of-Control Interest Rates

In general, your credit score will determine the kind of interest rates you can expect to pay – higher scores yield lower interest rates. But even for those with weak credit, some interest rates are unacceptably high.

  • Credit cards: Rates for cards vary widely, but many fall within the 15 – 22 percent range. If you’re paying much more than this, especially because of universal default or unannounced changes to your terms, you may need to contact your creditor.
  • Payday loans: These short-term, high-interest loans are infamous for having excessive interest rates. Yearly costs can be as much as 400%, which is why many states have introduced or passed legislation restricting them.
  • Credit card cash advances: These typically have wild interest rates – and are often mailed with your bill to look like personal checks. Avoid them if at all possible.

Warning #4:     Large Print and Very Small Print

Be wary of exciting “bargains” advertised in big print.

They’re usually followed by disclaimers, exceptions, costs, fees and more.

This may not be the most aggressive predatory lending technique, but it can trick those who aren’t paying careful enough attention.

Luckily, part of the Credit Cardholders’ Bill of Rights includes regulations for font size in credit card agreements.

--Have you already been "bamboozled by banks"? Learn about filing bankruptcy

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , ,
Posted in Bankruptcy and Predatory Lending | No Comments »

Wednesday, July 22nd, 2009

Ben Stein and Not-So-Free Credit Scores

The blogosphere has been all over Ben Stein, a financial guru, spokesperson and New York Times columnist, over his involvement with what appears to be a slightly shady "credit-score" site, FreeScore.com.

In advertisements, Stein shills for the group which claim to offer you a free credit score. As several blogs point out:

  1. Your credit score doesn't tell the full story. While your credit score is important, you'll need more information if you want to take action to improve. In order to see what's bringing your credit score down, you'll need to see your credit report, which includes any claims against you.
  2. FreeScore.com isn't actually free. After giving you a "score" for free, they begin charging you monthly fees.

While some people may want to check their credit score monthly, in most cases you don't need this kind of scrutiny. In fact, simply requesting your credit score or credit report can affect your credit score.

You are entitled to a free annual credit report from the government. And the government makes one available at exactly one - and only one! - Web site: Annualcreditreport.com.

Don't be fooled by similar or imitator sites.

If you're in debt and trying to get out, you may become a target of predatory merchants. These groups are looking to make a quick buck off your troubles.

Avoid this by informing yourself, reading the fine print and sticking to reputable, trustworthy sites and sources.

Trying to repair your credit but can't keep up with the bills? Consider filing bankruptcy.

Filing bankruptcy doesn't have to ruin your credit for life. Learn more: Credit After Bankruptcy.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , , , ,
Posted in Bankruptcy and Predatory Lending | 3 Comments »

Monday, June 15th, 2009

Consumer Credit Fairness Act = Hope for Low-Interest Loans?

As too many Americans know, loans with monstrous interest rates can lead to what seems like endless rounds of debt and bills.

And, in some cases, excessive interest rates can push struggling consumers to filing bankruptcy.

The “Consumer Credit Fairness Act,” a bill now before the Senate Judiciary Committee, would give consumers a little help for dealing with such costly loans.

Proposed Terms of the Consumer Credit Fairness Act

As it now stands, the proposed legislation would do two major things for Americans:

  • Limit creditors’ collection rights in bankruptcy: Lenders whose loans came with excessive interest rates (defined by the bill as 15 percent higher than the current yield on a 30-year U.S. Treasury bond) would come last on the list of creditors to be repaid in bankruptcy court.
  • Improve consumers’ chances of bargaining for lower rates: Because of the above change, consumers would likely be able to negotiate lower interest rates with their creditors instead of filing for bankruptcy.

How the Consumer Credit Fairness Act Could Help You

Imagine this scenario: you’ve got one or more loans with interest rates that are through the roof (credit cards, car loan, payday loan, overdraft loan, etc.).

Unless you can get your creditors to lower their interest rates, there’s no way you’ll be able to continue making payments and you’ll have to file for bankruptcy. So you call up your creditor:

  • YOU: Hello, I’d like you to lower my interest rates.
  • CREDITOR: Why should I do that? That means I’d collect less moola from you, a struggling consumer.
  • YOU: Well, you see, if you don’t lower my rates, I’ll file bankruptcy. And, thanks to the Consumer Credit Fairness Act, your loans will be the last on my repayment list. So you might not get any money at all.
  • CREDITOR: Hm. That doesn’t sound too good.
  • YOU: Exactly.
  • CREDITOR: All right. How does [insert lower rate here] sound?
  • YOU: Excellent.

While the above dramatization may illustrate a slightly simpler procedure than you’ll actually go through should this bill pass into law, it does show the essentials of how the legislation may likely work.

Opponents Predict Tighter Credit

Some have criticized the bill as being too generous to consumers, suggesting that, should it become law, it would limit creditors’ overall ability to lend money.

But supporters contradict this claim, insisting that the bill would more likely push lenders to rely more universally on types of loans with more reasonable interest rates.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , , ,
Posted in Bankruptcy and Predatory Lending | No Comments »

Monday, March 23rd, 2009

Warning Signs of Predatory Lending

Predatory lending can devastate consumers.

Predatory loans can come in the form of credit card agreements, mortgages, payday loans and even bank loans.

Although there’s no surefire way to make sure a loan you get is safe, but here are some warning signs that your lender is less than trustworthy.

Lack of Transparency: Any time the terms of your loan are unclear, beware. Some loans come with terms so lengthy and dense with legal jargon that the average borrower has no way of understanding them (think of your credit card agreement).

Hidden Interest: Loan-related costs with names like “fee” or “charge” are often just interest in disguise. These can take the form of “overdraft charges” from a bank, “fees” on a payday loan, or “service charges” on a credit card.

Hidden Add-ons: Some unscrupulous lenders will sneak extra services into a loan’s terms (e.g. home appraisal fees with a mortgage) without telling the borrower that such services may be available elsewhere for less money.

Outright Lies: Writing a borrower’s “stated income” and similar tricks amount only to lying on a loan form. The only way to be certain that information in your loan documents is accurate is to fill them out (or double-check them) yourself.

Redlining: Aiming loans at specific groups of people is illegal. Studies have found that subprime loans disproportionately affected women, racial minorities, less educated people and the elderly. Other groups may be targeted for other types of predatory lending.

Exorbitant Interest: Sometimes, lenders conceal how much interest they’re charging by revealing only short-term interest rates (as with credit card offers) or by disguising interest (see above). Payday loans, for example, can come with a yearly interest rate of more than 300 percent!

The Magic of Negotiation

One way to make sure you aren’t victimized by predatory loans is to know as much as you can about them – that way, you can walk away when warning signs pop up. But keep in mind, too, that part of understanding lending is understanding that almost everything is negotiable.

Asserting yourself by trying to get a lower interest rate or a discount of some kind can signal to lenders that you know what you’re doing and will not be taken in by predatory tactics. Just be sure to do some research first so you know a reasonable rate to request.

Learn more about filing bankruptcy and how it may lessen your financial stress.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Tags: , , , ,
Posted in Bankruptcy and Predatory Lending, Setting the Record Straight about Bankruptcy | No Comments »

« Older Entries