Recent investigations into the matter have focused primarily on for-profit universities, including the University of Phoenix and other schools that have campuses around the country and offer online classes to those who aren’t near a learning center.

The latest of these investigations, undertaken by Congressman Elijah Cummings (D – MD), highlights some of the shocking numbers associated with for-profit education:

• The University of Phoenix (the largest for-profit university in the country) gets 88 percent of its funding from the federal government. This money comes as various grants, loans, and veterans’ benefits that students of the university apply for and use to cover the cost of classes.
• More than 20 percent of the school’s students default on their loans.
• The chairman of the company that operates the University of Phoenix earned $6.5 million last year (including bonuses and stock options with his salary).

According to sources, these figures are typical of the for-profit education industry. And what’s really alarming for students and potential students who might enter the for-profit education system is that student loans are almost impossible to discharge in bankruptcy.

Further, studies have shown that six-year graduation rates for first-time bachelor’s students at for-profit colleges are abysmally low: about 22 percent for those who attend physical classes, and as low as five percent for those taking classes online.

In other words, the majority of those enrolled in these programs are accumulating student debt without earning the degree that could boost their income in their life after school. This, of course, makes repaying student loans that much more difficult.

Questionable Enrollment Tactics

Congressman Cummings has sent letters to the heads of several for-profit institutions, detailing the financial imbalances mentioned above and mentioning other problems that undercover investigations have revealed at such institutions.

In brief, the pushy and aggressive (and sometimes deceptive) sales tactics used to get new students to enroll at for-profit universities mimic those used by unscrupulous debt settlement firms and subprime mortgage lenders.

Unfortunately, as is often the case with other areas of finance, most of the consumers of for-profit education are not fully aware of the potential financial repercussions their decision to take on student loans might have.

Hopefully, Congressman Cummings will remain vigilant about this matter. He has requested a response from the education executives before the end of this month.

Background: How Medicaid Works

The case before the Supreme Court involves a challenge to Medicaid, a healthcare system that requires the federal government to provide funding to states to subsidize medical care for elderly, low-income, and disabled citizens.

Federal support, in most states, accounts for the majority of Medicaid funds. States that choose to enact Medicare programs must agree to certain terms laid out by the federal government, one of which is paying enough to healthcare workers that they can afford to provide needed care.

California Cuts Challenged

Despite those laws, California, in efforts to balance its budget in 2008 and 2009, cut Medicaid funding by close to 10 percent in some cases. This was problematic because:

• California did not submit its cuts to the federal government for approval before passing them into law.
• When the cuts were sent in, federal officials denied them for not providing adequate funding to doctors and other healthcare providers.
• Despite federal opposition, California enforced the cuts and now faces a lawsuit brought by hospitals, doctors, and patients.

Everyone who participates in Medicare and Medicaid stands to lose if the California cuts are permitted to go through:

• Doctors would be paid less for their work and may have to turn away patients on Medicaid because treating them would mean operating at a loss.
• Hospitals could lose serious money on performing certain procedures for patients on Medicaid because state reimbursement for those procedures might not be sufficient to cover their costs.
• Patients on Medicaid risk losing access to medical care, because doctors and hospitals may turn them away for fear of non-payment or insufficient payment from the Medicaid system. As it is, sources report that more than half of California’s Medicaid patients (56 percent) cannot find medical care because of reimbursement problems at the state level.

Should the Case Even Be in Court?

In addition to the issue of whether or not the California Medicaid cuts are legal is the issue of whether or not this dispute belongs in the court system. The Obama Administration and California Governor Jerry Brown’s administration have apparently contended that the funding of Medicaid is an issue for the state to figure out on its own, without help from the federal court system.

On the opposite side, the lawyer representing the plaintiffs in the suit has reportedly said that California failed to show how it considered the interests of all parties in its funding cut decision. Rather, he claims, the state simply tightened its purse strings without following correct procedures.

The Supreme Court’s decision could impact the future of Medicaid recipients in California and possibly around the country.

To understand why this is good news for consumers, a little history may be needed.

What Are Credit Card Arbitration Clauses?

Credit card arbitration clauses are little snippets of legal information (i.e. clauses) in credit card agreements that state:

• Any disputes between consumers and creditors cannot enter the legal system.
• Instead, these disputes go straight to arbitration.
• The arbitration system involves ostensibly “impartial” arbitrators who review the facts of the case and decide in favor of whatever party seems to be in the right.
• According to data analyzed by consumer advocates, arbitrators sided with the creditors in 99.98 percent of all arbitration cases in California (the only state where such data are made public).

Why such overwhelming favoritism of the creditors? Investigations into credit card arbitration cases show that many consumers may not even be aware that their cases are going to arbitration – notices generally come in the mail and consumers may assume they’re junk.

Plus, a consumer does choose to take action has to submit an argument in writing to the proper authorities, provide necessary documentation and outline the desired decision for the arbitrator to make.

Some sources suggest that arbitrators are even trained to favor creditors and penalized for finding in favor of consumers.

What Does the Bank of America Fine Mean?

The fine in this case comes as the result of a lawsuit that was filed in 2008. In the suit, Bank of America was charged with illegal and deceptive practices in its use of the credit card arbitration system. Those practices allegedly included:

• Not requiring debt collectors to show proof that consumers were aware of the arbitration;
• Employing lawyers not legally certified to practice in California;
• Charging consumers inflated fees to cover the bank’s legal costs; and
• Ignoring evidence submitted by consumers to favor their cases.

While Bank of America spokespeople apparently tried to downplay the decision, saying that the bank stopped requiring arbitration in 2009, the fine still translates to good news for consumers. Notably, it clears the path for potential a class-action lawsuit against Bank of America subsidiary FIA Card Services, which was responsible for much of the arbitration.

Bank of America is also now prohibited from working with the National Arbitration Forum, its former partner, for the next five years. These are all tangible benefits for consumers, and the good news continues: the San Francisco City Attorney who brought the initial lawsuit has stated that he may take further legal action against the parties involved in unfair arbitration practices.

But you may hate the way credit card issuers can change interest rates, or the steep fees they charge for various actions or that it’s gotten you into debt. You may hate the offer for credit cards that come through the mail to tempt you.

And if you’ve ever filed for bankruptcy, your relationship with credit cards may be even more complicated: credit cards may have gotten you into debt in the first place, but in your life after bankruptcy you might be struggling to qualify for a card that can help you rebuild financially.

Believe me, I get it. That’s why I’m so happy about this new complaint tracker.

Someone to Listen to Credit Card Woes…Online

The newly active Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, has launched a new web site (help.consumerfinance.gov) and toll-free phone line that lets consumers take action to address credit card problems. It works like this:

• You describe the problem. The first step asks for a brief description of the problem you’re having with your credit card issuer. It could be anything from a disputed charge to a raised interest rate you didn’t expect. The online form asks for the date the incident happened, how much money (if any) you lost, and whether you’ve contacted the company yet.
• You identify what you want to happen. In the “desired resolution” section, you indicate how you’d like the problem to be resolved. This might take the form of identifying what action you want the card issuer to take.
• You provide your information. This section requires your contact information so that the CFPB has a record of your complaint. This may become useful if the CFBP finds a pattern of abuse and needs to take legal action against a credit card company.
• You provide your card information. Finally, users are prompted to enter their card’s identifying information.

If you’re not sure how to begin, you have the option to chat online with someone who can help.

The CFPB form then prompts consumers to contact their card issuer to attempt to resolve the problem. If you can’t work out a resolution, you can contact the CFPB, which will use your tracking number to determine whether any laws were broken.

In the future, the CFPB plans to have similar sites for problems with mortgage loans, student loans, bank accounts and more. Down the line, information from these forms may be used in legal investigations.

In other words: there’s an exciting new consumer protection available. Let’s take advantage of it.

Here’s a look at where the bureau stands and what to expect from it in the future.

Executive Controversy

Before it became officially active, the CFPB was headed by Harvard Law Professor Elizabeth Warren, whom Obama appointed after the agency’s creation. Warren was regarded by many as the likely candidate to head the CFPB when it officially started business, but Obama has nominated instead Richard Coudray, Ohio’s former attorney general.

Still, some lawmakers have vowed that they will not confirm Cordray (or any candidate) as head unless the CFPB’s powers are scaled back.

Planned Consumer Protections

Despite an unfriendly right wing, the CFPB has moved forward with its planned protections, according to a progress report it released on July 18. Here’s a look at what this agency has cooking.

• “Know before You Owe:” This project involves simplifying the forms that explain the terms and conditions of mortgages to consumers. The all-too-recent housing market collapse reinforced a message many consumer advocates had been communicating for years: we need to make the mortgage borrowing process more straightforward.
• Transparency in credit cards: While the Credit CARD Act made strides toward improved credit card transparency, the CFPB still sees room for improvement. Its plans for making plastic more consumer-friendly are not yet clear, but the issue is high on the agency’s agenda.
• Credit score report: Right now, there’s some variation among the credit scores that consumers and lenders can purchase from the various credit reporting bureaus. The financial reform bill called for the CFPB to study why these differences occur and compose a report on suggested changes.
• Supervision of non-bank financial entities: Currently, financial oversight laws are in charge largely of banks. Other financial entities (like debt collectors, debt relief services, payday lenders, etc.) face little centralized regulation. The CFPB could pass rules that other companies in the finance world must follow.
• Training and workforce development: Another one of the CFPB’s future duties will be examining the workforce and devising a plan that would better prepare Americans for the jobs that need to be filled. Ideally, this measure would provide long-term solutions to unemployment problems by outlining the training and skill base that Americans need to complete the jobs that the country currently has to offer.

It’s unclear at this point how long it might take for Congress to approve the CFPB’s nominated leader, or if the Obama Administration will give in to calls for a board instead of a sole leader. But clearly, the bureau isn’t waiting around to start taking necessary action.

I know what you’re thinking: who uses pay phones anymore? But people do, whether because their mobile minutes have run out or their batteries have died. Here’s what to look out for next time you’re in need of a phone in a box.

They Charge How Much for a Pay Phone Call?

The New York Times reports of a pay phone and credit card scam that works like this:

• A person decides to make a pay phone call.
• The person has no change so opts to pay for the call with a credit card.
• After checking the call rates posted on the pay phone wall, the person places the call.
• When the person gets a credit card bill, outrageous-seeming charges show up for the pay phone calls.

Sources note that victims of this scam have reported charges as high as $16 – $20 for phone calls listed at 50 cents to a dollar on the pay phone booth.

One problem, though, is that the company responsible for the outlandish charges, BBG Communications, has reportedly claimed that it is doing nothing wrong, and that is charges accurately reflect the cost of providing their services.

Still, the high unexpectedly high costs have reportedly led to hundreds of consumer complaints, which have in turn led the Better Business Bureau to give the company a rating of F.

Fighting against Credit Card Scams

According to the Times, two lawyers are gathering information as part of a class-action lawsuit they plan to bring against BBG Communications. In the meantime, the Federal Trade Commission recommends taking the following steps to avoid scams of all sorts:

• Proceed with caution: It seems that those who use the pay phone services have the option of getting rate information by following auditory prompts during their calls. If you’re not sure about a new service, get all the information before you hand over your digits.
• Check your bills carefully: Some scams work by charging millions of people small amounts of money month after month. Many of those people never notice the unwelcome charges. To make sure you’re not paying money for services you don’t want or need, check your bill each month and challenge charges that seem incorrect.
• Go with your gut. If a company or situation feels less than trustworthy, see if you can find other options. Many times, our subconscious picks up on warning cues we may not notice with our conscious minds.

But, despite the lawmakers’ best intentions, some of the law’s provisions haven’t been explained with complete clarity in the media. Here’s a look at some important legal loopholes that might affect your next credit card statement.

Balance Increase Notices

Before the passage of the Credit CARD Act, issuers were, in many cases, allowed to increase interest rates arbitrarily and apply the increased rate to all balances on a user’s account. Rate increases can make a small amount of debt snowball and led many a consumer to the bankruptcy court.

The CARD Act changed that – sort of. Now, credit card issuers must issue notice of rate increases 45 days before that change takes effect. BUT:

• The 45-day rule applies to payments: In other words, a credit card issuer must give a consumer notice of a rate increase 45 days before the consumer is required to make the first payment at the new rate.
• Increases applied to purchases start sooner: The law actually permits credit card issuers to begin applying the increased rate to purchases made as soon as 14 days (two weeks!) after the postage date on the notification about the rate increase.

In other words, a consumer has a two-week window after a notice of increase of rate is mailed before purchases on the credit card start coming with an amped-up interest rate. In many explanations of the law’s provisions, this is ignored or misrepresented.

Retroactive Rate Increases

Another much-applauded change the CARD Act introduced was the outlawing of retroactive interest rate increases (that is, of an issuer applying a raised interest rate to balances accumulated before the rate changed).

But in reality, the new law only prohibits retroactive hikes in certain situations. Some exceptions to the rule allow rate hikes for existing purchases.

• Late payments: If a rate increase is triggered by a payment that is 60 or more days late, the card issuer can apply the increased rate to all balances on a consumer’s card.
• Other increases: For the most part, other retroactive increases are prohibited. However, if you’re worried about rate increases, be sure to read any mail regarding your credit card carefully.

Credit Cards & Bankruptcy

It’s no secret that many bankruptcy filers need the court’s protection because they’re overextended on credit. And credit cards are an easy way to take on more debt than you can afford to pay back.

Bottom line: Read your credit card agreements carefully. If there’s any language you’re unclear about, call your bank and ask for an explanation.

Luckily, the situation got sorted out with help from the couple’s lawyer, but it made me wonder: how many other people are facing improper foreclosures without legal help? Turns out, it could be more than you’d expect.

When A Lawyer Is a Good Idea

Consider these foreclosure nuggets I dug up:

• Foreclosures that involve fraudulent or absent paperwork have become more common. Remember the robo-signing scandal of last fall? It seems that careless paperwork for mortgage loans was fairly common during the housing boom. Now, sources note that many foreclosure cases are proceeding without banks providing the necessary documents to back themselves up.
• Judges are getting frustrated. In some states (especially New York, Ohio and Massachusetts), judges overseeing foreclosure cases have reportedly taken to punishing careless banks. Some reports show that judges have even declared that ownership of a property went to the borrower free and clear.
• Homeowners are suffering. Without legal guidance on how to respond to banks’ foreclosure attempts, many homeowners are losing their houses – often without realizing that the banks’ actions may not be legal.

So how can a lawyer help if you’re facing foreclosure? In some cases (like the one involving the attempted foreclosure of the property that never had a mortgage), a lawyer can help a family cut through foreclosure’s red tape.

In other cases, a lawyer may be able to discover a bank’s improper handling of a foreclosure and challenge the proceedings in court. While such action may not always actually stop the foreclosure, it could buy the homeowners some time, during which they could save up money for their next home.

And, of course, a lawyer can help you determine whether or not filing for Chapter 13 bankruptcy might help you keep your home or give you a shot at getting back on track with your mortgage payments.

Life after Foreclosure

Like bankruptcy, foreclosure can leave a serious ding on a person’s credit report. But rebuilding efforts are similar for the two: pay bills on time, take on a little credit when you can and repay it on time, and generally keep the long view in sight.

Foreclosure can be stressful and traumatic, but it’s not the end of the world – in fact, after reestablishing themselves in affordable living quarters, some people find that they’re less financially stressed after they lose their homes than before.

Specifically, business cards do not enjoy some of the protections that consumer-designated cards do. Here’s why that might be a problem.

Business Credit Cards Owned by Individuals

• Individuals with small business credit cards: Sources note that many business credit cards are marketed to individuals and families and that many American households have business credit cards in their lineup.
• Business cards not covered by CARD Act: Because business transactions are not subject to the Truth in Lending Act, regulators did not include business credit cards under the umbrella of the CARD Act’s protections. The reasoning here was that businesses are generally better able to judge borrowing risks than individuals and so don’t need the same regulations in place.
• Millions of non-business offers: In the last five years, sources indicate that business card issuers have bombarded 12 million American households with as many as 44 million business card offers per month. Just to clarify, that’s households, not business addresses. Some of these addresses could be for individuals who work from home and/or have businesses based in their houses; others may not fit that bill.

Protections Business Cards Don’t Have

The Credit CARD Act limited the following exclusively for individual (not business) credit cards:

• Retroactive interest rate increases: This practice, while no longer allowed for typical consumer credit cards, is still permitted for business cards, which could leave unprepared borrowers on the hook for more money than they were initially responsible for paying. This practice can make a reasonable debt into a difficult mountain to climb.
• Over-limit fees: These fees hit card users when they charge more than their card’s limit. While individual cards might simply deny the transaction, business cards can still permit the purchase but charge a hefty fee.
• Other cost-changing practices: The other protections put in place by the Credit CARD Act (like advance notice of term changes, “summary boxes” of debt and payment terms and others) are not guaranteed on business cards.

Considerations if You Have a Business Card

If you have a business credit card, it’s probably a good idea to take a look at the contract you signed to make sure you’re aware of the terms and conditions. You may also want to apply for a non-business card to use as your primary tool of transaction (though it may benefit your credit score to keep the business card open).

Here’s a look at one case and what you should know about the important matters of life and debt.

A Student Loan that Outlived the Student

A story reported by ABC tells a troubling story about a young woman who died at the age of 26 without having paid off her student loans in full. Here’s what happened next.

• Lenders contacted her father. Two of her creditors reportedly forgave the loans the woman had owed as soon as the father explained his situation. The other, though, reportedly continued to request payment from the father for the amount his daughter had left unpaid.
• Not a co-signer: If you’d taken on loans with a cosigner and then filed for bankruptcy (or died), the cosigner would be legally responsible to repay any of the debt that remained. In the case of the ABC story, though, the woman’s father had not cosigned for her loans; despite this, the lender persisted in attempting to collect payments.
• No formal policy: The lender, Wells Fargo, eventually forgave the loan. But, it seems, many private students lenders in the country do not have a formal policy in place to address what happens in the event of a student’s death or permanent disability.

Student Loans in Bankruptcy Court

This story has a sort of very dark humor to it: student loans are notoriously difficult to discharge in bankruptcy court, and have been the target of much scrutiny in recent years, as young adults graduate with tens of thousands of dollars in debt and few opportunities in the job market.

Generally speaking, student loans:

• Are unsecured but non-dischargeable in bankruptcy. Policies that exist to extend the greatest number of financial aid to the greatest number of students also make these loans very difficult to discharge. That’s what makes them easy to get: they’re very difficult to not pay back.
• Can rarely be affected by a hardship exemption. The exception to the no-discharge rule for student loans is the proof of undue hardship. This rule states that if a bankruptcy filer can demonstrate that keeping up with his student loan payments would cause him “undue hardship,” that his financial circumstances are unlikely to change in the near future, and that they are limited because of factors beyond his control, the court may choose to excuse the student loan debt. But the court only grants this exemption in very rare cases.