"The Federal Trade Commission this week released its latest findings in a ten-year study on the accuracy of credit reports. This report is another reminder of how important it is to review your credit report for inaccuracies.
WHAT DOES THIS MEAN TO YOU?
You can check your three credit reports for free once every 12 months at annualcreditreport.com. Dispute any errors, and contact the company that reported the incorrect information to correct it." ...more...
"A large and growing share of American workers are tapping their retirement savings accounts for non-retirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.
More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans." ...more...
"The Consumer Financial Protection Bureau is releasing Thursday much anticipated new mortgage rules, which will restrict the kind of subprime lending practices that caused both the financial and housing sectors to crash five years ago." ...more...
"WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) issued final rules to strengthen consumer protections for high-cost mortgages and to provide consumers with information about homeownership counseling. The Bureau also finalized a rule that requires escrow accounts be established for a minimum of five years for certain higher-priced mortgage loans." ...more...
"Bank of America agreed on Monday to pay more than $10 billion to Fannie Mae to settle claims over troubled mortgages that soured during the housing crash, mostly loans issued by the bank’s Countrywide Financial subsidiary.
Under the terms of the pact, Bank of America will pay Fannie Mae $3.6 billion, and will also spend $6.75 billion to buy back mortgages from the housing finance giant at a discount to their original value." ...more...
"Ten of the largest U.S. mortgage servicers will pay a combined $8.5 billion under an agreement that will end case-by-case reviews of foreclosure-abuse claims stemming from a 2011 deal with regulators.
Companies including JPMorgan Chase & Co., (JPM) Bank of America Corp. and Citigroup Inc. (C) must provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers, according to a settlement announced today by the Office of the Comptroller of the Currency and the Federal Reserve. They were among 14 servicers ordered to hire independent consultants to help clean up foreclosure practices amid claims that they improperly seized homes in the wake of the subprime mortgage crisis." ...more...
"College graduates who began their careers during the Great Recession faced several long-term economic obstacles. These included lower earnings, higher unemployment rates and greater career instability — all of which made it more difficult to buy homes and save for retirement. It also made it harder to pay off student loans.
The Obama administration had this group in mind when it created the Pay As You Earn Repayment Plan for federal student loans, which allows recent student borrowers to arrange affordable payments and qualify for loan forgiveness. The program, which went into effect late last month, needs to be broadly advertised if it is to reach the people who need it most." ...more...
"The California Homeowner Bill of Rights takes effect on January 1, 2013 to ensure fair lending and borrowing practices for California homeowners.
The laws are designed to guarantee basic fairness and transparency for homeowners in the foreclosure process. Key provisions include:" ...more...
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The American Taxpayer Relief Act [211.6 KB]
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Revenue Estimates of the American Taxpayer Relief Act [123.6 KB]
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Summary of American Taxpayer Relief Act Provisions [798.3 KB]" ...more...
"Those breathing a sigh of relief that their student loan payments are now in line with their income may want to re-examine the rules that set the payment in the first place. There could be a tax time bomb looming, slowly ticking away. And defusing it is not a big part of the policy discussion in Washington at the moment.
This potential tax bill is a byproduct of federal efforts, including the newly expanded income-based repayment program, that allow you to limit the monthly payments on most federal loans to what you can afford to pay. There’s a formula that uses your income to determine your payment. Then, the federal government forgives any remaining balance, usually after 10 to 25 years.
" ...more...
"A year ago, Bank of America tried to charge customers $5 a month just for using a debit card. Consumer backlash made B of A back off pretty fast. Now, the Wall Street Journal says the bank is shelving a plan to charge fees for new checking accounts, at least until late next year. Problem is, many of those accounts actually cost the bank money. So it's latest gambit shows the battle between profits and public relations.
" ...more...
"s the foreclosure process a long one in your state? Check out RealtyTrac’s state-by-state statistics on the number of days it took for a foreclosure to be completed in the third quarter." ...more...
"Backlogs in foreclosure processing are causing delays in home-price improvement and could wind up affecting the cost of a mortgage." ...more...
"The national bank settlement over robo signing takes effect Wednesday. And the California monitor for the settlement says the most notable complaint her office gets is for "dual-tracking." That's when homeowners are on track to be foreclosed on while trying to get a mortgage modification." ...more...
"... the productivity of the American work force from World War II to the mid-'70s grew almost double, 97 percent. The wage and salaries of average Americans, not just assembly line workers, but plumbers, carpenters, small business people, and so forth, they rose 95 percent, so just about the same increase in wages and salaries as in productivity.
The wealth, the growth, the economy, the prosperity was shared.
Since then, however, those wedge economics came in. And what you have seen is productivity has continued to grow, about 80 percent since 1973. But the average hourly compensation of an average worker has grown only 10 percent." ...more...
"“We are canceling the remaining amount you owe Chase!” says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. “You are approved for a full principal forgiveness of your Home Equity Account,” says another, from Bank of America.
Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn’t elated — because she doesn’t owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out.
" ...more...
"Mortgages guaranteed by the Federal Housing Administration are permitted one year after a consumer exits a Chapter 13 bankruptcy reorganization, which requires a repayment plan that is often a fraction of what is owed, and two years after the more common Chapter 7 liquidation, which discharges most or all debts. Conventional mortgage guidelines from Fannie Mae and Freddie Mac, meanwhile, call for a wait of two to four years.
" ...more...
"As the number of people taking out government-backed student loans has exploded, so has the number who have fallen at least 12 months behind in making payments — about 5.9 million people nationwide, up about a third in the last five years.
In all, nearly one in every six borrowers with a loan balance is in default. The amount of defaulted loans — $76 billion — is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities, according to a survey of state education officials." ...more...
"Last year, MetLife said elderly victims of financial scams lost at least $2.9 billion in 2010, up from $2.6 billion in 2008. And 20% of Americans over the age of 65 have been victims of financial swindles, a 2010 IPT report said. "This is a major problem, and we know there is significant under-reporting," says Mark Lachs, director of geriatrics at New York-Presbyterian Healthcare System.
Some older Americans are too embarrassed to disclose financial abuse. Some lack the tools to find a good financial adviser and may not have the knowledge to understand investment advice. Others may be susceptible to fraud because of diminished mental capacity." ...more...
"According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000." ...more...
"In a move that brings two federal agencies as close to warfare as possible within the confines of bureaucratic memos, the Treasury Department called out housing regulator Edward DeMarco on Tuesday for his continued refusal to offer a key piece of housing assistance to underwater borrowers struggling to save their homes from foreclosure.
" ...more...
"Illinois Governor Pat Quinn Wednesday signed a bill into law that clarifies best practices for post-judgment collection of debts. The new law largely bans the practice of “body attachment” for debt-related judgments, through which some consumers were being jailed for failing to show up for hearings in debt collection cases." ...more...
"The Consumer Financial Protection Bureau (CFPB) Tuesday announced its first public enforcement action with an order requiring Capital One Bank (U.S.A.), N.A. to refund approximately $140 million to two million customers and pay an additional $25 million penalty. " ...more...
"The bills mirror and extend protections that were implemented under a nationwide settlement between 49 state attorneys general and the five largest U.S. banks, a case brought over the practice of robosigning documents. Unlike that settlement, the new legislation would apply to all banks, although those that process fewer than 175 foreclosures a year would be exempt from some procedural requirements.
" ...more...
"Have Americans already forgotten the lessons learned in the financial crisis? The number of people with no money saved for emergencies has risen to 28 percent, up from 24 percent a year ago, according to Bankrate's Financial Security Index." ...more...
"On this week’s Moyers & Company, Rolling Stone editor Matt Taibbi and Yves Smith, creator of the finance and economics blog Naked Capitalism, join Bill to discuss the folly and corruption of both banks and government, and how that tag-team leaves deep wounds in our democracy. Taibbi’s latest piece is “The Scam Wall Street Learned from the Mafia.” Smith is the author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism." ...more...
"Some 36 percent of young adults aged 19-25 have had problems paying medical bills or are carrying medical debt, according to a new survey released Friday." ...more...
"The Consumer Financial Protection Bureau today has unveiled its online database of consumer complaints against credit card companies — and the financial industry is taking it about as well as you’d expect." ...more...
"The US personal bankruptcy rate would be twice as high if not for George W. Bush's 2005 reform, according to NY Fed economist Donald P. Morgan.
This isn't really a good thing for individuals, whose ability to discharge debts was limited by the Bankruptcy Abuse Prevention and Consumer Protection Act.
Instead it served to protect banks.
Morgan argues that coming out of a recession the bankruptcy rate should have surged to 8 filings per 1,000 households. Compared to this scenario, the recorded rate of 4 per 1,000 is pretty low.
Read more: http://www.businessinsider.com/ny-fed-on-bankruptcy-reform-2012-6#ixzz1wsRIixmn" ...more...
"Clearly, saving for retirement is largely a factor of consistent work — currently a more elusive achievement for Gen Yers than the other generations, according to the Bureau of Labor Statistics.
" ...more...
"Baby Boomers, with their inheritances, homes, and old-fashioned pensions, may appear to be on track for a solid retirement — but some experts say the forecast for the generation born from 1946 through 1964 isn't necessarily so rosy.
" ...more...
"The average education debt for law grads at private schools last year was nearly $125,000, while the average for grads of public law schools was more than $75,700, according to new figures released by the ABA.
The debt load increased 17.6 percent from the prior year for private law grads and 10 percent for public law grads, the Daily Journal (sub req.) reports. In 2001-02, the average debt was only about $46,500 for public law school grads and about $70,000 for private law school grads." ...more...
"Among 195 ranked law schools surveyed annually by U.S. News, 191 reported the average indebtedness of graduating students in 2011, the most recent figures available. Overall, law students graduated with an average of $100,433 in debt, though at some of the schools with the most heavily debt-laden students, graduates faced an average debt of more than $50,000 higher.
Graduates of the California Western School of Law graduated in 2011 with an average indebtedness of $153,145—a reported figure higher than any other law school in the country. In comparison, graduates of Georgia State University entered the field with an average debt of $19,971—the lowest average debt load in the country among law schools." ...more...
"As evidenced by the Obama Administration’s higher education goals, it is in our national interest for more people to get post-secondary education or training. If public policies only encouraged safe choices, few would borrow to go to college. Few would start businesses either. Most businesses fail, even those started by those who have previously run successful businesses. Yet we have decided as a society that we want people to start businesses even if this means writing off some bad debt. The same principle should apply to education." ...more...
"The Consumer Financial Protection Bureau announced on Monday that it had opened a student loan complaint system for issues regarding student loans. The system was put in place for students to voice their issues with lenders.
" ...more...
"Study finds that BAPCPA made the process more expensive for debtors, but resulted in no gains for creditors." ...more...
"The unemployment rate for recent college grads – those under 25 — has been stuck at more than nine percent for three years running. But among older college grads, the unemployment rate has been under five percent during that whole time. So the question is this: at a time of high unemployment and relentlessly rising tuition, is a college education worth the expense? And if you decide it is, what do you need to know to get a better, safer loan?" ...more...
"Education was historically considered a great equalizer in American society, capable of lifting less advantaged children and improving their chances for success as adults. But a body of recently published scholarship suggests that the achievement gap between rich and poor children is widening, a development that threatens to dilute education’s leveling effects." ...more...
"After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, state and federal officials said. It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses." ...more...
"In prepared remarks, Cordray talked about the bureau’s “know before you owe” campaign, which aims to simplify the fine print in financial disclosures." ...more...
"The cost of not having enough money just got steeper.
The median overdraft fee banks charge customers surged to $30 from $27.50 last year, according to a study released Tuesday by Moebs Services, an economic research firm that tracks pricing at financial services companies. The survey looked at overdraft fees from more than 2,500 banks and credit unions of all sizes across the country.
" ...more...
"Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.
Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.
" ...more...
"Lending institutions in the United States reported a 16 percent increase in their credit card chargeoff rates in the third quarter of 2011, according to data released last week by the Federal Reserve." ...more...
"WASHINGTON â Taking a broad swipe at the Securities and Exchange Commissionâs practice of allowing companies to settle cases without admitting that they had done anything wrong, a federal judge on Monday rejected a $285 million settlement between Citigroup and the agency." ...more...
"Outsourcing, usually intended to ease strained public budgets, tends to most directly affect people like Ms. Townsend and her co-workers. But there can be other drawbacks. The quality of services provided by contract workers, for example, may not be as consistent as that of experienced government employees. And taxpayers can end up paying for the cuts in more indirect ways.
What governments save in salaries and benefits often âends up on the government books through all sorts of programs,â said Paul C. Light, a professor at the Wagner School of Public Service at New York University, referring to unemployment insurance, Medicaid and other public assistance for workers earning low incomes." ...more...
"The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday.
While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation." ...more...
"THERE are two things everyone knows about American economic recoveries. The first is that the housing sector traditionally leads the economy out of recession. The second is that there is no chance of the housing sector leading the present economy anywhere, except deeper into the mire. .... Although total housing supply is not far out of line, the distribution of supply between the rental and owner-occupied markets remains distorted." ...more...
"Her larger appeal...comes from her ability to shred Republican arguments that rebalancing the tax burden constitutes class warfare." ...more...
"The Internet banking services that have been sold to customers as conveniences, like online bill paying, also serve as powerful tethers that keep customers from jumping to another institution." ...more...
"Officially, there are 3.5 million homes for sale nationwide. But there are millions more lurking in the shadows â hidden neatly away on banksâ balance sheets, stalled in foreclosure court proceedings, or simply occupied by nonpaying owners as lenders wait months or years before taking action.
The housing marketâs ballooning shadow inventory â buoyed by a yearlong foreclosure slowdown â stands as its most menacing problem, threatening to stifle recovery for several years." ...more...
"So, what are the protesters so upset about, really?
Do they have legitimate gripes?
To answer the latter question first, yes, they have very legitimate gripes.
And if America cannot figure out a way to address these gripes, the country will likely become increasingly "de-stabilized," as sociologists might say. And in that scenario, the current protests will likely be only the beginning.
The problem in a nutshell is this: Inequality in this country has hit a level that has been seen only once in the nation's history, and unemployment has reached a level that has been seen only once since the Great Depression. And, at the same time, corporate profits are at a record high.
In other words, in the never-ending tug-of-war between "labor" and "capital," there has rarelyâif everâbeen a time when "capital" was so clearly winning." ...more...
"In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.
Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession â from December 2007 to June 2009 â household income fell 3.2 percent." ...more...
"The Federal Reserve released data late Friday showing that its member banks reported a 3.4 percent annualized decline in card balances in August. Total revolving credit outstanding was $790 billion in the month, down from a peak of $972 billion in September 2008." ...more...
"At this point, there are still plenty of options for people who want to stick with banks like Bank of America or Wells. They could simply switch over to using a credit card instead of a debit card. The problem is some people are no longer eligible to get a credit card. Then there's people who really like the budgeting capability that a debit card gives them and they want to keep using it, and they don't want to pay for the privilege. And there are still plenty of community banks, plenty of online-only banks and plenty of credit unions that do not have minimum balances for checking accounts in order to maintain their free status, and they don't charge people monthly fees to use their debit cards." ...more...
"Marylandâs court system is the latest to require that collection agencies and debt buyers who sue consumers provide more documents to support their case.
On September 8, the Maryland Court of Appeals issued new rules for lawsuits filed in district court. The new rules now require debt buyers to present a bill, document signed by the debtor, or copy of an account statement from the original creditor showing purchases before the debt buyer can sue a consumer. Debt buyers also must present a complete chain of title as evidence of their ownership of the debt. The new rules take effect January 1, 2012." ...more...
"An amazingly knowledgeable discussion of the true root of the daunting economic decline of 80% of the American public, and the forces at work that relentlessly push it that direction." ...more...
"BOSTON â Elizabeth Warren, the Harvard law professor who has battled the financial industry as a consumer advocate, will announce her candidacy Wednesday for what will probably be a high-profile race against Senator Scott P. Brown." ...more...
"The recession continued to push Americans, particularly young people, to double up in households with friends and family.
The group of 25-to-34-year-olds experienced a 25 percent rise in living at home in the period between 2007, when the recession began, and 2011. Of that group, nearly half were living below the poverty line, when their parentsâ incomes were excluded.
âWeâre risking a new underclass,â said Timothy Smeeding, director of the Institute for Research and Poverty at the University of Wisconsin, Madison. âYoung, less educated adults, mainly men, canât support their children and form stable families because they are jobless.â" ...more...
"Last year about one in four adults under 65 reported having medical debt, an all-time high for the country. That's because health care costs continue to rise at the same time people are losing their jobs and health coverage. Kelley Weiss with the California HealthCare Foundation Center for Health Reporting has the story of one San Francisco man struggling to pay off his medical bills." ...more...
"Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies â container ships, satellite communications, eventually computers and the Internet â started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs. The pay of graduates of prestigious colleges and M.B.A. programs â the âtalentâ who reached the pinnacles of power in executive suites and on Wall Street â soared.
The middle class nonetheless continued to spend, at first enabled by the flow of women into the work force. (In the 1960s only 12 percent of married women with young children were working for pay; by the late 1990s, 55 percent were.) When that way of life stopped generating enough income, Americans went deeper into debt. From the late 1990s to 2007, the typical household debt grew by a third. As long as housing values continued to rise it seemed a painless way to get additional money.
Eventually, of course, the bubble burst. That ended the middle classâs remarkable ability to keep spending in the face of near stagnant wages." ...more...
"The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowersâ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers." ...more...
"The concern is that a country full of increasingly pessimistic consumers will stop spending and undermine the recovery.
But the relationship between consumer confidence and spending habits isn't at all straightforward." ...more...
"With the nation's foreclosure system all but paralyzed after an avalanche of loan failures and "robo-signing" scandals, many delinquent homeowners are defying lenders and staying put. Instead of packing up and slinking away, they're living for free, sometimes for years. They're hiring lawyers to challenge their cases, and many are winning reprieves or causing the process to stall even further." ...more...
"In a decade of frenzied tax-cutting for the rich, the Republican Party just happened to lower tax rates for the poor, as well. Now several of the partyâs most prominent presidential candidates and lawmakers want to correct that oversight and raise taxes on the poor and the working class, while protecting the rich, of course." ...more...
"The first way to improve policy, then, is to directly target the root of the problem: household balance sheets. When banks were having trouble due to the toxic assets on their books, the Fed took them off their hands at very favorable rates, and then took additional steps to ensure the banks would be able to survive. Unfortunately, however, that help didnât âtrickle downâ from banks to households.
But what if we had taken the hundreds of billions of dollars that went to banks and instead used those funds to help households pay their bills, particularly their mortgages? If the money had been used, for example, to fund a modern version of the mortgage relief program that worked so well in the Great Depressionâa program that, unlike recent half-hearted efforts such as the Home Affordable Modification Program, allowed households to avoid foreclosure in large numbersâthen the assets the banks hold would no longer be as toxic. Helping these households also helps the banks as the money âtrickles up,â so itâs possible to address both balance sheet problems at once. If households have the ability to pay their mortgages and other bills, then the bankâs problems will take care of themselves." ...more...
"While the Constitution requires that defendants in criminal cases be provided a lawyer, there is no such guarantee in civil cases. The Legal Services Corporation, created by Congress, gives out federal grants that provide the bulk of support for legal aid to the poor. Over the decades, that budget has shrunk â it was $404 million in 2011, about one-third less than it was 15 years ago, adjusted for inflation. The House Appropriations Committee has proposed reducing that to $300 million for 2012. The cut would be devastating; the budget should, instead, be increased.
Half of the people who seek help from legal aid offices are already turned away. Some offices are so understaffed that they must engage in triage, so that in, say, domestic abuse cases, they will only assist someone seeking a restraining order against a violent partner if that person is in immediate danger of being hurt again." ...more...
"The scam, as described by Harris, involved multiple law firms and call-center affiliates who marketed lawsuits against mortgage banks to homeowners in California and at least 16 other states who were facing foreclosure.
The defendants sent out at least 2 million mass mailers that masqueraded as official government documents, and then followed up with phone calls, the Justice Department said.
Victims paid retainers from $3,500 to $10,000, believing that the lawsuits would stop pending foreclosures, reduce or even eliminate their principal balance, reduce their interest rate to as low as 2 percent and give them monetary damages, it said." ...more...
"Did America's record-high level of economic inequality in 2007 help cause the financial crisis of 2008? With Americans' borrowing back on the rise and signs that economic inequality is growing, could there be another financial crisis in the near future? Paul Solman continues his series of reports on U.S. economic inequality." ...more...
"Financial gains over the last decade in the United States have been mostly made at the "tippy-top" of the economic food chain as more people fall out of the middle class. The top 20 percent of Americans now holds 84 percent of U.S. wealth, as Paul Solman found out as part of a Making Sen$e series on economic inequality." ...more...
"Thomas M. Hoenig, the soon-to-be former president of the Federal Reserve Bank of Kansas City. Mr. Hoenig, at the helm of the Kansas City Fed for the last 20 years, has thought long and seriously about the problems facing the central bank, and he spoke with me about them last week after attending his final meeting of the policy-making Federal Open Market Committee. He will turn 65 next month, the mandatory retirement age for a Fed bank president.
Mr. Hoenig has been pretty much alone among Fed presidents in publicly calling to break up large banks that are too big to succeed." ...more...
"Credit card debt, called revolving debt by the Fedâs monthly Consumer Credit report (G.19), increased at an annual rate of 7.9 percent in June, the sharpest increase in nearly four years. Consumer credit card balances grew by $5.2 billion in June to $798.3 billion.
June marked the second month in a row that credit card debt outstanding expanded after nearly three years of declines. A combination of soaring charge-off rates at large consumer banks, tightening of lending policies in the wake of the financial crisis, and consumers paying down outstanding credit card balances led to steady and significant drop in total card debt over the course of the past three years. Peaking at $973.6 billion in August 2008, credit card debt bottomed out at $789.7 billion in April of this year, a 23.3 percent decline over the period.
Non-revolving debt â like that found in auto, student, and personal loans â grew at a 7.7 percent annualized rate in June. Banks added $10.3 billion in non-revolving debt in the month to stand at $1.648 trillion at the end of June" ...more...
"America has a long history of raising the debt limit to accommodate spending. A look at some of the issues in the debate over the nationâs debt." ...more...
"A looming issue relates to the potential liability stemming from the Mortgage Electronic Registry Systems, or MERS. This company, owned by the major banks, was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to expedite the home loan process.
By eliminating the need to record changes in property ownership in local land records, MERS ramped up profits for lenders. In 2007, MERS calculated that it had saved the industry $1 billion over 10 years. An estimated 60 percent of all home loans were registered to MERS.
But the MERS machine started to sputter during the foreclosure crisis. Lawyers challenged MERSâs ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. While some courts have not objected to MERSâs foreclosing in place of banks, others have." ...more...
"The new federal Consumer Financial Protection Bureau is officially open for business ⌠and is taking your complaints about credit cards.
The bureauâs Web site offers an easy-to-navigate feature to file your complaints. To do so, you enter your name and contact information and describe the problem, both in your own words and by using simple pull-down menus. The menus, for instance, help you explain the nature of your complaint â late fees, billing disputes, interest rate, etc. â and what, if anything, youâve done so far to resolve it." ...more...
"President Obama said Sunday that he would nominate Richard Cordray, the former attorney general of Ohio, to lead the new Consumer Financial Protection Bureau, passing over Elizabeth Warren, the Harvard Law professor who was the driving force behind the bureauâs creation." ...more...
"Both Republicans and Democrats promised more civil discourse in Thursdayâs hearing. But the political sniping sometimes overwhelmed testimony as the hearing devolved into what one committee member called âa partisan food fight.â Democrats apologized to Ms. Warren for her treatment by Republicans whom they accused of âsabotagingâ the agency to protect Wall Street." ...more...
"or the second consecutive month, employers added scarcely any jobs in June, startling evidence that the economic recovery is stumbling.
...
Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the governmentâs monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted." ...more...
"The Obama administration on Thursday announced a beefed-up program that will allow eligible homeowners to skip part or all of their monthly payments for 12 months or more while they search for a new job. Certain homeowners have been eligible to skip payments for three or four months, far shorter than most unemployed people need to get back on their feet." ...more...
"Two of the nationâs biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk." ...more...
"The final figures show that the median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009. The earlier study had put the median pay at a none-too-shabby $9.6 million, up 12 percent." ...more...
"Bank of America will pay $8.5 billion to settle claims by investors who lost money on mortgage-backed securities. The securities at issue were put together and sold by Countrywide, and they became Bank of America's problem when the bank acquired the mortgage giant in 2008.
The settlement announced today will wipe out the profit the company has earned this year. And the company still faces legal challenges. Bank of America said it will have to set aside more money to settle other claims from Fannie Mae and Freddie Mac, and from unspecified private investors. And the company is under investigation by state attorneys general over its foreclosure practices." ...more...
"In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk â three years in California, two years in Nevada and Colorado â but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books." ...more...
"In the latest podcast on ARM industry blog The Debt Collection Drill, Moss & Barnett attorneys John Rossman and Mike Poncin examine the legality of using Facebook and text messages to collect debts and also discuss obtaining consumer consent before using email to communicate with a consumer." ...more...
"Debt has become a way of life for American college students. The average student loan debt among graduating college seniors was more than $23,000 in 2008, according to FinAid.org. In addition, the student lender Sallie Mae says the average graduating senior with at least one credit card had $4,138 in debt on the card." ...more...
"In a decision Monday signed in Los Angeles by 20 judges of the U.S. Bankruptcy Court for the Central District of California, the court found that âthere is no valid governmental basis for DOMA.â
The case involves a gay male couple in California who filed for joint bankruptcy protection as a married couple. The U.S. trusteeâs office, an arm of Justice Department that oversees bankruptcy cases, asked the court to dismiss the case. The trustee said the Defense of Marriage Act, or DOMA, barred the court from recognizing the coupleâs marriage.
The court disagreed, however, saying the couple âdemonstrated that there is no valid governmental basis for DOMA. In the end, the court finds that DOMA violates the equal protection rights of the debtors as recognized under the due process clause of the Fifth Amendment.â" ...more...
"There is to be a new experiment in permitting New Mexican pro se debtors (self-represented debtors) file their bankruptcies electronically. The purpose is to help permit greater access to court, but I suspect another primary purpose is to try to ease some of the burden on court staff, as pro se filers before could take their papers to the clerkâs office, and the clerkâs office would file the papers for them. You see, attorneys must file electronically. Possibly by the end of 2011, pro se debtors will be filing electronically, too." ...more...
"âIn the coming years, a lot of people will still be paying off their student loans when itâs time for their kids to go to college,â said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.
Two-thirds of bachelorâs degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges." ...more...
"As early as this week, federal bank regulators and the nationâs big banks are expected to close a deal that is supposed to address and correct the scandalous abuses. If these agreements are anything like the draft agreement recently published by the American Banker â and we believe they will be â they will be a wrist slap, at best. At worst, they are an attempt to preclude other efforts to hold banks accountable. They are unlikely to ease the foreclosure crisis." ...more...
"After a year of undercover investigation into the loan modification industry, the National Fair Housing Alliance â or NFHA - has released a report that identifies what they describe as âan industry rife with corrupt practices.â The investigation looked at 80 companies and found many were using deceptive and illegal practices to tempt home owners facing foreclosure to use their services. The NFHA says with one in nine homeowners behind on their mortgage payments companies are seizing mortgage modification as a way to profit. For more spoke with Shanna Smith, president of the National Fair Housing Alliance. For information on mortgage issues, she recommends going to the Department of Housing website: www.hud.gov and in the search section look up the phone number of their local HUD approved housing counselor. HUD also runs a hotline: 888-995-HOPE." ...more...
"Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nationâs incomeâan inequality even the wealthy will come to regret." ...more...
"There is a huge disparity with respect to how and how much attorneys are paid, depending upon where in the country they practice. This is not a shocking revelation on its face, given the disparities in the cost of living from city to city. The data reveal, however, variations that go beyond big city=expensive, small town=cheap." ...more...
"NOSTALGIA is running high on Wall Street for the days when junk mortgage underwriting and opaque derivatives trading juiced bank profits. As regulators continue to devise the machinery of the Dodd-Frank regulatory reform law, major financial institutions are working overtime in Washington to bring the good times back again." ...more...
"Mr. Engleâs is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?
No. Charlie Engle wasnât a seller of bad mortgages. He was a borrower. And the âmortgage fraudâ for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.
âThe Department of Justice has made prosecuting financial crimes, including mortgage fraud, a high priority,â said Neil H. MacBride, the United States attorney for the Eastern District of Virginia, in a statement. (Mr. MacBride, whose office prosecuted Mr. Engle, declined to be interviewed.)
Apparently, though, itâs only a high priority if the target is a borrower. Mr. Moziloâs company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis." ...more...
"The U.S. Court of Appeals for the Seventh Circuit last week ruled 2-1 that the statute which governs the debt collection industryâs behavior does not extend to courts and is specifically limited to protecting consumers and those with special relationships with the consumer.
The court, however, did note that its ruling contradicts opinions issued by the Sixth and Ninth Circuit courts. In McCollough v. Johnson, Rodenburg & Lauinger, LLC and Guerrero v. RJM Acquisitions, LLC the courts essentially said FDCPA trumps litigation efforts.
David Cherner, ACA Internationalâs corporate counsel and director of state government affairs, said the Seventh Circuit courtâs ruling in OâRourke vs. Pallisades Acquisition and Pallisades Collections provides an important alternative perspective to what the other two appellate courts have ruled." ...more...
"lthough not specifically enumerated in the report released Tuesday, the FTC said the most complaints against collectors were:
Debt collector calls repeatedly or continuously;
Falsely represents the amount or status of debt;
Fails to send written notice of debt;
Falsely threatens suit
The FTC said that complaints about credit card companies fell 26 percent in 2010, most likely due to new rules in restrictions passed recently by Congress and the Federal Reserve." ...more...
"The studyâs lead author, Dr. David Himmelstein, said, âMassachusettsâ health reform, like the national law modeled after it, takes many of the uninsured and makes them underinsured, typically giving them a skimpy, defective private policy thatâs like an umbrella that melts in the rain: the protectionâs not there when you need it.â" ...more...
"âWe need to come up with a budget that involves shared sacrifice.â Like the Democratic state senators who left the state to prevent a quorum vote on the governorâs proposed legislation, the demonstrators acknowledge the need for budget cuts.
âBudget fix, tax the rich.â Part of that shared sacrifice, they argue, should include increased taxes at the high end. Some pointed to a recent proposal by Gov. Mark Dayton, a Democrat, of Minnesota to do exactly that. Other signs point out that Governor Walker handed out $140 million in new corporate tax breaks before pointing to a budget shortfall of about the same amount (Forbes and others reported on those tax cuts in more detail)." ...more...
"After radically scaling back auto lending during the financial crisis, banks and the lending arms of the automakers have started to issue loans more aggressively. Borrowers of all types are now finding it much easier to obtain a loan compared with a few months ago." ...more...
"Although the FTC has not recently penalized any single data furnisher with a significant FCRA or FACT Act related fine, FCRA experts within the FTC warn that âlenders should be more concerned with the consumerâs right to private legal action with regards to FCRA and FACTA violations than regulatory fines.â Specifically, legal actions related to technical violations of the regulations such as inaccurate reporting of consumer account information to the credit bureaus.
What makes litigation a bigger risk now than in the past? In a recent decision in Bateman v. American Multi-Cinema, Inc., the Ninth Circuit Court opened the door for more class actions seeking exorbitant amounts in statutory damages for technical violations of the FCRA and FACTA with its decision that an FCRA or FACTA class action could not be denied based on the enormity or disproportion between actual and statutory damages, and there was no evidence that lawmakers held the intent to preclude class actions under either of these regulations." ...more...
"Welcome to the online home of the Consumer Financial Protection Bureau (CFPB). This new bureau is in the construction phase, but weâre already hard at work on plans to make consumer financial products and services clearer for Americans." ...more...
"Collection violation penalties should be âat least $5,000,â collectors should include a copy of a consumerâs original credit agreement signature in their communications, and debt should have a âsell-by date,â according to a new report released by two consumer groups.
The report, âPAST DUE: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now,â was issued in January by Consumers Union and East Bay Community Law Center. Consumers Union is best-known for publishing the popular magazine Consumer Reports." ...more...
"During these difficult economic times, legal services providers have experienced a dramatic influx of requests from clients [] who seek assistance in defending improper lawsuits brought by debt collectors. In addition, consumers [] continue to be hounded years after they settle their debt by unfamiliar collection agencies with little information about the debt. These experiences illustrate problems inherent in the current debt collection system. There is a massive industry buying and selling large portfolios of debt for pennies on the dollar, and a court system in which debt collectors are able to get court judgments without proof that they own the debt or even that the consumer owes any debt." ...more...
"âThey donât have anything to fall back on,â said Carl Van Horn, a public policy professor at Rutgers University and co-author of the study. âThey canât sell their house, their retirement savings are nonexistent, they owe all this money in credit card debt â and thatâs a bleak future.â
The growing reliance on plastic has driven the average credit card debt for people over 65 to $10,235, according to a July 2009 study by Demos, a public policy research organization in New York." ...more...
"Net charge-off and delinquency rates in December declined again at five major U.S. credit card issuers, according to data filed by the banks this week with the SEC.
Bank of America, Capital One, Chase, Citi and Discover all reported lower chargeoff rates in December 2010 compared to November. December also marked the second-straight month â and the third in four months â that the five largest card issuers reported charge-off rates below 10 percent." ...more...
"The Supreme Court has settled a means test issue that has caused much debate in lower courts. The question presented was whether a person could deduct âownershipâ expenses for a vehicle when the car was owned free-and-clear (i.e. no payments are currently being made). The Supreme Court ruled that you may NOT claim the ownership expense if you are not in fact making payments on the vehicle. The case was a Chapter 13 case but the language appears to be broad enough to apply to Chapter 7 cases as well. It resolves a spit of authority between Federal Circuit courts by overturning rulings in Fifth, Seventh and Eight Circuits, and affirming a decision from the Ninth Circuit. Whether this changes the practice where you live depends on which line of cases your court was following." ...more...
"Justice Elena Kagen, in her very first decision since ascending to the Supreme Court, ruled in an eight-to-one opinion that the BAPCPA means test is designed to enable creditors to recover as much as possible while ensuring that consumers seeking bankruptcy relief have enough money to maintain a reasonable standard of living.
The case, Ransom v.F.I.A.Card Services, N.A., had been frequently discussed at national bankruptcy symposiums that Iâve attended during the past year. Even though the case is not a victory for the consumer (it is basically a win for the credit card companies), it was not unexpected either. The Supreme Court upheld the decision of the U.S. Court of Appeals for the Ninth Circuit." ...more...
"In numerous opinions, judges have accused lawyers of processing shoddy or even fabricated paperwork in foreclosure actions when representing the banks.
Judge Arthur M. Schack of New York State Supreme Court in Brooklyn has taken aim at an upstate lawyer, Steven J. Baum, referring to one filing as âincredible, outrageous, ludicrous and disingenuous.â
But New York judges are also trying to take the lead in fixing the mortgage mess by leaning on the lawyers. In November, a judge ordered Mr. Baumâs firm to pay nearly $20,000 in fines and costs related to papers that he said contained numerous âfalsities.â The judge, Scott Fairgrieve of Nassau County District Court, wrote that âswearing to false statements reflects poorly on the profession as a whole.â" ...more...
"Credit card balances, referred to as revolving debt in the Fed report, fell again in November. Banks reported that their total credit card debt outstanding fell at an annual rate of 6.3 percent, or by $4.2 billion, to $796.5 billion. While it marked the 27th month of credit card declines, November was the first month that total outstanding credit card debt fell below $800 billion since 2004." ...more...
"Holly Petraeus, whose husband is the U.S. commander in Afghanistan, is helping to create the new Consumer Financial Protection Bureau, setting up the Office of Service Member Affairs.
At a news conference, Petraeus said she has been dealing with the financial pitfalls facing military families for many years. Professionally, she has worked for the Better Business Bureau, protecting members of the military from predatory lending and other abusive practices.
But she said that as a young Army couple, she and her husband, Gen. David Petraeus, made some of the "rookie financial mistakes that I counsel people against today â buying the expensive sports car, signing an apartment rental contract sight unseen based on a slick brochure, putting money into a questionable investment without doing research simply because it promised great returns."
She said they were lucky that it was harder to get into big trouble in those days.
Today, members of the military are often aggressively targeted by those offering high interest rate payday loans and too-good-to-be-true deals on cars. The new office she is helping to create will try to detect such traps and stop them." ...more...
"Starting Jan. 22, bankruptcy filers will be able to take several new and higher exemptions under state law, including an increase in the home equity allowance from $50,000 to $150,000 on Long Island.
Jewelry, art, a computer and a cell phone, as well as pets and their food, have been added to the list of exemptions.
The changes, signed into law Thursday by outgoing Gov. David A. Paterson, were intended to better reflect today's values and cost of living and also bring New York's exemptions more in line with those passed by other states.
Included in this legislation is a new exemption for a vehicle not exceeding $4,000 above the debtor's liens and encumbrances ($10,000 for a vehicle equipped for use by a disabled person) and a raise of the bankruptcy exemption accordingly. This bill would also increase the homestead exemption from $50,000 to either $75,000, $125,000 or $150,000 depending upon the county of residence. (150K for KINGS, QUEENS, NEW YORK, BRONX, RICHMOND, NASSAU, SUFFOLK, ROCKLAND, WESTCHESTER AND PUTNAM counties; 125K for DUTCHESS, ALBANY, COLUMBIA, ORANGE, SARATOGA AND ULSTER counties; 75K for all other counties.)
The new law will also give New Yorkers the option of choosing the Federal bankruptcy exemptions when the new law takes effect." ...more...
"There's been some evidence for Ronald Mann's "Sweat Box" model of consumer debt. The idea is that the law wouldn't actually end up reducing the number of filings; it would just slow down the filings, so that consumers spent longer struggling, and paying high fees and interest charges to the lenders.
But that looked more convincing when they were rising towards their old rates. Now that they're filing again, it may be time to revisit. of course, it's not a big fall--but as I say, the economy is considerably worse now. If it falls further, I think we'll eventually have to say that the bankruptcy reform did produce a measurable, if not enormous, reduction in bankruptcies." ...more...
"The Census Bureau recently reported that the poverty rate in the United States rose to 14.3 percent last year, the highest level in more than 50 years.
Texas and Florida saw the most people fall below the line. In Florida alone, 323,000 people became newly poor last year, bringing the state's poverty total to 2.7 million." ...more...
"On November 16, 2010, the Sacramento County Superior Court broadly enjoined the business practices of Roni Lynn Deutch and her corporation, Roni Deutch A Professional Tax Corporation (collectively, âDeutchâ). Deutch advertised heavily in California and on national television offering to resolve taxpayerâs balances owing to the IRS for less than the amount owed." ...more...
"But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years.
âThe difference is that in the case of debt buyers, the abuses are much worse,â says Richard Rubin, a consumer lawyer in Santa Fe, N.M.
âAt least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.â
The debt in these cases â typically from credit cards, auto loans, utility bills and so on â is sold by finance companies and banks in a vast secondary market, bundled in huge portfolios, for pennies on the dollar. Debt buyers often hire collectors to commence a campaign of insistent letters and regular phone calls. Or, in a tactic that is becoming increasingly popular, they sue." ...more...
"Have you noticed that the lead dogs investigating the mortgage foreclosure mess are not any federal prosecutors or national bank regulators, but rather the state attorneys general? I sure have. I canât think of a more encouraging development." ...more...
"While the credit check has long been a routine part of the job application process, experts are wondering whether it's still a fair screening tool in the wake of a recession that has left 15 million Americans unemployed and unable to keep up with their bills.
In a meeting of the Equal Opportunity Employment Commission last week to discuss the use of credit history as a discriminatory barrier to employment, a panel of legal experts and social scientists explained how the screening practice may be harmful and unfair to American workers.
"A simple reason to oppose the use of credit history for job applications is the sheer, profound absurdity of the practice," said Chi Chi Wu, a staff attorney at the National Consumer Law Center. "Using credit history creates a grotesque conundrum. Simply put, a worker who loses her job is likely to fall behind on paying her bills due to lack of income. With the increasing use of credit reports, this worker now finds herself shut out of the job market because she's behind on her bills. This phenomenon has created concerns that the unemployed and debt-ridden could form a luckless class."" ...more...
"While some other banks have also suggested they can wrap up faulty foreclosures in a matter of weeks, some judges, lawyers for homeowners and real estate experts like Mr. Cole expect the courts to be inundated with challenges to the banksâ actions.
âThis is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law,â Professor Cole predicted." ...more...
"Two major mortgage lenders announced plans to resume taking back homes as soon as possible. But delays over questionable paperwork have not eliminated the threat of foreclosure for homeowners." ...more...
"The third installment of our Making Sen$e foreclosure series on Wednesday's NewsHour. The focus: Boston Community Capital, a privately and publicly funded "community development finance institution."
In this web video exclusive, we talk to Elyse Cherry, CEO of Boston Community Capital, about how and when BCC could be a reasonable alternative for homeowners who are in foreclosure trouble." ...more...
"A total of 288,345 properties were lost to foreclosure in the July-September quarter, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service. That's up from nearly 270,000 in the second quarter, the previous high point in the firm's records dating back to 2005.
Banks have seized more than 816,000 homes through the first nine months of the year and had been on pace to seize 1.2 million by the end of 2010. But fewer are expected now that several major lenders have suspended foreclosures and sales of repossessed homes until they can sort out the foreclosure-documents mess." ...more...
"The case, Simmons v. Roundup Funding, LLC, No. 09-4984, was filed by Lamont and Melissa Simmons after a debt buyer, Roundup Funding, filed a proof of claim during the Simmonsâ bankruptcy proceedings. Roundup claimed the couple owed $2039.21, but the bankruptcy judge in the case agreed with the Simmonâs and found that Roundupâs claim was too high, reducing it to $1,100. The Simmonsâ then sued Roundup for violating the FDCPA by misrepresenting the amount of debt." ...more...
"But if payday lenders are strictly business -- fast cash, no questions asked -- West End wants to get personal.
Applicants have to sit down with a counselor to go over their family budget. Here's Barbara Reed, the director of the program, again.
REED: We want to look at your income, we want to look at your expenses. We want to help you see why you're in this financial crisis. What are some things you could do differently to prevent this financial crisis?
MARILYN ROMAN: They sit down and they show it to you in black and white." ...more...
"Elizabeth Warren answers your questions on the Consumer Financial Protection Bureau, a watchdog for the American consumer, charged with enforcing the toughest financial protections in history" ...more...
"Indeed Internal Revenue Code (âIRCâ) § 61(a)(12) does include in gross income subject to income tax â[i]ncome from discharge of indebtedness.â IRC § 108 posits several exceptions to discharge of indebtedness income. One exception is IRC § 108(a)(1)(B), which excludes discharged debt from gross income to the extent the debtor-taxpayer was insolvent immediately before the discharge of indebtedness." ...more...
"Homeowners like Michelle Puzdrowski, 48, of Chesterfield Township aren't surprised about mishandled paperwork. After her temporary loan modification through Bank of America ended in June, she received three sets of documents from three Bank of America affiliates telling her she owed three vastly different amounts to come current. They varied from $15,000 to $25,000.
"They took over my loan from Countrywide and I don't think they have the original documents or know what the terms were," said Puzdrowski. "It makes me ... angry, mad, sick, depressed. I feel for so many people who are in my situation. It's disheartening."" ...more...
"Charge-offs continue to be a main driver in the rapid fall of credit card debt. Moodyâs recently reported that card charge-offs at major issuers climbed back over the 10 percent mark in August after improving slightly over the early summer. Delinquencies, however, continue to improve, with Augustâs average reading falling below 5 percent. The improvement in delinquencies could signal that charge-offs will decrease in coming months as banks have already worked through a backlog of old bad debt.
Non-revolving debt â like that found in student, auto and personal loans â increased 1.2 percent in August after expanding at a 0.7 percent in July. Total non-revolving debt now stands at $1.592 trillion." ...more...
"The very first case argued today, the opening day of the 2010 Supreme Court term, was Ransom v. MBNA. Ransom presents an issue at the heart of the bankruptcy means test. The question for the Court is whether an above-median-income debtor in chapter 13 who does not currently have a car payment can take the IRS allowance for vehicle âownership expenseâ as part of the means test. This issue also arises in chapter 7. You can find the transcript of the oral argument here. http://bit.ly/ransom_oral_arg" ...more...
"After years of fighting off debt, James Reach has lost the battle -- along with his house. Not unlike many consumed with debt, Reach desperately wants to file for bankruptcy.
But even if he did, he would still be drowning in debt. That's because his debt largely consists of private student loans -- which, by law, cannot be discharged in bankruptcy -- unlike virtually every other type of private loan.
But a subcommittee of the U.S. House passed the Private Student Loan Bankruptcy Fairness Act of 2010 late last month. The bill, co-sponsored by U.S. Rep. Danny Davis, would make it far easier for those who lose a job or otherwise can't pay the loans to get a fresh start.
...
Fifteen percent of all student loans are now private, the College Board says. Unlike student loans from the government, there is no cap on interest rates -- loans can have rates of up to 20 percent -- no flexible payment options and no cancellation rights. This means those who cannot pay are essentially trapped in debt.
....
"For the first time in history, Americans owe more on their student loans than on their credit cards," Sen. Richard Durbin said.
But under the proposed legislation, a version of which Durbin plans to introduce in the Senate, borrowers of private loans would not only be able to discharge the debts through bankruptcy but would also receive protections on interest rates and payment options.
Edie Irons, president of the Institute for College Access and Success, is hopeful that the bill will come before the full Congress before the November elections.
In the meantime, people like Reach struggle to make payments on debt that seems to grow exponentially. He says he's not even sure how much in loans his family owes.
"One of my child's original debts was $37,000. The last invoice we received was for $108,000," he said." ...more...
"The fees were constant: $28 to cash a paycheck. $1.50 for a money order. A dollar or more every time I swiped the prepaid cash card I bought at the drug store.
In all, I racked up $93 in fees in a monthlong experiment of living without a bank and making a go of it on the economic fringe. That works out to $1,100 a year just to spend my own money.
It may be hard to fathom why anyone would live this way, but a federal study last year found that about one in four U.S. households skirts banks and relies on services such as check-cashing and payday loans. Many of these households bring in less than $30,000 a year." ...more...
"Hear and read the transcript of the oral argument about this means test case before the Supreme Court, about whether you can deduct an auto ownership expense if youâre not making payments." ...more...
"Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly." ...more...
"At the heart of the debate is the fact that, like most Western countries, the United States has a progressive tax code that levies higher rates on people with higher incomes. But the concept of class and the issue of taxes are both so politically charged that discussions about how to calibrate those rates and how much income qualifies someone as rich in the contemporary United States are incendiary.
During the presidential campaign in 2008, the Republican nominee, Senator John McCain of Arizona, set off a fury when he was asked the dividing line between middle class and rich and replied that it was $5 million, a statement he said was intended as a joke. Mr. Obamaâs response was $150,000, a figure that is three times the median family income." ...more...
"Ira with Planet Money economics correspondent Adam Davidson on whyâeven after everything President Obama has done to save Wall Street, actions which have led to record profits and bonusesâWall Street seems ungrateful. Adam and producer Jane Feltes head out to a Wall Street bar where they're told by three finance guys that there's no reason to thank the President for saving their jobs. Planet Money is a co-production of This American Life and NPR News. (14 minutes)" ...more...
"For the past several years, the flagging economy has propelled a steady increase in personal bankruptcies. And while filings remain elevated, compared with previous years, they arenât increasing as fast as they once were.
But that doesnât necessarily signal an improvement in the economy (despite reports that the recession is technically over). In fact, bankruptcies are more sensitive to factors like the amount of outstanding consumer credit. In general, shortly after lenders tighten the credit spigot, filings tend to jump because strapped consumers can no longer rely on credit cards or other loans to pull them through a rough patch. But over time, if fewer new loans are being made, filings tend to drop." ...more...
"...I could not have worked on the agency for months and months, possibly over a year. ... So the question was, would the president nominate me [as director] and sort of put me in a pumpkin shell for a while, or could I get started to work immediately? And my own enthusiasm was, I'd really like to get to work right now." ...more...
"Tens of thousands of home foreclosures have been thrown into question because paperwork may not have been reviewed properly at GMAC Mortgage.
The mortgage company, owned by Ally Financial, has halted evictions in 23 states while it goes back to check and, in some cases, correct certain court documents." ...more...
"Law professor Todd Henderson's now-infamous blog entry about the mindset of the rich has incited such an uproar that he felt he needed to delete it.
An "electronic lynch mob," he wrote yesterday, "caused untold damage to me personally." But despite the apparent hate-mail, the original post, which University of California, Berkeley, economics professor Bradford DeLong re-posted for the sake of the "conversation," has also inspired a legitimate debate about an idea that typically makes people either furious or embarrassed. In short, the rich don't feel "rich."" ...more...
"Since the economic collapse, there are not enough jobs being created for the population as a whole, much less for those in the twilight of their careers.
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group â 7.3 percent â is at a record, more than double what it was at the beginning of the latest recession." ...more...
"In selecting Ms. Warren, administration officials picked an outspoken critic of many credit-card and mortgage-lending practices who has called for an overhaul of the way banks treat consumers. Consumer advocates are hoping she plays a central role setting the agency's direction.
"It is our expectation that she will have a critical role in forming the agency," said Lauren Saunders, a managing attorney at the National Consumer Law Center in Washington." ...more...
"The bureau will consolidate employees and responsibilities from a host of other regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and even the Department of Housing and Urban Development. It is expected to have hundreds of employees and a budget of up to $500 million.
The bureau will nominally be part of the Fed, which is obligated to finance its budget, but the central bank may not influence its personnel or rules.
The bureau will have the authority to write and enforce new standards for mortgages, credit cards, payday loans and a wide array of other financial products. A consequence of the arrangement is that Ms. Warren will be working closely with Mr. Geithner, with whom she has occasionally clashed." ...more...
"WASHINGTON â Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening." ...more...
"The poverty rate jumped to 14.3 percent in 2009, up from 13.2 percent a year earlier and the highest rate since 1994, the Census Bureau said Thursday. Last year, a record 43.6 million people were in poverty, up from 39.8 million in 2008 â the third consecutive increase.
"The number of people in poverty in 2009 is the largest number in the 51 years for which poverty estimates have been published," the Census Bureau said." ...more...
"It's not entirely clear why household income should have remained stagnant during all those years when the U.S. economy was growing and top earners were seeing their incomes rise.
Earlier this summer, the FT laid out three of the leading theories:" ...more...
"it's very interesting that the pro se rate for the converted/dismissed chapter 13s is the same as the overall rate. That would suggest that being pro se in chapter 13 is not meaningfully associated with having one's case dismissed or converted." ...more...
"Complaints about debt collectors failing to identify themselves has grown the quickest of all complaint types since 2007. In 2009, complaints about this behavior totaled 21,012 -- up from 1,227 in 2007 -- an increase of 1,612.5 percent." ...more...
"We talk with Gary Rivlin, author of "Broke, USA: From Pawnshops to Poverty, Inc. - How the Working Poor Became Big Business." Rivlin is a former reporter for the New York Times, Industry Standard and East Bay Express." ...more...
"Tax resolution firms are a misnomer. They exact high fees from unassuming consumers and seldom resolve anything. These firms are a relatively recent development, and they are becoming a serious problem for consumers in our country.
Tax resolution scams advertise heavily, offering to settle Federal tax obligations for a fraction of the amount owed, even for âpennies on the dollar.â I have heard ads announcing a âspecial IRS programâ to compromise tax balances, available for only a âlimited time.â One firm claims to have saved âtens of thousands of taxpayers tens of millions of dollars.â
These ads are, of course, false. The IRS rarely accepts an offer in compromise. There are much better ways of securing relief from a threatened or actual levy (seizure) of a taxpayerâs wages or bank account. But the unsophisticated people targeted by the ads do not know this." ...more...
"As the economy again sputters and potential buyers flee â July housing sales sank 26 percent from July 2009 â there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve." ...more...
"At a time when even people with no graduate degree ... often end up six figures in the hole and people getting married for the second time have loads of debt from their earlier lives, it should come as no surprise that debt can bust up engagements. Even when couples disclose their debt in detail, it poses a series of challenges.
When, exactly, are you supposed to reveal a debt of this size during the courtship? Earlier than youâd disclose, say, a chronic illness?" ...more...
"A report released Wednesday found foreclosures have not only economic consequences, but create health problems for the people and families involved - and those effects can ripple throughout a community.
In a survey of nearly 400 residents in two Oakland neighborhoods particularly hard hit by the foreclosure crisis, the Alameda County Public Health Department and Causa Justa/Just Cause, a housing rights group, teamed up to look at how people undergoing foreclosure experience higher levels of stress and increased medical problems. Tenants living in buildings in foreclosure have similar problems." ...more...
"Mark Kantrowitz, publisher of finaid.org, one of the best sites for college financial aid information, has posted a Student Loan Debt Clock, www.finaid.org/studentdebtclock, that keeps a running tally of the outstanding federal and private student loans.
The last time I checked, the total was more than $848 billion. I watched in awe as the last five digits kept changing, pushing the debt load to a level that is, frankly, hard to fathom." ...more...
"For years, long before the recession began, job growth had become increasingly polarized in this country, with high-paid occupations that demand significant amounts of education and training growing rapidly, alongside low-wage, entry-level, service-type jobs that do not require much schooling or special skills, according to David Autor, a labor economist at the Massachusetts Institute of Technology.
The growth of these low-wage jobs began in the 1980s, accelerated in the 1990s and began to really take off in the 2000s. Losing out in the shuffle, according to Dr. Autor, are jobs that he describes as âmiddle-skill, middle-wageâ â entry-level white-collar positions, like office and administrative support work, as well as certain blue-collar jobs, like assembly line workers and machine operators.
The recession appears to have magnified that trend, according to Dr. Autor in a recent paper, released jointly by the Center for American Progress, a left-leaning policy group, and the Hamilton Project, which has a more centrist reputation. From 2007 to 2009, the paper found, there was relatively little net change in total employment for both high-skill and low-skill occupations, while employment plummeted in so-called middle-skill occupations." ...more...
"The evolution of this story leads me to believe that what's happening here is that many people who hold laissez-faire economic views have an extremely difficult time accepting that markets can behave in a collectively irrational and disastrous fashion without any kind of government intervention. This seems to me like a fairly non-controversial proposition. There was no government involvement required to precipitate the Dutch tulip-bulb frenzy of the 1620s, or the tech-stock boom of the 1990s. Ponzi schemes require no implied government guarantee. Yet a lot of people seem to be seeking for a way to claim that government distortion of the real-estate market played a key role in this crisis, even though the evidence shows that what changed was not government, but financial markets. Meanwhile, the government intervention that everyone agrees played a major role, the Fed's decision to keep interest rates unusually low through 2005, doesn't seem to be the focus of the argument that the government is responsible for the crisis." ...more...
"In Moodyâs monthly Credit Card Indices Report, the ratings agency noted that the average delinquency rate for all card issuers fell to 4.93 percent in July, the first time in nearly two years the rate has been below five percent. Likewise, the average charge-off rate fell below 10 percent, to 9.3 percent, for the first time in 14 months." ...more...
"With unemployment high and jobs scarce, work is hard enough to find. But in today's economy, there's an even bigger barrier for some: their home.
Many people can't afford to sell their homes; as many as one-third of homeowners owe more than their home is now worth, and there are few buyers. Americans who once expected mobility now find themselves grounded, with their careers and lives fixed in place. They can't move to better job markets without taking a huge financial hit." ...more...
"students aren't taught about money. "Most of them are pretty clueless when they first start college, unless their parents have really done a great job of educating them about finance all along. We just don't get much financial education in high school, and then parents send their kids off to college kind of like pushing them out of the nest."
Kristof, who wrote the book Taming the Tuition Tiger, says the biggest mistake students make is getting into too much debt, especially by taking out private student loans. She says the loans are easy to confuse with federal loans. But they have much higher interest rates." ...more...
"People filing for Chapter 7 and Chapter 13 consumer bankruptcy protection are facing as much as a 55 percent cost increase as one result of the 2005 comprehensive bankruptcy reforms, according to a new study." ...more...
"Mortgage rates are the lowest in modern memory while affordability, because of price declines of 30 percent in many areas, is the highest in at least a decade. The government is allowing buyers to put only a token amount down, guarantees lenders against default and regularly issues proclamations that the worst is over.
Apparently, all of that is not enough to put a floor under housing. With unemployment steady for month upon month at more than 9 percent, and with millions heavily in debt or simply skittish, many potential buyers are lost to the market." ...more...
"Credit card charge-offs hit a new record high in the second quarter, according to the Fed. Meanwhile, card delinquencies dropped significantly while late payments on real estate loans broke records." ...more...
"The first of a Fed series to be published quarterly on household debt and credit, the 38-page report shows just how tapped out the consumer remains three years after the borrowing bubble burst.
To be sure, the data indicates that consumers are doing what they can to kick their debt habits. But the process is slow.
For example, total consumer debt stood at $11.7 trillion on June 30, down just 6.5 percent from its peak in the third quarter of 2008. The number of open credit card accounts was down considerably â 23.2 percent â from the highs reached during the second quarter of 2008, while mortgage obligations have fallen 6.4 percent from the peak that was seen almost two years ago." ...more...
"So it turns out that the Elizabeth Warren rap video that went âviralâ this week is actually a made-in-Hollywood production.
You know the video, donât you? The one in which a struggling comedian named Ryan Anthony Lumas, dressed in a cowboy outfit, high-steps his way through two minutes of catchy, if ersatz, rap, with lyrics like Sheriff Warrenâs what we need-o/ Sheâs not about the money and the green-o... /She wants to expose the banks and all the greed/ and get rid of unnecessary fees/Which means more money in my pocket?" ...more...
"The two companies have long been the biggest players in the mortgage market, making them natural scapegoats when the market soured â especially among Republicans already suspicious of government involvement in financial affairs. Never mind that publisher Guy Cecala of Inside Mortgage Finance says Fannie and Freddie were not the biggest offenders in backing risky, subprime loans.
"Clearly there was a lot more going on than just Fannie Mae and Freddie Mac purchasing a few bad loans," he says. "In fact, the bulk of the bad loans weren't purchased by Fannie Mae and Freddie Mac.
"Yet, Fannie and Freddie carry the government guarantee; they're supposed to do good things for the housing market. And to some extent, everybody feels they let us down."" ...more...
"Congress has not ignored renters. Last year, it passed a law that lets tenants stay in a home that has been foreclosed upon for 90 days or, in most cases, until the lease runs out.
The stimulus act, passed in February 2009, provided $4 billion to public housing agencies for capital and management activities such as rehabilitating vacant rental units. It also included $2 billion to provide Section 8 housing assistance payments to owners of multifamily rental housing units, which also supports housing for low-income renters.
It also provided $1.5 billion over three years to create a new program for renters called the Homeless Prevention and Rapid Re-Housing Program." ...more...
"Congress has not ignored renters. Last year, it passed a law that lets tenants stay in a home that has been foreclosed upon for 90 days or, in most cases, until the lease runs out.
The stimulus act, passed in February 2009, provided $4 billion to public housing agencies for capital and management activities such as rehabilitating vacant rental units. It also included $2 billion to provide Section 8 housing assistance payments to owners of multifamily rental housing units, which also supports housing for low-income renters.
It also provided $1.5 billion over three years to create a new program for renters called the Homeless Prevention and Rapid Re-Housing Program." ...more...
"Rules that take effect Sunday will prohibit banks from charging certain overdraft fees without a customer's permission, but the rules will not prevent banks from posting a customer's daily checking account transactions in a way that maximizes overdraft fees.
Whether banks abandon this fairly common ordering practice in the wake of this week's court ruling against Wells Fargo remains to be seen." ...more...
"" ...more...
"A San Francisco judge's scathing ruling ordering Wells Fargo to pay its customers $203 million for manipulating debit transactions to maximize overdraft fees might be just the start of troubles for the bank.
U.S. District Judge William Alsup's 90-page opinion Tuesday described Wells Fargo's motive as profiteering and said the San Francisco-based bank's goal was to "maximize the number of overdrafts and squeeze as much as possible" out of customers." ...more...
"Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in lines of credit in 2009." ...more...
"The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
...
Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter." ...more...
"Most of the tax cuts that were a signature domestic initiative of George W. Bushâs presidency carried an expiration date of Dec. 31, 2010, to limit the potential revenue losses; supporters assumed that they would be extended when the time came.
....
For their part, Republicans do not emphasize the impact of extending the tax cuts for wealthy individuals. Rather, they say Mr. Obama is about to spring a big tax increase on many small-business owners who file their taxes as individuals. Analyses from the Joint Committee on Taxation and the Tax Policy Center, a nonpartisan research organization, show that less than 3 percent of filers with small-business income pay at the top two income tax rates, and many of those are doctors and lawyers in partnerships.
Extending them for the next 10 years would add about $3.8 trillion to a growing national debt that is already the largest since World War II. About $700 billion of that reflects the projected costs of tax cuts for those in the top 2 percent of income-earners." ...more...
"So here we go again, three years later, and G.M. is buying a subprime company to finance cars for people who may not be able to afford them, and given high unemployment levels, may not even have jobs to start saving for one. And yes, we, the taxpayers, still own 61 percent of the automaker.
âAfter G.M.âs experience with GMAC, which left G.M. seeking a taxpayer bailout, you have to think the company and, in turn, the taxpayers would be better off if G.M. focused on making cars that people want to buy and stayed clear of repeating its effort to make high-risk car loans,â Senator Charles E. Grassley, the Iowa Republican, said in a statement." ...more...
"âMost people, if they have the means to do it, would like to make sure they have someplace to live before they let a house go into foreclosure,â Goldman said. âThey know theyâre going to kill their credit score, so they make sure to get a home they wonât mind staying in.â
Freddie Mac and larger rival Fannie Mae cracked down on buy and bail in 2008 by banning in most cases the use of rental income from an existing home to qualify for a new mortgage unless the first property has at least 30 percent equity.
âThere were a number of policies put in place to squelch this type of activity, but people who are savvy can always find a way to circumvent policies,â said Burns of the Federal Housing Finance Agency, which regulates Fannie Mae, Freddie Mac and the 12 federal home loan banks.
In addition to the rental restrictions, the mortgage giants now usually require reserves equal to six months of loan payments for both homes. The measures have been sufficient to block most applicants who attempt to buy and bail, said Pete Bakel, a spokesman for Washington-based Fannie Mae." ...more...
"Consumers now owe more on their student loans than their credit cards.
Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today â both federal and private â total some $829.785 billion, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com." ...more...
"What we want is for President Obama to gut it up and appoint a real consumer advocate to serve as director of the new Consumer Financial Protection Bureau. Created by the Wall Street reform bill that Obama recently signed into law, the CFPB can be an independent, aggressive force to battle banker scams and rip-offs on behalf of ordinary Americans. However, it will only be that if an extraordinarily knowledgeable, feisty fighter who is unafraid to confront the banksters is put in charge.
That description fits Warren perfectly. The first thing you need to know about her is that Treasury Secretary Timothy Geithner, the tail-wagging puppy of Wall Street, is trying to block her because America's banking barons both despise and fear Warren. I don't know about you, but I find that wonderfully refreshing! What finer testimonial could a consumer protector have than to be vehemently opposed by the special interests she would regulate?" ...more...
"Many Democrats and liberal interest groups have launched an all-out campaign to have Elizabeth Warren nominated as the first consumer financial-affairs regulator. Many bankers and Republicans are hell bent on stopping her.
Few are paying attention to who is waiting in the wings.
The White House's other top candidate, Treasury Department Assistant Secretary Michael Barr, has, like Ms. Warren, spent years calling for stricter curbs on the banking industry. While little known to the public, he has left behind a more-detailed paper trail than Ms. Warren, offering clues to how he might run the agency." ...more...
"Stephen Colbert interviews Barney Frank wants Elizabeth Warren to head the consumer protection agency because she's an extraordinarily zealous pragmatist. (video 07:39)" ...more...
"Whether Elizabeth Warren heads the nascent Bureau of Consumer Financial Protection has become the first pitched battle in how the recently passed financial reform laws are put into practice. If the episode so far is any indicator, the battle between interests and reformers is far from over." ...more...
"Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customerâs credit card or other unsecured debt." ...more...
"Collecting old consumer debts has become a labyrinthine industry involving buyers of secondhand debt, muddled statutes of limitation, lawsuits and, sometimes, abusive tactics." ...more...
"Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers." ...more...
"Major credit issuing banks reported last week that charge-offs and delinquencies in their credit card portfolios eased in June, almost across the board." ...more...
"Ms. Warrenâs supporters want President Obama to nominate her as the first head of a new consumer financial protection bureau created by the legislation he signed into law last week. They say that Ms. Warren, who conceived the idea and helped shepherd its passage into law, is the only acceptable choice to finish the project." ...more...
"The progressives seem to have made Elizabeth Warren their cause-du-jour. I have a long and complicated history with Elizabeth Warren, so allow me a moment to offer my long and complicated thoughts on her. Really long. So long that I had to break it into two parts--scholarship and public life--in order to prevent the nausea, daytime sleepyness, and intracranial bleeding that might otherwise result. Consider yourselves warned." ...more...
"Last week CNN Money published a slideshow of ten ex-debt collection workersâ experiences in the industry centered on âin their own wordsâ accounts of why they left the profession.
The absence of any overt editorial framing by CNN appears on the surface of things to present these former debt collectors in a disinterested manner. But calculated editorial decisions were in fact made to draw readers into the content through understated sensationalism and, once hooked, color their perceptions of the accounts receivable management industry in the same worn-out coat of paint as so many previous accounts of third party debt collectors." ...more...
"The signature achievement â a response to the 2008 financial crisis that fundamentally alters the relationship between Wall Street and the federal officials charged with regulating it â is a culmination of two years of fierce lobbying and intense debate over how to deal with the financial excesses that tipped the nation into the worst recession since the Great Depression." ...more...
"Here are 10 ways the new law will help consumers like you:" ...more...
"A long recession and a slow recovery have combined to force more Minnesotans to turn to the bankruptcy system." ...more...
"The vote by the Senate was 60 to 39, with three Republicans from the Northeast joining with the Democrats in voting to advance the legislation.
One Democrat, Senator Russ Feingold of Wisconsin, voted against the bill, saying it was still not strong enough to prevent future crises. And the seat held by Senator Robert C. Byrd, Democrat of West Virginia, who died last month, is vacant." ...more...
"These people share their experiences in the collections industry -- and why they left.
(robust discussion follows article. - See related post from InsideArm 7/ed.)" ...more...
"Collection law firms are able to handle such large volumes of cases because computer software automates much of their work. Typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.
Once the data is obtained by a law firm, software like Collection-Master from a company called Commercial Legal Software can âtake a file and run it through the entire legal system automatically,â including sending out collection letters, summonses and lawsuits, said Nicholas D. Arcaro, vice president for sales and marketing at the company.
No group has definitive statistics on debt collection lawsuits, but federal regulators, collection lawyers and judges say the numbers have increased and are straining the court system.
Most consumers fail to show up in court, and those who do rarely have a lawyer. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment." ...more...
"Retail sales are up, and credit card debt is down. Why is that bad news?" ...more...
"Collection agencies, like everyone else, are now using social networking sites to track down or keep tabs on people they're interested in." ...more...
"One reader pitched in with her own story, about her 11-year-old son answering a phone call from a debt collector. The person on the phone proceeded to inform the child that his mother hadnât made a student loan payment in seven years." ...more...
"Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population." ...more...
"Democratic leaders in Congress say their top pick for the post is Elizabeth Warren, the high-profile Harvard law professor and an outspoken critic of what she sees as a too-cozy relationship between government and bankers." ...more...
"ive years ago, bankruptcies soared to record levels as debt-strapped consumers raced to seek court protection before Congress changed the law to curb what had been considered an epidemic of filings.
For a while, filings dropped, but the recession has forced so many people into dire straits that bankruptcies in California are setting new records." ...more...
"The settlement requires reimbursement to consumers who were overcharged. BOA, in addition to agreeing not to lie, steal, or file documents without reviewing them, will also have to follow notice procedures similar to those that are already required or are likely to be required for all mortgage companies once new Bankruptcy Rule 3002.1 becomes effective in December, 2011. The United States Trustee (UST) Program assisted the FTC in its efforts. This settlement is the first significant positive result of increased UST scrutiny of mortgage lenders, although the extent of the USTâs participation is not known." ...more...
"For years, a house in California was a machine for building wealth, and few were the families that could resist temptation. They refinanced their loans to pay for vacations, operations, tuition or, frequently, investments in more houses. Many of these households ended up struggling after the crash.
The lenders were often aggressive in making loans and frequently were predatory. The extent to which this absolves the borrowers of responsibility is at the center of the current debate.
The original legislation said borrowers who took cash out of their houses would be shielded as long as they used the money for home improvements. In its current form, the proposed law is not quite so forgiving.
The bill that passed the Senate by a lopsided vote of 30 to 4 would protect former homeowners up to the amount of their original loan. For instance, a family that took out a $500,000 mortgage to buy a house and then refinanced and took cash out, swelling their loan to $600,000, would be released from claims on the original sum but remain vulnerable on the $100,000." ...more...
"For all the focus on the historic federal rescue of the banking industry, it is the governmentâs decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion." ...more...
"The long recession has delivered an abundance of customers â debt-saturated Americans, suffering lost jobs and income, sliding toward bankruptcy. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customerâs debt is actually reduced.
State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industryâs proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.
Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors." ...more...
"Debt settlement companies offer help to individuals in financial turmoil. Peter S. Goodman reports on the growing criticism the industry has inspired." ...more...
"Federal prosecutors have charged 1,215 people in hundreds of mortgage fraud cases that resulted in estimated losses of $2.3 billion, administration officials said on Thursday, unveiling a crackdown after the housing market collapse." ...more...
"Countrywide, now a unit of Bank of America, was once led by Angelo Mozilo and was the nationâs largest mortgage lender in the glorious, pre-crisis days of the housing boom. But it was also a predatory institution, and the F.T.C., citing Countrywideâs serial abuse of troubled borrowers, extracted a $108 million fine from Bank of America last week.
That money will go back to some 200,000 customers whom Countrywide forced to pay outsized fees for foreclosure services. These included billing a borrower $300 to have a propertyâs lawn mowed and levying $2,500 in trusteesâ fees on another borrower, when the going rate for that service was about $600.
Though Countrywideâs mortgage contracts specifically barred such practices, they served the company well by generating income during downturns when it was harder to keep making money off new mortgages. This âcounter-cyclical diversification strategy,â as Countrywide called it, was designed to âextract the last dollar out of the pockets of the most desperate consumers,â said Jon Leibowitz, the F.T.C. chairman." ...more...
"You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts." ...more...
"Lawsuits filed by consumers against debt collection agencies are on pace to hit another record this year, according to the latest stats from a firm tracking the legal actions." ...more...
"The F.T.C. and the United States Trustee Program, which enforces federal bankruptcy laws for the Justice Department, said that in numerous instances Countrywide misled customers or bankruptcy court officials.
The fees, which were billed as the cost of services like property inspections and lawn mowing, were grossly inflated as Countrywide created new subsidiaries to hire vendors to supply the services, allowing the company to increase fees in the process, the commission said.
The F.T.C. has not yet established how much will be paid to each consumer, in part, Mr. Leibowitz said, because Countrysideâs record keeping was âabysmal.â The $108 million settlement represents the F.T.C.âs estimate of consumer losses, but does not include a penalty, which the commission is not allowed to impose." ...more...
"The Supreme Court has just issued its opinion in Hamilton v. Lanning, a case interpreting the "means test" that the 2005 bankruptcy amendments added to chapter 13. The issue was chapter 13's requirement that the debtor commit his or her "projected disposable income" to a plan, and whether projected disposable income should be determined in a mechanical way (based on the debtor's income for the past six months as defined in the means test) or whether projected disposable income should include reliance on some estimate of the debtor's income in the future during the plan period. The Supreme Court rejected the mechanical approach, which was argued for by the debtor trustee and the National Association of Consumer Bankruptcy Attorneys, and adopted the forward-looking approach. The decision, authored by Justice Alito, was 8-1, with a dissent by Justice Scalia arguing the plain meaning of the text supported the mechanical approach." ...more...
"Among the more glaring bookkeeping fictions on big banksâ balance sheets today are the values they assign to all of the bounteous second mortgage loans. doled out during the mortgage bonanza. As any realist will attest, many of these loans are worth little, and yet there they sit, at fantasy levels, on banksâ ledgers." ...more...
"âNot many a day passes without my receiving an emergency ex parte motion seeking to stop a foreclosure or eviction, and theyâre increasing every week,â notes Los Angelesâ Dukes. âOnce a trickle, theyâre now rapidly flowing, and weâre prepared for a flood.â His colleague, Judge Mary Thornton House, says almost all civil litigants claim indigence and ask for a waiver of court fees. âAlthough the applicants are genuinely needy, granting a fee waiver takes water out of a well that cannot be replenished.â" ...more...
"A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
This type of modification does not beg for a lenderâs permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads." ...more...
"Debt buying companies â a fast-growing segment of the debt collection industry â engage in systematic debt collection abuses that particularly target low-income New Yorkers and people of color, according to a report issued today by The Legal Aid Society, MFY Legal Services, Inc., NEDAP, and Urban Justice Center." ...more...
"The BBB serving Central California is warning businesses to avoid Fresno-based collection agency Maxwell, Turner & Associates, Inc. The agency has an F-rating for 32 unanswered complaints within the last 10 months." ...more...
"As measures take effect this year to overhaul credit card and overdraft practices, "What you're essentially doing is squeezing the balloon, (so fees) are going to pop up somewhere else," says Bart Narter, senior vice president at Celent, a bank research and consulting firm. Yet, ongoing regulatory scrutiny means that new fees rolled out by the industry will generally be "more fair," and unlike overdraft charges, won't disproportionately affect the poorest consumers, Narter says." ...more...
"The vote was 59 to 39, with four Republicans joining the Democratic majority in favor of the bill. Two Democrats opposed the measure, saying it was still not tough enough." ...more...
"Consumer Protection: Creates a federal regulator to write and enforce rules protecting consumers of financial products like checking accounts, mortgages and payday loans. Increases the authority of state regulators to enforce protections." ...more...
"The holdouts, Senators Maria Cantwell of Washington and Russ Feingold of Wisconsin, joined with 39 Republicans to block an effort by the majority leader, Harry Reid of Nevada, to wrap up debate on the bill." ...more...
"New credit card and overdraft restrictions will save U.S. consumers from being charged at least $5 billion in fees this year alone at the largest U.S. retail banks and credit card companies, a USA TODAY analysis reveals." ...more...
"Apparently, when you publish your Social Security number prominently on your website and billboards, people take it as an invitation to steal your identity.
LifeLock CEO Todd Davis, whose number is displayed in the companyâs ubiquitous advertisements, has by now learned that lesson. Heâs been a victim of identity theft at least 13 times, according to the Phoenix New Times.
Thatâs 12 more times than has previously been known." ...more...
"The Senate is currently debating legislation that would call for the farthest reaching overhaul of financial regulation since the Great Depression. The House, mainly along party lines, passed a similar overhaul bill in December. The New York Times has highlighted some of the bill's 378 amendments below." ...more...
"U.S. loans at least 30 days overdue, a signal of future write-offs, dropped to 6.73 percent in April compared with 7.07 percent in the previous month, the Charlotte, North Carolina- based bank said today in a regulatory filing. Write-offs climbed to 12.71 percent last month from 12.54 percent in March." ...more...
"Dale Mingilton is with the BBB and says more people are calling them and saying these crooks are calling them, claiming to be from a collection agency and simply harassing them to get their money. Mingilton says the number of complaints on these phony collection agencies has gone up 131 percent from last year." ...more...
"The Senate approved a series of amendments unfavorable to the banking industry over the last week, but this one was widely regarded as the most surprising. Meddling in dealings between businesses generally is anathema to Republicans and a relatively low priority for Democrats.
And this was not an easy vote. Lobbyists for the wounded but formidable banking industry made clear to some senators that this decision would affect future campaign donations, according to people who participated in those conversations.
But retailers mounted an unusually effective yearlong campaign to frame the issue as a chance for Congress to help small business. A leading trade group for chain retailers worked with small-business groups to make sure that every time a senator held a town hall meeting back home, a local business owner showed up to ask about card fees." ...more...
"Even accounting for a host of differences between peopleâincluding attitudes to risk, income levels and credit scoresâthose who fell behind on their mortgages were noticeably less numerate than those who kept up with their payments in the same overall circumstances. The least numerate fell behind about 25% of the time. For those who did best on the test, the number of payments they missed was almost 12%. A fifth of the least numerate group had been in foreclosure, but only 7% of those who were more numerically adept had." ...more...
"The rate of increase across the entire nation was 10%. There are 29 judicial districts that saw a rate of increase greater than 10%. Those judicial districts fall principally in three areas: the plains and west coast, the upper Midwest, and the northeast. Thus, the national statistics do mask a great deal of regional variation." ...more...
"A small but growing number of lawyers and consumers are fighting back against bill collectors and violations of the Fair Debt Collection Practices Act." ...more...
"With straightforward majority reasoning of "ignorance of the law is no excuse" and a dissent that included fears of plaintiffs' attorneys run amok, the ruling has something for everyone. But an ARM legal expert notes that the impact will be immediate and burdensome for collection lawyers." ...more...
"Margot Saunders, an attorney with the National Consumer Law Center, said bankruptcy may be the best option for some people to wipe out liability for their second loans.
"People with a second mortgage who are facing foreclosure should go to bankruptcy to get rid of the unsecured second-mortgage note," she said. "They should do it as soon as they're foreclosed upon, because that's when they're at rock-bottom, not when they've started to rebuild (their finances)."" ...more...
"Under the new so-called Card Act, credit card companies will have a harder time raising or imposing fees. But some consumer advocates worry the law will have unintended side effects. John Ulzheimer, a credit expert with Credit.com, talks with Michele Norris about these concerns." ...more...
"Through polling and focus groups, Luntz sculpts what he calls "words that work." He instructed Senate Republicans in talking about health care, and now a leaked 17-page memo he wrote in January tells the GOP which words to use in the financial regulation debate." ...more...
"A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.
RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009." ...more...
"The Congressional Oversight Panel has released a report saying federal mortgage aid programs aren't doing enough to help more families out of foreclosure. Stacey Vanek-Smith talks to panel chair Elizabeth Warren." ...more...
"What Chase â one of the strongest of the big banks â might be really worried about is not the primary mortgages it services but the $133 billion in home equity loans and lines of credit it carries on its own books.
The question of what happens to these secondary loans in a mortgage modification was at the heart of the Congressional hearing on Tuesday.
Investors who own the primary loans argue that the others should be second in line, getting only the money that is left over after they have been satisfied. But banks like Chase, which own the majority of second loans, want a better deal. Since they have the power to disrupt any modification, the result so far has been a standoff." ...more...
"At the end of February, total outstanding revolving debt was $858.1 billion, a level not seen since September 2006. Since its peak in September 2008, credit card debt has declined $117.6 billion, with most of the decline due to bank chargeoffs (âChargeoffs a Key Driver in Declining Credit Card Balances,â Sept. 23, 2009)." ...more...
"According to the FTCâs complaint, the operators do business as Ecash and GeteCash, offering loans of up to $1,000 to be repaid from a borrowerâs upcoming paycheck. They require online loan applicants to check a box indicating their agreement with loan terms. These terms include an inconspicuous statement consumers often donât see, which states that their wages will be garnished to cover delinquent loan payments. The statement allegedly attempts to circumvent federal requirements, including a debtorâs right to revoke a garnishment agreement." ...more...
"FreeCreditReport.com, of course, is not free. To use the service, you must enroll in "Triple Advantage," a credit monitoring service that you can get for the not-so-low price of $14.95/month. The Federal Trade Commission (FTC) had recently taken action to prevent these sorts of abusive practices. Under rules that just went into effect, any web site that purported to offer a "free" credit report had to include prominent text and a link at the top of the page directing consumers to AnnualCreditReport.com, which is the legitimate site offering consumers to request a free credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.
In what appears to be a transparent attempt to evade this new regulation, FreeCreditReport.com's owner, Experian, has begun charging $1 for FreeCreditReport.com and says it will donate the $1 to charity. Under Experian's reasoning, FreeCreditReport.com is no longer "free," and hence it doesn't have to comply with the new FTC rule." ...more...
"Consumer loan delinquencies fell in most loan categories in the fourth quarter of 2009, marking the second quarter in a row of broad-based improvement, according to the American Bankers Associationâs Consumer Credit Delinquency Bulletin." ...more...
"Banks benefited from the change in bankruptcy law by limiting losses and accelerating the credit cycle.
First, banks swamped consumers with easy credit. They offered unlimited credit cards, and jumbo mortgages to borrowers with little or no documentation. Then, the banks piled on home equity lines and refinancing. Throughout the process they took thousands of dollars in fees along the way." ...more...
"Wisconsin and Iowa passed laws to curtail procedural abuses that officials said were common in cases handled by Talx. Connecticut fined Talx ( pronounced talks ) and demanded an end to baseless appeals. New York, without naming Talx, instructed the Labor Department staff to side with workers in cases that simply pit their word against those of agents for employers." ...more...
"The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market." ...more...
"One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.
Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on." ...more...
"Federal courts reported over 158,000 bankruptcy filings in March, or 6,900 a day, a rise of 35 percent from February, according to a report to be released on Friday by Automated Access to Court Electronic Records, a data collection company known as Aacer. Filings were up 19 percent over March 2009. The previous record over the last five years was 133,000 in October." ...more...
"President Obama will sign a bill today that ends a 45-year-old program under which banks and other private-sector lenders such as Sallie Mae receive a federal subsidy for making government-guaranteed college loans.
...
The bill also makes changes to the new income-based repayment program, which helps borrowers who have large debts relative to their income.
Under this program, loan payments are limited to 15 percent of discretionary income and any balance remaining after 25 years is forgiven. The new bill will limit payments to 10 percent of discretionary income and forgive balances after 20 years. But these changes only apply to loans taken out by new borrowers on or after July 1, 2014. They are not retroactive.
Public-service workers on the income-based repayment plan can have their remaining balances forgiven after 10 years. That does not change under the new law." ...more...
"The Obama administration on Friday announced broad initiatives to provide more assistance to homeowners who are behind on their mortgage or owe more than their house is worth." ...more...
"The adjustments announced today are tailored to accomplish these goals by helping a targeted group of borrowers.
Eligible homeowners for modifications under HAMP must, for example: live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship. The new flexibilities for the modification initiative announced today continue to target this group of homeowners.
The FHA refinance options being announced today will provide more opportunities for lenders to restructure loans for some families who owe more than their home is worth. This is a voluntary program for lenders and homeowners. The population eligible for a FHA refinance must be current on their mortgage. This rewards responsible homeowners and creates stabilizing incentives in the housing market." ...more...
"The legislation will make it easier to pay back student loans, by reducing the share of income that a graduate must devote to loan payments and by accelerating loan forgiveness â but not right away. Those who take out new loans after July 1, 2014, will have to devote 10 percent of their income to payments, down from the current 15 percent, and those who keep up their payments will have their loans forgiven after 20 years, reduced from the current 25.
âIncome-based repayment is a fantastic addition to the Senate bill that will allow over a million students to avoid being crushed by unmanageable levels of debt,â said Rich Williams, a higher-education advocate at the U.S. Public Interest Research Group.
With the new legislation, students will have to take out their loans through their collegeâs financial aid office, instead of using a private bank." ...more...
"She is an Oklahoma native, a janitorâs daughter, a bankruptcy expert at Harvard Law School and a former Sunday School teacher who cites John Wesley â the co-founder of Methodism and a public health crusader â as an inspiration. She brims with cheer, yet she is she is such a fearsome interrogator that Bruce Mann, her husband, describes her as a grandmother who can make grown men cry. Back at Harvard, Ms. Warrenâs teaching style is âSocratic with a machine gun,â as one former student put it. In Washington, she grills bankers and Treasury officials just as relentlessly." ...more...
"Bank of America said on Wednesday that it would begin forgiving some mortgage debt in an effort to keep distressed borrowers from losing their homes." ...more...
"Regardless of the outcome of the movements to amend and modify the new bankruptcy law, parties with a particular interest in consumer bankruptcy should expect higher levels of filing in 2010 and 2011, with Chapter 7 filings accounting for an outsized proportion of consumer filings." ...more...
"For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal governmentâs biggest attack on economic inequality since inequality began rising more than three decades ago." ...more...
"Back when rates ran at 7 or 8 percent, making extra payments offered what amounted to a guaranteed return on your money. When youâre ridding yourself of debt that costs you much less, however, itâs easier to imagine a future when you could more easily earn a higher return by investing those potential extra mortgage payments someplace else." ...more...
"Civil lawsuits brought by consumers against debt collectors, debt purchasers and other credit reporting agencies increased 52.5 percent in Fiscal Year 2009, according to data released Tuesday by the Administrative Office of the U.S. Courts." ...more...
"President Obama and Congressional leaders have vowed to enact the farthest reaching overhaul of financial regulation since the Depression. On Dec. 11, the House voted 223 to 202 for an overhaul bill shepherded through by Representative Barney Frank, chairman of the Financial Services Committee. After several months of negotiations with Republicans, the chairman of the Senate Banking Committee, Christopher J. Dodd of Connecticut, introduced a Democratic bill on March 15. The committee approved the bill, 13-10, on March 22 with technical amendments and sent it to the Senate floor. Here is a look at how the bills compare:" ...more...
"One fast-growing American industry has become a conspicuous beneficiary of the recession: for-profit colleges and trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed $30,000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics and advocates for greater oversight of financial aid." ...more...
"Under a sensible bankruptcy system, households in severe financial distress ought to be able to discharge their debts if they are willing to do two simple things: turn over all assets and make payments out of future income, to the extent that either exceeds a low and nationally uniform threshold. If debtors wanted to keep assets against which they have borrowed, they should have to pay the fair value of the assets, but nothing more.
A rational bankruptcy system would also scrap the separate chapters altogether, along with the complicated paperwork now required to document and justify the chapter choice in each particular case. There would be simple, separate tracks automatically determined by each familyâs financial position. Families with no substantial income or assets â the great majority of bankrupt households â should face a process as simple as filing a 1040EZ tax form." ...more...
"Bankruptcy lawyers sometimes forget: not everyone worried about debt actually needs to file bankruptcy. The anxiety that brings someone to your office may not be grounded in a real understanding of the rights of their creditors." ...more...
"A federal law that bars attorneys from telling clients who are contemplating bankruptcy to take on more debt is not an unconstitutional restriction on the free-speech rights of lawyers, the Supreme Court decided Monday
Attorneys may give their clients any advice that does not lead to an abuse of the bankruptcy system, the court ruled unanimously in an opinion written by Justice Sonia Sotomayor." ...more...
"Under new rules, public service employees can enjoy full loan forgiveness after making 10 years of monthly payments on their federal loans. So it's technically more than just teachers who are eligible; it's also those working in government, military service, emergency management, public safety, law enforcement, public health and elsewhere." ...more...
"Senator Bob Corker, the Tennessee Republican who is playing a crucial role in bipartisan negotiations over financial regulation, pressed to remove a provision from draft legislation that would have empowered federal authorities to crack down on payday lenders, people involved in the talks said. The industry is politically influential in his home state and a significant contributor to his campaigns, records show." ...more...
"Studies estimate about one-quarter of all defaults are voluntary "walkaways," also known as strategic defaults and jingle mail (for the sound the abandoned keys make in a mailbox).
The phenomenon reflects shifting attitudes toward debt and commitment. In an era where high-profile investors have walked away from multibillion-dollar real estate projects and more than 2 million Americans have gone through foreclosure, defaulting has begun to lose its stigma.
Being underwater - owing more than a home is worth - is a big trigger for those strategic defaults. Often another problem, such as job loss, divorce or higher monthly payments, is involved. But some homeowners just don't want to be saddled with a huge mortgage when they have no equity." ...more...
"The Supreme Court on Monday issued this ruling, in a case called Milavetz, Gallop & Milavetz v. United States, holding that the First Amendment did not stand in the way of 2005âs Bankruptcy Abuse Prevention and Consumer Protection Actâs prohibition on bankruptcy advisers giving certain kinds of advice to clients. Specifically, the court found constitutional a provision in the law barring debt relief services, including lawyers, from advising clients to incur more debt for filing for bankruptcy." ...more...
"This part is bad for the attorneys:
âAttorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under the BAPCPA. By definition, âbankruptcy assistanceâ includes several services commonly performed by attorneys, e.g., providing âadvice, counsel, [or] document preparation,â §101(4A). Moreover, in enumerating specific exceptions to the debt-relief-agency definition, Congress indicated no intent to exclude attorneys. See §§101(12A)(A)â(E). Milavetz relies on the fact that §101(12A) does not expressly include attorneys in advocating a narrower understanding.â
And this part is bad for the debtors:
âSection 526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose. The statuteâs language, together with its purpose, makes a narrow reading of §526(a)(4) the natural one. Conrad, Rubin & Lesser v. Pender, 289 U. S. 472, supports this conclusion. The Court in that case read now-repealed §96(d), which authorized reexamination of a debtorâs attorneyâs fees payment âin contemplation of the filing of a petition,â to require that the portended bankruptcy have âinduce[d]â the transfer at issue, id., at 477, understanding inducement to engender suspicion of abuse. The Court identified the âcontrolling questionâ as âwhether the thought of bankruptcy was the impelling cause of the transaction,â ibid. Given the substantial similarities between §§96(d) and 526(a)(4), the controlling question under the latter is likewise whether the impelling reason for âadvis[ing] an assisted person . . . to incur more debtâ was the prospect of filing for bankruptcy. In prac- tice, advice impelled by the prospect of filing will generally consist of advice to âload upâ on debt with the expectation of obtaining its discharge. The statutory context supports the conclusion that §526(a)(4)âs prohibition primarily targets this type of conduct.â" ...more...
"Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed." ...more...
"The Federal Reserve reported Friday that consumer borrowing rose by $4.96 billion in January, surprising economists who were looking for borrowing to decline by $4.5 billion. It was the first gain after a record 11 straight declines and the largest increase since July 2008.
In percentage terms, the overall increase was an advance of 2.43% and followed a revised 2.23% drop in December.
The strength in January came from a $6.62 billion increase in borrowing for auto loans and other types of nonrevolving debt. That represented a 5.01% gain and followed a 3.69% rise in the auto loan category in December.
Credit cards and other types of revolving credit fell $1.66 billion or 2.3%. Even with the decline, it was a much smaller drop than the 12.9% plunge in December. Credit card borrowing has now fallen for a record 16 straight months, although the January decline was the smallest since July." ...more...
"Moodyâs reported that credit card charge-offs advanced above 11 percent in January, for the first time ever, to 11.15 percent. The ratings agency predicted that credit card charge-offs will peak at close to 12 percent in the next several months.
Moodyâs reported that the delinquency rate â which it calculates as payments more than 30 days late -- dropped to 5.96 percent in January, the first month below 6 percent since September. The amount of a cardholderâs balance paid slid to 17.53 percent in January after increasing in December." ...more...
"As the government cracks down on the way banks charge fees for overspending on debit cards, the industry is mounting an aggressive campaign aimed at keeping billions of dollars in penalty income flowing into its coffers. Chase and other banks are preparing a full-court marketing blitz, which is likely to include filling mailboxes with various aggressive and persuasive letters, calling account holders directly, and sending a steady stream of e-mail to urge consumers to keep their overdraft service turned on." ...more...
"After Congress passed credit card legislation last May, new rules governing credit card companies take effect Monday. Some changes to the way companies can set interest rates and pay schedules already took effect last August. For an idea of what consumers can expect from the new changes, we spoke to Adam Levin, chairman and founder of Credit.com, a consumer education and advocacy group. He's also the former director of New Jersey's consumer affairs division." ...more...
"The Federal Reserve's new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010." ...more...
"In his latest book, Nobel Prize-winning economist Joseph Stiglitz claims President Obama has failed to spark economic reform by reverting to orthodox politics instead of advocating a new economic model. Stiglitz joins us in the studio to discuss the book, "Freefall: America, Free Markets, and the Sinking of the World Economy."" ...more...
"Beginning Monday, some of the more outrageous practices of credit card issuers will be outlawed. But just like a bully on a playground who doesn't punch when the teacher is watching, lenders will find ways to continue pummeling consumers." ...more...
"Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives â potentially for years to come." ...more...
"The number of homeowners falling behind on their mortgage payments almost always rises with the start of winter. But late last year, the total fell slightly, the Mortgage Bankers Association said in its quarterly delinquency report.
âWeâve got fewer new problems coming into the system,â Jay Brinkmann, the groupâs chief economist, said in a briefing. The improvement in the fourth quarter, he added, âfrankly surprised us.â
The system, however, is still overwhelmed with millions of distressed homeowners. In a series of events in the Las Vegas area on Friday, President Obama said he was designating $1.5 billion from the Troubled Asset Relief Program to develop assistance programs in five of the most troubled states, including Nevada.
.......
The housing market is at a difficult juncture. Last summerâs modest recovery in home prices has apparently ceased. The governmentâs effort to compel lenders to modify troubled mortgages has done relatively little. And the pool of pending foreclosures is so large that it is likely to be a drag on the market for years.
About one in seven homeowners with a mortgage is struggling to pay it, an unprecedented level of distress that threatens to undermine the fragile economic recovery." ...more...
"After a U-turn in the politics of poverty, food stamps, a program once scorned as âwelfare,â enjoys broad new support. Following deep cuts in the 1990s, Congress reversed course to expand eligibility, cut red tape and burnish the programâs image, with a special effort to enroll the working poor. These changes, combined with soaring unemployment, have pushed enrollment to record highs, with one in eight Americans now getting aid." ...more...
"There's nothing free about FreeCreditReport.com's credit-monitoring service, which carries a $14.95-per-month charge. Erica Possin went to the site to check her credit before buying a new car. She says she entered her credit card information and received her report, but she didn't realize she would be automatically enrolled in the monitoring service.
.....
The only authorized site from which to get a truly free report is AnnualCreditReport.com, which is run by the FTC. Most people are legally entitled to a no-cost report once a year from each of the credit agencies: Equifax, Experian and TransUnion" ...more...
"âPeople like me are beginning to feel like suckers,â Mr. Koellmann said. âWhy not let it go in default and rent a better place for less?â
After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administrationâs loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
New research suggests that when a homeâs value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying." ...more...
"Recent research on healthcare showed a startling shift in the American populace, especially among young people: incomes are plummeting for those just starting out. Combined with new communications habits, accounts receivables management experts believe the shift may be permanent." ...more...
"Frontline episode being rebroadcast this week on PBS stations nationwide, outlines the âartâ of deceptive business practices that credit card companies seem to feel is their birthright." ...more...
"Bankruptcy lawyers noted it's not only layoffs and firings driving people to insolvency as the economic downturn drags on. The losses of once-regular overtime pay and full-time status have left consumers unable to stay current on monthly payments that in the past were no problem to handle.
"The under-employment issue is huge," said Milwaukee bankruptcy attorney James Miller. "More and more people are working multiple jobs but they are making less now than they were five years ago and trying to make a go of it on these limited incomes." ...more...
"So many people have lost their jobs, says John Farver, another Seattle area bankruptcy lawyer, that they can no longer afford what they easily could have six months ago. "They need their own personal bailout," he says. "Just like the fat cats on Wall Street."" ...more...
"The number of U.S. student loan accounts has risen 29 percent to 69 million over two years, according to Equifax, while balances have jumped by $105 billion to $527 billion.
"We've never seen this high student loan activity," said Dann Adams, president of Equifax's U.S. Information Systems." ...more...
"Credit card issuers are concerned, of course, that these rules will crimp their profits. So some companies are devising creative ways to generate new revenue.
An example is Alliance Data Systems, a big issuer of private-label credit cards like those that specialty stores offer. It has decided to levy a $1 monthly surcharge to customers who choose to receive account statements by mail.
Proof, yet again, that if you close the door, they will come in through the window. And if you close the window, they blow through the door.
The $1 statement fee from Alliance certainly seems to flout the spirit of both the Fedâs regulations and the Credit Card Accountability Responsibility and Disclosure Act of 2009. But because it is labeled a statement fee, it does not appear to violate the letter of the law, which barred credit card issuers from levying separate fees when a consumer submitted a payment, whether âby mail, electronic transfer, telephone authorization, or other means, unless such payment involves an expedited service by a service representative of the creditor.â" ...more...
"Steven Colbertâs take on the âWalk Away From Your Mortgageâ article in the Sunday New York Times magazine... (video, 6 minutes)" ...more...
"November marked the 14th consecutive month for credit card debt contraction. Since September 2008, more than $101 billion in credit card debt has been wiped off the books of credit issuing banks.
Non-revolving debt, like that found in auto, student and personal loans, declined by $3.8 billion, or at an annual rate of 2.9 percent." ...more...
"Businesses â in particular Wall Street banks â make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral â perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. Former Treasury Secretary Henry M. Paulson Jr. declared that âany homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator â and one who is not honoring his obligation.â (Paulson presumably was not so censorious of speculation during his 32-year career at Goldman Sachs.)" ...more...
"The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.
And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets." ...more...
"For consumers, the move makes perfect sense. Credit unions are not-for-profit cooperatives, and they're owned by their members. They offer the same products and services banks do, but unlike banks, credit unions exist only to serve their members -- not to generate profits for outside investors. Members typically experience that difference in the form of better rates and lower fees. In 2008 (the latest data we have available), consumers saved $9.2 billion by using credit unions rather than banks, or the equivalent of $104 per member and $198 per family. And that's just on average. Loyal members -- those who use credit unions extensively -- often receive total financial benefits that are much greater than the average." ...more...
"If I were a debt collector, I would be pretty unhappy about an AP article that came out yesterday. It portrays the career as one for felons and bullies. And indeed, there are some collectors who do use unlawful tactics. But there are also bad eggs in other industries who sometimes break the law. There are dirty doctors, lawyers, cops and hedge fund managers, to name a few. I don't think the article fairly singles out the collections industry." ...more...
"As the sour economy leaves people less and less able to pay their debts, the collection abuses have become so flagrant and numerous that state and federal authorities have moved to shut down several Buffalo-area agencies where the most heartless and bullying telephone calls originated. At least 20 people have been sued or arrested on criminal charges.
The regional Better Business Bureau said that in the past three years, it has gotten 4,562 complaints about debt collection agencies in western New York. Of 213 agencies it has graded in the region, 104 were given an "F." And of all the complaints about debt collection received by the Better Business Bureau nationwide last year, about 1 in 10 involved a company in western New York." ...more...
"The AP gathered data from the nation's 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before.
Arizona saw the fastest increase, a jump of 77 percent from the year before, followed by Wyoming (60 percent), Nevada (59 percent) and California (58 percent)." ...more...
"Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system." ...more...
"âThe simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,â said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. âWhen you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone elseâs house and then committing arson.â" ...more...
"The fragile housing sector showed signs of firming up, according to a report from the National Association of Realtors, with existing home sales climbing a greater-than-expected 7.4 percent in November, to a seasonally adjusted annual rate of 6.54 million, up from 6.09 million in October." ...more...
"Members of the accounts receivable management industry are increasingly finding themselves under attack from state attorneys general and civil lawsuits brought by consumers alleging violations of the Fair Debt Collections Practices Act (FDCPA). ARM leaders have always been well-advised to understand the legal and regulatory environments applicable to the industry, but that need is even more important today." ...more...
"Fannie Mae, Freddie Mac and Citigroup Inc. have announced that they will suspend evictions during the holidays.
Freddie Mac and Fannie Mae said they have ordered mortgage servicers and foreclosure attorneys to suspend evictions for occupied single-family homes owned by the government-controlled companies between Dec. 19 and Jan. 3, 2010. Foreclosure processes will continue, however." ...more...
"Now, even before most of the Credit CARD Act's provisions have gone effective, a new report from the Center for Responsible Lending finds that the card industry has already invented a new bunch of tricks and traps." ...more...
"The measure, called The Wall Street Reform and Consumer Protection Act (H.R. 4173), passed the full House on a 223-202 vote. No Republicans voted for the bill, while some moderate Democrats voted against it as well. The Senate could have similar divisions, according to Peterman. The Senate has not yet marked up the proposals for consideration, and is unlikely to do so in 2009." ...more...
"After falling a month earlier, financial institutions reported rising credit card defaults in November. Bank of America (NYSE: BAC) still leads all big banks with a 13 percent default rate, but Citigroup (NYSE: C) posted the largest rise as defaults jumped 1.5 percent to top 10 percent in November.
JP Morgan Chase (NYSE: JPM), the nationâs largest credit card issuer, saw defaults rise to 8.81 percent in November, which marks a new high for the year. However, the bank did report a small drop in delinquencies, which represent payments 30 days past due, to 4.9 percent from 4.95 percent in October." ...more...
"More than half of the nationâs unemployed workers have borrowed money from friends or relatives since losing their jobs. An equal number have cut back on doctor visits or medical treatments because they are out of work." ...more...
"Historically, the government has reported such figures in terms of how many students default within two years -- a figure that stands at 6.7 percent of student borrowers overall and about 11 percent at for-profit schools.
But the new three-year numbers, though preliminary, give a clearer picture of whether a student at a particular school will default, so the government will soon begin using them to help decide which colleges qualify for taxpayer-supported student aid programs" ...more...
"Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government. Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out." ...more...
"Figures released this week by the Federal Reserve showed that Americans owed $10.8 trillion on home mortgages at the end of the third quarter, down 2.2 percent from a year earlier and the lowest level since mid-2007.
Similarly, the Fed said that outstanding credit card bills in October totaled $888 billion, down 8.5 percent from a year earlier. That number was the lowest since March 2007.
Those trends do not, however, necessarily indicate that Americans have paid down their debts and are starting to lead the more frugal lives that some financial planners have been recommending for years. There has undoubtedly been some of that, but the declines also indicate that banks have been forced to write off a lot of bad debts and have grown more stingy in granting credit.
As can be seen from the accompanying charts, banksâ credit card write-offs have soared, to an annual rate of 10.2 percent in the third quarter of this year." ...more...
"The House on Friday approved a Democratic plan to significantly tighten federal regulation of Wall Street and the financial sector, advancing a far-reaching Congressional response to the financial crisis still reverberating through the economy.
After three days of floor debate, the House voted 223 to 202 to approve the measure, which did not get a single Republican vote. It creates a new agency to oversee consumer lending, establishes new rules for transactions that contributed to the meltdown, and seeks to reduce the threat that one or two huge companies on the verge of collapse could bring down the economy." ...more...
"In Jerman, the defendant law firm filed a complaint seeking foreclosure of real property owned by the consumer plaintiff. The complaint included a validation notice that provided the debt would be assumed valid unless the consumer disputed the debt in writing within 30 days. The plaintiff filed a complaint alleging the defendant violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement." ...more...
"Filing bankruptcy reshapes America.
This chart from the EconomicCrisisBlog.com graphically illustrates what many of us in the Atlanta area already know â Georgia has one of the nation's highest rates of bankruptcy filings." ...more...
"The nationâs employers not only have stopped eliminating large numbers of jobs, but appear to be on the verge of rebuilding the American work force, devastated by the recession." ...more...
"Tucked into the 2005 Bankruptcy Reform Act is some strange language forbidding lawyers from advising clients âto incur more debt in contemplation ofâ a bankruptcy filing.
Indeed, it sounds like a sound proscription: nobody wants lawyers encouraging clients to load on debt before filing for bankruptcy in the hope that the debt will soon be erased. But is such a prohibition constitutional?" ...more...
"Several justices seemed convinced on Tuesday that a federal law restricting the advice bankruptcy lawyers may offer was a bad idea. But they had differing ideas about what the Supreme Court should do about it." ...more...
"Student loans are a way of life in America, and the federal government guarantees most of those loans. The question now before the Supreme Court is what the obligations of the lender and the borrower are when a student can't pay." ...more...
"State Bar prosecutors took action last month against five more lawyers under investigation for loan modification misconduct, bringing to 14 the number of attorneys who have resigned or been placed on involuntary inactive enrollment since creation of the barâs Loan Modification Task Force in April." ...more...
"Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments. The Treasury Department also will wait until reductions are permanent before paying cash incentives that it promised to mortgage companies that lower loan payments.
âTheyâre not getting a penny from the federal government until they move forward,â Mr. Barr said." ...more...
"Lending by U.S. banks plunged by 2.8 percent in the third quarter, the largest drop since at least 1984 and the fifth consecutive quarter in which banks have reduced lending, the Federal Deposit Insurance Corp. reported Tuesday.
The decline in lending is emerging as a serious impediment to economic recovery. Banks reduced the amount of money extended to their customers by $210.4 billion between July and September, cutting back in almost every category, from mortgage lending to funding for corporations." ...more...
"âThis has really become the insurance system for the country,â said Susan R. Limor, a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket one recent afternoon included medical debts of more than $1,000." ...more...
"As Congress debates how to rein in credit and debit card companies in the United States, Australiaâs experience is being pointed to as an example of just how tricky that can be: for one thing, if regulators limit one fee or rate, banks are likely to find another way to keep revenue flowing." ...more...
"An increasing amount of the bankruptcies are being filed by middle class Americans, suffering from the perfect storm of the highest unemployment levels since the early 1980s, rapidly declining home equity, tight credit and previously incurred debt, reports USA Today, citing a report from Elizabeth Warren, Harvard Law School Leo Gottlieb professor of law and chair of the Congressional Oversight Panel on the Troubled Asset Relief Program (TARP) and Deborah Thorne, Ohio University associate professor of sociology." ...more...
"The fallout from the recession has cut deeply into the housing security, employment and income of many Americans. But some parts of the country are clearly faring better than others. Here, three interactive maps show foreclosure and jobless rates as well as household income by county." ...more...
"New Law Offers Some Help
If graduates can prove that they are hardship cases, they can defer loan payments for up to three years. And since Congress passed the Income-Based Repayment Plan this summer, borrowers now can sign up for a program that will limit their payment to 15 percent of their incomes." ...more...
"The unemployment rate fell in 13 states, including Massachusetts, where it declined to 8.9 percent from 9.3 percent; New Hampshire, with a drop to 6.8 percent from 7.2 percent; and West Virginia, which fell to 8.5 percent from 8.9 percent.
The number of states with at least 10 percent unemployment held at 14 last month, the Labor Departmentâs report showed. In the states reporting record jobless rates, California was at 12.5 percent; South Carolina, 12.1 percent; Florida, 11.2 percent; and Delaware at 8.7 percent. The District of Columbia also set a high with an 11.9 percent rate." ...more...
"with roughly a quarter of the stimulus money out the door after nine months, the accumulation of hard data and real-life experience has allowed more dispassionate analysts to reach a consensus that the stimulus package, messy as it is, is working.
....
In interviews, a broad range of economists said the White House and Congress were right to structure the package as a mix of tax cuts and spending, rather than just tax cuts as Republicans prefer or just spending as many Democrats do. And it is fortuitous, many say, that the money gets doled out over two years â longer for major construction â considering the probable length of the âjobless recoveryâ under way as wary employers hold off on new hiring." ...more...
"F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent.
For decades, most F.H.A. loans were in low-cost states like Texas and Michigan. Under the agencyâs loan limits, houses along the coasts were usually too expensive to qualify. In 2007, fewer than 4,400 F.H.A. loans were made in California, according to the research firm MDA DataQuick, and none were in San Francisco.
The Economic Stimulus Act of 2008 helped change that by temporarily doubling the maximum loan the F.H.A. insured, to $729,750. A two-unit property like the one bought by Mr. Rowland and his friends can be insured for up to $934,200.
âF.H.A. financing was a lost language in San Francisco, the real estate equivalent of Aramaic,â said Michael Ackerman, the agent who represented Mr. Rowland and his friends. âOnce the limits were raised, smart buyers started calling.â" ...more...
"Unless foreclosure modification efforts begin succeeding on a permanent basis â which many analysts say they think is unlikely â millions more foreclosed homes will come to market.
âIâve been pretty bearish on this big ugly pig stuck in the python and this cements my view that home prices are going back down,â said the housing consultant Ivy Zelman.
The overall third-quarter delinquency rate is the highest since the association began keeping records in 1972. It is up from about one in 14 mortgage holders in the third quarter of 2008." ...more...
"Consumer lawsuits against debt collectors claiming violations of the Fair Debt Collection Practices Act (FDCPA) are on the rise.
With SearchReceivables.com, you can quickly search hundreds of ARM sites for the latest news on FDCPA lawsuits. (see a search on "FDCPA lawsuits"). Although this a site for creditors, it follows both creditor-focused and consumer-focused websites and blogs." ...more...
"Senator Chris Dodd (D-Conn.) has introduced the Senate side version of financial reform legislation that would put control of much of the financial services industry, including mortgages and credit cards, under the control of a new, independent Consumer Financial Protection Financial Agency (CFPA).
The CFPA would also oversee the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA)." ...more...
"Starting today, we're enabling people everywhere to find and read full text legal opinions from U.S. federal and state district, appellate and supreme courts using Google Scholar. You can find these opinions by searching for cases (like Planned Parenthood v. Casey), or by topics (like desegregation) or other queries that you are interested in. For example, go to Google Scholar, click on the "Legal opinions and journals" radio button, and try the query separate but equal. Your search results will include links to cases familiar to many of us in the U.S. such as Plessy v. Ferguson and Brown v. Board of Education, which explore the acceptablity of "separate but equal" facilities for citizens at two different points in the history of the U.S. But your results will also include opinions from cases that you might be less familiar with, but which have played an important role." ...more...
"U.S. credit card companies said on Monday that defaults fell more than expected in October, but delinquencies mostly rose in a sign consumers remain under stress and the sector can expect more pain ahead.
The drop in defaults reflected a decline in late payments earlier this year thanks to tax refunds and economic stimulus actions." ...more...
"The U.S. Department of Agriculture said Monday that 17 million U.S. households experienced some sort of food shortage in 2008, up 31% from 13 million households in 2007.
In 2008, a year marked by rising food costs and recession, the prevalence of "food insecurity" in the U.S. soared to the highest levels in the history of the USDA's national annual survey, which began in 1995.
According to the survey, 14.6% of U.S. households experienced food insecurity at least some time during 2008, up from the 11.1% of U.S. households in 2007 that fell into the USDA's definition of food insecure." ...more...
"Accounts receivable management companies are shifting their collection strategies to include more settlement offers and payment arrangements as debtors struggle through a recession that shows little sign of letting up on the American consumer.
In insideARMâs most recent Credit & Debt Collection Industry Confidence Survey, more than 72 percent of collection agency respondents said that they have tried âmore payment arrangementsâ in the past six months in an effort to increase revenue. Nearly 68 percent of debt buyers responded in a similar way." ...more...
"The Federal Housing Administration, the government agency whose loan-insurance programs have become a crucial source of support for the housing market, said on Thursday that its cash reserves had dwindled significantly in the last year as more borrowers defaulted on their mortgages.
âThere is a real risk. Nobody has a crystal ball,â said Shaun Donovan, secretary of Housing and Urban Development.
The agency released an audit that spelled out the rapid deterioration of its finances. It is tightening loan standards in hopes it will not become another drain on the United States Treasury, but is reluctant to clamp down so much that it snuffs out the tentative recovery in housing." ...more...
"For many families across the country, the greatest damage inflicted by this recession has not necessarily been financial, but emotional and psychological. Children, especially, have become hidden casualties, often absorbing more than their parents are fully aware of. Several academic studies have linked parental job loss â especially that of fathers â to adverse impacts in areas like school performance and self-esteem." ...more...
"Some of the key points of the bill include:
â Establishing a consumer financial protection agency that will end abusive practices and provide clear and accurate information to Americans.
â Ending the era of "too big to fail" regulation in order to prevent large and complex companies from harming the U.S. and global economy. This would include imposing new capital requirements on such companies and requiring them to write their own "funeral plans" in the event that they fail.
â Creating a single federal bank regulator in lieu of a system in which multiple regulators have unnecessary overlap and conflicting regulators. Dodd said the system now in use enables large banks to shop for a regulator that fits their needs rather than the public interest." ...more...
"Since September 2008, Americans have shed $86.2 billion in credit card debt. Although many credit consumers restrained card spending, much of the mathematical credit for the plunge can be given to soaring charge off rates at banks (âBanks Charging Off Debt at a Higher Rate than in Great Depression,â Oct. 28)." ...more...
"Banks began raising interest rates and pulling back credit lines about a year ago as delinquencies crept upward and regulators discussed reforms. As banks have become more aggressive in making changes, lawmakers have accused them of trying to impose rate increases before many of the new rules take effect in February.
On Monday, the Federal Reserve provided new evidence of the banksâ actions. About 50 percent of the banks responding to the Fedâs survey said they were increasing interest rates and reducing credit lines on borrowers with good credit scores. About 40 percent said they were imposing higher fees. The banks also said they were demanding higher minimum credit scores and tightening other requirements." ...more...
"Gov. Schwarzenegger signed Senate Bill 94 Oct. 11, immediately prohibiting any person, including attorneys and real estate licensees, from collecting an advance fee to perform foreclosure relief services. The new law, adopted as an emergency measure, closes a loophole that permitted foreclosure scam artists to exploit the ability to charge advance fees.
It is now unlawful for any licensed attorney or real estate agent âwho negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower ⌠to claim, demand, charge, collect, or receive any compensation until after the [attorney or agent] has fully performed each and every service the licensee contracted to perform or represented that he, she, or it would perform.â" ...more...
"Advanta became notorious among small business borrowers for offering credit cards at attractive low interest rates and then raising APRs steeply, often to over 30%. The company stopped all new credit card lending in May and entered into a settlement with the FDIC over the interest rate hikes, which the regulator said constituted unfair and deceptive practices. (Advanta didnât admit or deny liability in the settlement.) When settlement checks began arriving in September, the average settlement of $131 seemed laughable to many business owners who were still paying sky-high interest on thousands of dollars of charges they made under the initial low rates. At least one group filed a lawsuit seeking class action status. (An Advanta spokesman declined to comment about any pending litigation.)" ...more...
"In upscale communities such as Los Altos, Greenbrae and Alamo, where median prices top $1 million, about twice as many households received default notices from January to September as in the same period in 2008, according to recorders' office data compiled by MDA DataQuick, a San Diego real estate research firm.
The same is true for mid-scale areas with median prices around $500,000, such as Walnut Creek, Los Gatos and Campbell.
...
Overall, 17 percent of Bay Area default notices this year were in communities where the median price topped half a million dollars, up from 12.2 percent last year." ...more...
"In all, more than one out of every six workers â 17.5 percent â were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.
This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.
The official jobless rate â 10.2 percent in October, up from 9.8 percent in September â remains lower than the early 1980s peak of 10.8 percent.
The broader rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina." ...more...
"In separate actions to address Americansâ continuing economic hardship, the government moved Thursday to assist long-unemployed workers and struggling businesses, as well as home buyers and homeowners facing foreclosure.
Fannie Mae, the federally controlled mortgage company, announced a Deed for Lease program in which those in danger of eviction may be able to stay as tenants in their houses for at least a year.
At the same time, Congress gave final approval to a stimulus measure that will extend unemployment benefits for the longtime jobless, aid that will bring total assistance for many to nearly two years. Other provisions of the bill will expand two popular tax breaks â one for home buyers, the other for businesses operating at a loss." ...more...
"Borrowing by consumers for revolving credit, including credit cards, fell at an annual rate of 13.3 percent in September, the same as August. This category has declined for a record 12 straight months.
Borrowing for non-revolving loans, including auto loans, dropped at an annual rate of 3.7 percent in September after edging up 0.1 percent in August. The August gain reflected the surge in car sales as consumers rushed to take advantage of the government's Cash for Clunkers program.
The $14.8 billion overall decline in borrowing left total consumer credit at $2.46 trillion in September. The 7.2 percent annual rate of decline followed a 4.8 percent drop in August. The Fed's report doesn't include mortgages or other loans secured by real estate." ...more...
"The jobless figure stands in contrast to other economic indicators that suggest the economy is beginning to turn around. Gross domestic product grew in the third quarter for the first time in more than a year, suggesting the deep recession may be ending.
But the new unemployment data are sparking concern that the recovery in jobs may be lagging even further than usual behind the broader economic recovery. The unemployment rate is expected to continue rising into early next year and remain high through most of 2010." ...more...
"In the six decades since the government began compiling such data, the highest level of unemployment came at the end of 1982, when it hit 10.8 percent. Despite the widespread assumption that the recession has already ended, and even as the economy has resumed growing, the governmentâs latest snapshot of the labor market released Friday testified to the uncomfortable truth that expansion had yet to translate into jobs." ...more...
"Federal law guarantees free credit reports each year, but many consumers who got theirs from FreeCreditReport.com unintentionally paid for an expensive credit monitoring service" ...more...
"Just flip on the television or radio, or surf the Internet, and you will find countless ads placed by companies offering to help you get a loan modification.
The only problem is, it's tough to know if they truly will be able to help you. Why? A new study reveals that servicers actually make more money when a loan goes into foreclosure than if it is modified." ...more...
"mortgage servicers -- companies that collect monthly mortgage payments and distribute them to investors -- have found it's cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors, according to "Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior," a new report from the National Consumer Law Center (NCLC)." ...more...
"Slowly, Wall Street is reprising its critical role in the credit markets. In the third quarter investment banks sold nearly $20 billion worth of car loans, six times as much as in the same period of 2008. The yields on bonds backed by credit-card payments have fallen drastically, a sign that investor appetite is back. And the volume of mortgage securities, the largest segment of the credit market, is on track this year to nearly match the peak levels of 2005. "The core consumer finance sectors seem to be reasonably intact," says Joseph R. Mason, a finance professor at Louisiana State University." ...more...
"Ending a year of contraction, the United States economy grew in the third quarter, the Commerce Department said on Thursday. But even if a recovery is technically in the offing, job seekers likely will not begin to feel the benefits for months to come." ...more...
"Moodyâs Investors Service reported earlier this week that bank charge-offs had reached $116 billion year to date, or 2.9 percent of outstanding loans on an annualized basis. According the report, the rate is higher than the charge off rate during the Great Depression.
...
âWhile the latest reports of net charge-offs to banks are alarming and unprecedented, the credit economy during the Great Depression and the one we have now are very different from each other,â cautioned Dana Wiklund, research director for Financial Insights' Risk Management Advisory Service." ...more...
"None of the credit cards offered online by the 12 largest U.S. banks would meet requirements of new federal curbs on the industryâs rates and fees, a report from the Pew Charitable Trusts said.
All of the cards surveyed used practices considered âunfair or deceptiveâ by the Federal Reserve, according to the report released today by the Philadelphia-based nonprofit organization. The study examined almost 400 cards advertised by banks and credit unions and compared terms for cards offered in July 2009 and December 2008." ...more...
"Michael Moore's Capitalism: A Love Story made a splash, but critic John Powers says its critique of capitalism is "the kind of scattershot tirade I used to hear in my college dorm." Better object lessons: New documentaries, Schmatta and American Casino, that do far more to explain how grand economic forces shape our daily lives." ...more...
"In 2008, only 10% of chapter 7 debtors had above-median incomes. And nearly all of that 10% passed the means test once expenses are deducted. According to its report, the U.S. Trustee filed a motion to dismiss for abuse in 2,881 Chapter 7 cases--that works out to 4% of all above-median cases and .4% of all chapter 7 cases. Those numbers are hard to square with any fear that there will be any measurable change in the fraction of people made ineligible for chapter 7 this year. Importantly, these numbers donât reflect how the very existence of a median income test may discourage people from filing a bankruptcy case or may push people directly to chapter 13 rather than risking an abuse determination. But again, that effectâwhatever its magnitudeâprobably wonât change with median income fluctuation." ...more...
"Lawmakers worked this week on defining what the agency covers and what it doesn't.
These kinds of credit will face scrutiny: payday loans, paycheck cashing, debit cards, overdraft protection and mortgages.
Providers would have to register with the new agency, pay its fees and fines; and face its regulators.
Not included are: auto dealers, retail stores, doctors, lawyers and anyone else who's not in the finance business but who might extend credit." ...more...
"A recent study suggests that most homeowners have qualms about abandoning a mortgage that they can afford to pay, even if it straps them to an investment thatâs unlikely to pay off anytime soon
But if the house has lost significant value, or if many neighbors walk away from their mortgages, the study says, âstrategic defaultsâ are significantly more likely.
It is an increasingly common question facing homeowners, many of whom have seen their properties lose large amounts of equity in recent years: would you give up a home that is considered to be âunderwaterâ even if you could still afford the monthly payments?" ...more...
"A committee in the U.S. House of Representatives was expected to move forward this week with legislation that would create a new regulator, the Consumer Financial Protection Agency (CFPA), which could supplant the Federal Trade Commission as the primary regulator for collection firms.
A bill currently before the House Financial Services Committee, H.R. 3126, would also take regulatory powers from the Federal Reserve and other agencies and place it in the hands of independent regulators who would oversee products such as credit cards and other financial services. As such, the CFPA would oversee the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA)." ...more...
"Over months of debate, the agency's scope and scale have been cut back through the bill-drafting process in the U.S. House of Representatives Financial Services Committee.
The panel is likely to approve a bill that would exempt a long list of businesses from CFPA jurisdiction but expose large banks to tougher new oversight.
The new agency would have purview over credit cards, mortgages, bank fees and other financial products. It would strip existing agencies, including the Federal Reserve, of consumer protection duties, centralizing them.
A full House vote was not expected until November. The outlook for the proposed agency was unclear in the Senate, where lawmakers are moving more slowly on financial reform." ...more...
"Yesterday, the Senate Judiciary Committee held a hearing titled âMedical Debt: Can Bankruptcy Reform Facilitate a Fresh Start.â The hearing examined medical bankruptcies in America, and witnesses included CAP fellow Elizabeth Edwards and Kerry Burns, a Rhode Island mother who was forced into âfinancial ruinâ by her late sonâs medical bills.
One of the highlights of the hearing was when Sen. Al Franken (D-MN) questioned Hudson Institute Senior Fellow Diana Furchtgott-Roth about medical bankruptcies. Franken asked Furchtgott-Roth â who claimed that moving towards a European-style system of universal health care would increase bankruptcies â about how many medical bankruptcies there were in countries that have universal health care, like Switzerland and France. Furchtgott-Rott repeatedly told Franken that she didnât âhave that number,â and Franken informed her that the number was actually zero:" ...more...
"On October 5th, 2009, the Ninth Circuit Bankruptcy Appellate Panel (BAP) published its decision in In re Martinez, wherein it concluded that debtors who strip junior liens off mortgages are not entitled to deduct those payments from the chapter 13 projected disposable income test. While the decision was ordered published, the 3 judge panel disagreed with each other in a 2-1 split decision. Unfortunately, it also technically comprised three seperate appeals, yet all of which were entirely unopposed by the debtors with only the Chatper 13 Trustee arguing the appeal in favor of eliminating the deduction." ...more...
"Credit card customers say they arenât going to take it anymore, with CNBC's Suze Orman." ...more...
"A lawsuit was filed in May alleging that Phoenix-based Nationwide Asset Services, Inc. (NAS) defrauded consumers in New York who were seeking help with their debts. The judge ruled for the state, finding that 1,981 consumers had been victims of fraud.
......
The court found that the majority of NAS customers were promised a 25 to 40 percent reduction in their outstanding debt but never saw such reductions. Only one-third of one percent of consumers received such savings. The other customers suffered continued harassment and lawsuits by creditors and debt collectors and had their credit ratings destroyed." ...more...
"The Associated Press sent an article out over its wires Thursday afternoon that was innocuously titled, "States raise limits on creditors as debtors squirm." But the main focus of the article is the growing trend of individual states passing laws targeting the accounts receivable management industry that supersede the Fair Debt Collection Practices Act (FDCPA).
The AP article notes that several states or local government entities have already proposed or passed laws stricter than the FDCPA, with most focusing on debt purchasing. More states are expected to follow suit.
The list of states â North Carolina, Idaho, Colorado, New York, Arkansas, Maryland, New Jersey and Massachusetts, along with New York City â is not new to the ARM industry." ...more...
"National consumer credit laws already prohibit collection agencies from harassing, deceptive, or unfair practices like telling neighbors or family about what is owed, or calling before 8 a.m. or late at night. Since the recession started, at least a half-dozen states have adopted additional limits, like imposing statutes of limitation on collections and adding opportunities to punish abusive practices in court. Other states may follow suit.
Lawmakers are increasingly focusing on outfits that buy bad debt from credit card companies and other lenders for pennies on the dollar and profit when they collect more than they paid." ...more...
"Older Americans are heading into and through retirement with a boatload of debt. They're carrying everything from mortgages and home-equity loans to big credit-card balances, and many are finding the burdens harder and harder to bear. In the last eight years, the over-55 crowd has become the age group most likely to declare bankruptcy, according to the AARP." ...more...
"The Senate Committee on the Judiciary, Subcommittee on Administrative Oversight and the Courts has scheduled a hearing on "Medical Debt: Can Bankruptcy Reform Facilitate a Fresh Start?" for Tuesday, October 20 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building." ...more...
"The Chicago Cubs filed for bankruptcy as part of a plan by owner Tribune Co. to sell the baseball team to the family of TD Ameritrade Holding Corp.âs founder, Joe Ricketts." ...more...
"Local governments, like many businesses, are struggling with a data glut. Agencies collect huge amounts of information about topics as diverse as building permits, potholes, Medicaid cases and foster-child placements. Technology, according to computer experts and government officials, can be a powerful tool to mine vast troves of government data for insights to streamline services and guide policy.
âThe mistake people make is to think that collecting the data is the endgame,â said Michael R. Bloomberg, the mayor of New York. The real payoff, he said, takes another step. âWe actually use the data,â he noted.
Indeed, New York has been a pioneer among cities in the use of computing firepower to sift through data to improve services. It began in the 1990s with the cityâs CompStat system for mapping, identifying and predicting crime. The system, combined with new policing practices, reduced crime rates in New York and was later adopted by Los Angeles, Philadelphia, Baltimore and other cities." ...more...
"In what must seem like a cruel joke to many, the accounts proved the most dangerous for those closest to retirement. During the market downturn, the 401(k)s of 55-to-65-year-olds lost a quarter more than those of their 35-to-45-year-old colleagues. That's because in your early years, your 401(k)'s growth is driven mostly by contributions. You control your own destiny. But the longer you hold a 401(k), the more market-exposed it becomes. It's a twist that breaks the most basic rule of financial planning." ...more...
"The Federal Reserve reported late Wednesday that revolving debt, mostly from credit cards, dipped at an annual rate of 13.1 percent in August. Almost $10 billion in credit card accounts outstanding were wiped off of banksâ books in the month. Both numbers are among the highest ever reported for a month.
August marked the 11th consecutive month of declines in credit card debt. Since September 2008, when card debt peaked at an all-time high of $975 billion, banks have shed nearly $76 billion in card account balances. The Fed said that the total outstanding figure was $899 million at the end of August.
The last time the figure was that low was May 2007, meaning the contraction in card balances is much more rapid than the growth before the downturn." ...more...
"Holstein argues that the filing of a bankruptcy case is "an entirely clerical act" that doesn't require the skills of a licensed attorney. However, the bankruptcy court's mandatory e-filing rule holds that only lawyers are allowed to register for the service, Holstein says.
He bases his challenge on federal antitrust law, which he says favors competition and is based on the principle that increased competition stimulates lower prices in the public interest.
...
He seeks a declaration that the mandatory e-filing rule, the ABA rule and a new Illinois Rule of Professional Responsibility that is to go into effect on Jan. 1, 2010, are unconstitutional and go far beyond their stated aim of protecting consumers." ...more...
"Five hundred thousand troubled homeowners have had their loan payments lowered on a trial basis under the Making Home Affordable Program, said Treasury Secretary Timothy F. Geithner in a morning telephone briefing with reporters. Mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings, he added, and roughly 40 percent of the 1.2 million homeowners deemed eligible have been helped." ...more...
"For many people who do not have bank accounts, or cannot get a credit card, the appeal is irresistible, making the reloadable cards among the consumer banking industryâs fastest-growing products. But their convenience comes with a catch: fees, often hidden in the fine print.
The MiCash Prepaid MasterCard docks cardholders a $9.95 activation fee. Like many competitors, it then charges numerous recurring fees, including $1.75 for each A.T.M. withdrawal, $1 for each A.T.M. balance inquiry, 50 cents for each purchase, $4 for monthly maintenance, $2 for inactivity after 60 days and $1 for a call to customer service." ...more...
"How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America." ...more...
"4. âThis could actually improve your credit score down the road.â
Yes, bankruptcy will pummel your credit score, says Barry Paperno, consumer-operations manager for FICO, the company that develops the credit scoring formula used by the three major credit bureaus. Yet bankruptcy can be less damaging in the long run than juggling late payments on credit cards for years in a bid to postpone the inevitable. Bankruptcy stays on your creditâreport for 10 years, but you can begin repairing it immediately, if gradually.
The fact is, most people go bankrupt with lousy credit. Theyâll be able to return to (and maybe surpass) their prebankruptcy FICO score more quickly than the rare debtor with pristine credit who needs to file bankruptcy after, say, a serious illnessâwhich could mean a creditâscore drop of 100 points or more, Paperno says." ...more...
"Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000. According to the Labor Departmentâs latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed." ...more...
"Did you know that because of legislation dating back to 1976 under the Higher Education Act private student loans are unable to be discharged through bankruptcy? In other words, feel free to run up the credit card and splurge, but take out loans to pay for education? Thatâs just reckless." ...more...
"This week, the Federal Reserve published its quarterly report on debt levels in the economy. While Uncle Sam borrowed more, others borrowed less. The accompanying chart shows that total domestic debt â the amounts owed by individuals, governments and businesses â climbed just 3.7 percent from the second quarter of 2008 through the second quarter of this year. That is the smallest increase since the Fed started these calculations in the early 1950s." ...more...
"Credit card debt outstanding has plummeted in the past year, and the prevailing narrative has credited the decline to consumer frugality. But with charge-off rates well beyond historic highs, other factors are at play." ...more...
"Beginning Oct. 19, Bank of America will stop charging any fees for customers who overdraw their accounts by less than $10 in a single day. It will also limit the number of overdraft fees it charges to four a day, although the bank will continue to charge a fee of $35 per overdraft.
Chase will cap the number of overdraft fees it charges a day to three. It will stop charging fees when accounts are overdrawn by less than $5. Chaseâs overdraft fees are $25 for the first fee each year, $32 for the next four and $35 after that.
Current customers who want to opt out of Bank of Americaâs automatic overdraft protection can go into their branch on Oct. 19 and turn off the ability to overdraw their accounts. The bank will cut them off when their debit card purchases or A.T.M. withdrawals go beyond the money in their checking account, and will no longer cover bounced checks." ...more...
"Authorities say that if a borrower missed the repayment, the companies employed venomous collection tactics. The FTC alleged that they falsely threatened consumers with arrest or imprisonment, falsely claimed that consumers were legally obligated to pay the debts, threatened to take legal action they could not take, repeatedly called consumers at work using abusive and profane language and improperly disclosed consumersâ purported debts to third parties." ...more...
"Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed." ...more...
"The statistics also showed that real median household income declined nationwide, rising in only five states â New York, New Jersey, Kansas, Louisiana and Texas â compared with 33 states in 2007. It ranged from $37,790 in Mississippi to $70,545 in Maryland. Income inequality was highest in metropolitan New York, where the top fifth of households received 20 times as much as the bottom fifth." ...more...
"From 2004 to 2008, "one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM," said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. "That's more than twice the national average.
"People think option ARMs (will be) a national crisis," he said. "That's not really true. It's just in higher-cost areas like California where you see their prevalence."" ...more...
"While the young have lost ground, older people have grown more prosperous over the years and the decades. Older women have done best of all.
The dividing line between those getting richer or poorer: the year 1955. If you were born before that, you're part of a generation enjoying a four-decade run of historic income growth. Every generation after that is now sinking economically.
Household income for people in their peak earning years â between ages 45 and 54 â plunged $7,700 to $64,349 from 2000 through 2008, after adjusting for inflation. People in their 20s and 30s suffered similar drops. Older people enjoyed all the gains." ...more...
"A weak U.S. labor market led to bigger bank writedowns of credit card debt in August as a record-high jobless rate left consumers struggling to pay their bills.
Charge-offs, or the writedown of uncollectible debt by banks, increased 81 basis points to 10.62 percent in August, after a 31 basis points decline to 9.81 percent in July. On the retail front, credit card writedowns increased 49 basis points to 9.99 percent in August, according to JPMorgan Securities." ...more...
"âFrom a technical perspective, the recession is very likely over at this point,â he said, adding that âitâs still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was.â
The cautiously optimistic assessment came at the conclusion of a speech by Mr. Bernanke at the Brookings Institution marking the anniversary of the market crisis that was precipitated by the collapse of the investment bank Lehman Brothers." ...more...
"Title VII of the Helping Families Save Their Homes Act provides uniform federal protection to tenants after foreclosure--at least until the law expires on Dec. 30, 2012 (apparently the date by which someone thought the foreclosure "crisis" will have abated). The law requires the new owner of a foreclosed property to allow tenants to stay in the foreclosed property for the remainder of the lease. If there is no lease, or if the lease is terminable at will under state law, tenants must be given at least 90 days' notice before they may be evicted. This is a floor that does not preempt more generous state law.
I'm interested in how financial institutions and tenants are going to deal with these requirements. Lenders have attorneys who routinely handle evictions after foreclosure. Being a landlord is a different task. Are tenants supposed to call the former owners' mortgage servicer when their pipes burst? If not, how is the tenant supposed to learn exactly who is the new owner of the property? Are note holders actively hiring property management companies to comply with this rule? Perhaps more interestingly, the bill doesn't seem to permit an eviction during the 90 days even if the tenants declare they aren't going to pay a dime of rent!" ...more...
"Debtors whose budget shows they canât afford to reaffirm the loan on their car may get to keep the car without reaffirmation under a line of decisions by bankruptcy judges.
A number of judges have ruled that âpay and driveâ survives bankruptcy reform if the debtor signs a reaffirmation agreement that is denied by the judge as not being in the debtorâs inerest. Lose in court and drive away in your car!" ...more...
"In another sign of both the recession and the long-term stagnation of middle-class wages, median family incomes in 2008 fell to $50,300, compared with $52,200 the year before. This wiped out the income gains of the previous three years, the report said.
Adjusted for inflation, in fact, median family incomes were lower in 2008 than a decade earlier." ...more...
"Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation.
In the four decades that the Census Bureau has been tracking household income, there has never before been a full decade in which median income failed to rise. (The previous record was seven years, ending in 1985.) Other Census data suggest that it also never happened between the late 1940s and the late 1960s. So it doesnât seem to have happened since at least the 1930s." ...more...
"Credit card debt outstanding in the United States has fallen by nearly $70 billion in less than a year and continues its downward spiral, according to a government report released yesterday.
The Federal Reserve said Tuesday that consumer credit outstanding in the U.S. declined by $21.5 billion in July, the largest monthly drop on record. The annualized rate of decline, 10.4 percent, was also the largest on record." ...more...
"Cramdown is back.
House Financial Services Committee Chairman Barney Frank (D-Mass.) tells the Huffington Post he plans to revive the effort to give bankruptcy judges the authority to renegotiate home mortgages -- by making it part of this fall's much-anticipated financial regulatory reform bill" ...more...
"When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.
So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks â and a $34 fee. He got the $6.50 student discount at the movie theater â but no discount on the $34 fee. He paid $6.76 at Loweâs for screws â and yet another $34 fee. All told, he owed $238 in extra charges for just a dayâs worth of activity." ...more...
"Ron Lieber, author of the Your Money column, explains the inner workings of debit cards and how to avoid overdraft fees that can cost hundreds of dollars a month." ...more...
"The Labor Departmentâs latest employment report, released Friday, added weight to a growing belief that, at least technically, the economy had already escaped the grip of recession. Though 216,000 net jobs vanished in August, the losses continued to moderate from their worst numbers of the year.
Yet the report also lent credence to a deepening consensus that, even as the economy resumes expansion, the recovery was likely to be weak, prompting most companies to hold back from aggressive hiring." ...more...
"Outstanding credit balances classified as subprime or deep subprime have grown by more than 33 percent since the third quarter of 2008, according to a study released this week by Experian.
Further, the number of consumers in the highest grade, superprime, has declined by 10 percent since Q3 2008." ...more...
"âI submitted the paperwork three times, and nothing happened,â said Mrs. Giguere, 41, who has a high school education and worked as restaurant manager before losing her job.
On Thursday, something happened. She questioned a Wells Fargo official about the bankâs lack of response â under oath.
The spectacle of a high-ranking banking executive being grilled by an ordinary homeowner was the result of an unusual decision by Judge Randolph J. Haines of the United States Bankruptcy Court to summon a senior executive from Wells Fargo to appear in Mrs. Giguereâs bankruptcy case." ...more...
"Accounts receivable management industry experts say that the recently approved North Carolina law -- SB 974, which will go into effect October 1, barring an unexpected governorâs veto -- will have harmful unintended consequences on consumers along with an unknown impact on debt buyers." ...more...
"People who are insured often find themselves in debt because their insurance has limited benefits and high out-of-pocket costs, Lavarreda said. She said a growing number of people are buying policies with high deductibles or those that require them to pay a percentage of the total bill.
"When you get a high deductible plan, you have less coverage and you're exposed to more risk," she said, adding that some people buy policies with deductibles of several thousand dollars in order to afford the monthly premiums." ...more...
"how can you avoid being caught in a hospital debt collector nightmare? Here are some practical, worthwhile tips for you to know and share. These came from many sources, but kudos go especially to the California Hospital Association, for pro-actively providing detailed information." ...more...
"The National Top 10 Consumer Complaints List for 2008 is:
Debt Collection
Auto Sales
Home Repair/Construction
Credit Cards (tie)
Internet Goods and Services (tie)
Predatory Lending/Mortgages
Telemarketing/Do-Not-Call
Auto Repair
Auto Warranties (tie)
Telecom/Slamming/Cramming (tie)" ...more...
"Even as evidence mounts that the Great Recession has finally released its chokehold on the American economy, experts worry that the recovery may be weak, stymied by consumersâ reluctance to spend.
Given that consumer spending has in recent years accounted for 70 percent of the nationâs economic activity, a marginal shrinking could significantly depress demand for goods and services, discouraging businesses from hiring more workers." ...more...
"The hospital arranged a conference call with a social worker, who outlined how the dementia and its financial toll on the family would progress, and then added, out of the blue: âMaybe you should divorce.â
âI was blown away,â M. told me. But, she said, the hospital staff members explained that they had seen it all before, many times. If M.âs husband required long-term care, the costs would be catastrophic even for a middle-class family with savings." ...more...
"Last year, debit card use surpassed credit card use for the first time in history: Americans made 28.4 billion debit purchases compared with 21 billion credit card purchases, according to payment systems newsletter The Nilson Report.
It happened, industry watchers say, because of tighter credit, recession-weary and strapped consumers, wider acceptance of debit cards for small purchases, and a burgeoning youth market that prefers paying with debit cards." ...more...
"The foreclosure crisis will get much worse before it gets any better.
Thatâs the only conclusion to draw from a recent survey by the Mortgage Bankers Association, which found that six million loans were either past due or in foreclosure in the second quarter of 2009, the highest level ever recorded by the group. Worse, loan defaults are not the only cause of foreclosures. In some areas, unpaid property taxes are provoking foreclosures, even for homeowners otherwise current on their payments." ...more...
"Late last week, rating agency Moodyâs said that the charge-off rate on U.S. cards in July was 10.52 percent, down from a record-high of 10.76 percent in June. The overall delinquency rate fell to 5.73 percent in July -- the lowest level all year -- from 5.81 percent in June." ...more...
"more than a half-million option ARMs scheduled to reset in the next four years, at rates many homeowners cannot afford. ..... Default and foreclosure rates on option ARMs recently passed those of subprime mortgages, according to the research firm First American CoreLogic, in part because so many subprime mortgages have already failed" ...more...
"California Attorney General Edmund G. âJerryâ Brown, Jr. announced Monday that his office won a judgment against an Anaheim-based small-balance lender that will force the company to stop using âloan shark tactics in collecting debt, including abusive calls at all hours of the day and night and empty threats of law enforcement action.â" ...more...
"A big feature of the 2005 changes to the U.S. bankruptcy law was supposed to be a means test that would get people into chapter 13 instead of chapter 7. Because a chapter 13 requires a 3- or 5-year repayment plan, the law's advocates pitched it as an attempt to force "can pay" debtors to repay a portion of their debts. Initially, chapter 13 rates did go up, but that was a statistical artifact of the huge surge in filings just before the 2005 law. As I have noted previously, the chapter 13 rate has been declining ever since.
I am now officially going to call it ....
Anyway you measure it, chapter 13s have returned to their historical level..." ...more...
"On Thursday, the first of a set of new rules went into effect resulting from the landmark credit card legislation earlier this year.
Banks must now provide written notice to customers 45 days before increasing the interest rate or changing the terms on a card. So banks raced to get out in front of that requirement, making a bunch of changes before Thursday, lest they have to give you a month and a half of warning.
Irritated by the changes? Inclined to take your business elsewhere now? This is exactly the right instinct, since plenty of people can still get a better deal from a different card. Fee-free balance transfers still exist. And banks have barely touched the most lucrative rewards programs â and wouldnât dare fiddle too much given the revenue they generate.
The best revenge is a better card. Hereâs how to find one." ...more...
"Advocates say the new rules are a good first step but don't go far enough in protecting consumers. For instance, even though issuers now must give 45 days notice of "any significant change," account closures and credit line reductions don't count as major changes." ...more...
"After trying unsuccessfully to make ends meet, more people are opting to make the financial choice of last resort: filing for bankruptcy. .... How do you know when it's time to file?" ...more...
"What debt should you pay first, and what debt should wait till last, with CNBC's Suze Orman." ...more...
"palliative care specialists often talk about wanting to curb the excesses of the medical machine, about their disillusionment over seeing patients whose bodies and spirits had been broken by the treatment they had hoped would cure them. But their intention, in a year observing their intimate daily interactions with patients, was not to limit peopleâs choices or speed them toward death." ...more...
"Starting Thursday, credit-card users are getting more time to avoid late fees and maybe rate hikes.
A new consumer-protection law wonât lift all debt burdens, by any means, but supporters call it a victory against some of the most abusive practices of the bank-card industry.
Hereâs a rundown on what the Credit Card Accountability, Responsibility, and Disclosure Act means to you, both right now and in February when Phase 2 takes effect." ...more...
"Not many people would knowingly pay more than $35 for a cup of coffee. But far too many people are getting saddled â with no warning â with outsized bills for minor purchases, under a euphemistically labeled âoverdraft protection programâ that most major banks have adopted over the last 10 years." ...more...
"As mortgage delinquencies rise each month, and as the number of foreclosures increase each quarter, the ânew mantraâ of many pro-se and represented consumers is to demand that the mortgage servicer âprove up the original note.â Is this just some new and creative gimmick that has been sold to the desperate homeowners and to a few lawyers who have attended âprogressiveâ seminars or is there really something to it? I submit that there is really something to it." ...more...
"Taken together, the reports made clear that consumers were likely to continue hoarding their dollars into the usually robust back-to-school shopping season, a crucial time for retailers.
The Commerce Department said Thursday that retail sales fell by a seasonally adjusted 0.1 percent in July from a month earlier, far below the 0.7 percent increase economists were expecting. Comparing this July to the same month a year ago, retail sales were down 8.3 percent. Stark as that drop sounds, it is actually a slight improvement from recent months, when sales were down 9 percent or more compared to the same month a year ago." ...more...
"according to data from the 2007 Consumer Bankruptcy Project, the mean credit card debt for bankruptcy filers is $23,543, with a median of $13,279. Among chapter 7 filers, the mean credit card debt was $26,267 and the median $17,032. For chapter 13, those numbers were $18,076 and $6,079, respectively. This actually seems fairly modest when you consider that, by the end of 2008, the average accredit-card balance was $8,329, more than a quarter the average bankruptcy total of $23,543. In addition, 7.9% of our chapter 7 filers and 18.2% of those in chapter 13 reported no credit card debt at all. In the general population, 53.9% of Americans held no credit card debt â a much larger difference." ...more...
"âJuly marks the third time in the last five months where weâve seen a new record set for foreclosure activity,â noted James J. Saccacio, chief executive officer of RealtyTrac. âDespite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, weâre seeing significant growth in both the initial notices of default and in the bank repossessions.â" ...more...
"The Massachusetts Supreme Judicial Court announced last week that it has changed some of the rules governing the use of small claims courts. The Court said that the changes were made specifically to address the volume of debt collection cases that are filed in small claims courts.
The rules changes come on the recommendation of the Small Claims Working Group, a panel of legal experts that was convened in 2006 to âexamine and improve current small claims practices.â The Working Group was created, in large part, in response to a series of articles that appeared in the Boston Globe chronicling the perceived imbalance of debtors and collection law firms in small claims courts, which allow cases with remedies of up to $2,000." ...more...
"Revolving credit, principally credit card accounts, led the declines, dropping at an annual rate of 6.8 percent. Non-revolving debt â like that found in auto, student and personal loans â contracted at an annual rate of 3.8 percent in June.
For the second quarter, revolving credit decreased at an annual rate of 8.2 percent. Over the past three quarters, revolving credit has declined 7.86 percent. Overall consumer credit has declined 4 percent." ...more...
"PolitiFact is a project of the St. Petersburg Times to help you find the truth in American politics. Reporters and editors from the Times fact-check statements by members of Congress, the White House, lobbyists and interest groups and rate them on our Truth-O-Meter." ...more...
"Editorial note from LegalConsumer.com
The pending health care reform legislation is perhaps the most important legislation , regarding the financial health of this nation, and the financial health of future generations of Americans.
There is a torrent of scare mongering and misinformation being spread on this issue on the airwaves and through e-mails and discussion boards all over the internet. (Lots of âextremely uninformed debateâ -- to borrow an Onion joke.)
Whether you ultimately agree or disagree with what is being proposed regarding health care, at least take the time to LEARN the FACTS about what is actually being proposed.
This site is a good source of straight FACTS about what is -- and, more importantly, what is NOT -- being proposed in the pending health care reform legislation.
As you discuss this issue with friends and loved ones this month by e-mail or in online discussion threads, send them this link.
The long term financial health of this nation and our ability to be a dynamic economic power in the global economy depends on getting our health care costs under control.
Take the time to learn the facts...
And then... (and ONLY then!....) ... call your congressperson and tell them where you stand.
Thanks for listening.
- A. Renauer, editor
LegalConsumer.com" ...more...
"The chapter 7 debtorâs mortgage payments were about $4,000 per month. Including them on the means test, his net disposable income was minus $2,376. His statement of intentions said that he was giving up the home. Without the secured payments, his means test net was plus $1,430. In a footnote, the 1st Cir said, the debtor âactually deducted both the housing allowance and his mortgage debt, which is clearly impermissible. Accordingly, his disposable income amount needs to be revised regardless of the treatment of his mortgage debt.â The UST filed a motion to dismiss. The bankruptcy court denied the motion and the 1st Cir. BAP affirmed. âThe BAP held that the means test calculation is meant to be âa 'snapshot' of the debtor's situation as of the petition date,â rather than a "'forward-looking'" consideration of "only those payments that will actually be made.â"
The 1st Cir affirmed also." ...more...
"Once reserved for government jobs or payroll positions that could involve significant sums of money, credit checks are now fast, cheap and used for all manner of work. Employers, often winnowing a big pool of job applicants in days of nearly 10 percent unemployment, view the credit check as a valuable tool for assessing someoneâs judgment.
But job counselors worry that the practice of shunning those with poor credit may be unfair and trap the unemployed â who may be battling foreclosure, living off credit cards and confronting personal bankruptcy â in a financial death spiral: the worse their debts, the harder it is to get a job to pay them off." ...more...
"During Franklin Roosevelt's first 100 days in office, congress granted every request the new president made. Barack Obama, despite enjoying a decisive majority in both houses of Congress, hasn't been so fortunate. His economic stimulus package failed to win a single Republican vote in the House, and conservative members of his own party are trying to block his ambitious plans to provide universal health care and curb global warming. What's more, Obama himself has alarmed supporters by compromising on key issues, and he has yet to flex his political muscle by mobilizing the tech-savvy network of grass-roots activists he assembled during last year's campaign. All of which raises the question: Is Obama raising false hopes? Or does he have what it takes to deliver real change?" ...more...
"The issue of deceased collections gained national attention earlier this year when U.S. Senator Chuck Schumer (D-N.Y.) called for an investigation into âdebt collectors that shake down relatives of deceased debtors.â The call came after the New York Times ran a piece detailing the practices of deceased debt collection agencies like DCM." ...more...
"There are many web sites that provide a link to the means test, one in particular I personally recommend is www.legalconsumer.com. The calculator is free and does not require registration as most others do. You simply click on the Free Means Test Calculator link which will prompt you to either enter your zip code or you may also choose your state of residency since bankruptcy laws are different for many states and you want to make sure you're getting the information specific to the state you live in." ...more...
"Industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the governmentâs $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans." ...more...
"The governmentâs long-awaited cash for clunkers program is underway. So weâve attempted to answer your questions about it here. Visit our complete cash for clunkers special section, where youâll find more information about the program, guidance on vehicle choice, and buying advice." ...more...
"The group, which calls itself Wealth for the Common Good, believes that people who have taxable income of more than $235,000 a year should support restoring their top federal income tax rate to 39.6% from 35% -- and now, not in 2011, when the higher rate is scheduled to return anyway." ...more...
"Vulnerable consumers are turning to credit cards for necessities, not luxuries, Demo's survey shows. For instance, more than half of households say medical expenses contributed to their credit card debt.
"The frivolous spending idea, that's not what's driving families into crazy debt," says Jose Garcia, a Demos associate director. "The expense that most affects families is the cost of living."" ...more...
"Even before the collapse of the housing and financial markets last year, Americans were woefully unprepared to pay retirement in the traditional sense of a post-career period of leisure and personal pursuits supported by a pension, well-managed nest egg and Social Security.
Now, trillions of dollars of housing equity have been destroyed, retirement savings have vaporized and pension funds are being squeezed. The old-fashioned notion that when you hit age 65 your lifelong employer will give you a warm sendoff, a gold watch and a pension that guarantees your financial security for life is very much in the past.
With their nest eggs in tatters, the stock market in the doldrums and time running out, many older Americans are resigning themselves to Plan C: simply working much later in life." ...more...
"While the economic recession continues to threaten the financial security of low- and middle-income households, its effects have been heightened by the reality that, even before the downturn, millions of households were experiencing difficulties meeting the most basic expenses. Now, as families experience declining home values and tightened credit markets, many are falling behind on their mortgage and credit card payments." ...more...
"With Nowlin, the 5th Circuit joined the 8th and 10th Circuits in ruling that §1325(b)(2)'s definition of "disposable income" is a starting point for calculating the disposable-income figure, and that changes in a debtor's income should be taken into account.
"We join the Eighth and the Tenth Circuits in adopting a forward-looking interpretation of 'projected disposable income' in §1325(b)(1). It accounts for the relevant statutory language, including the phrases 'to be received in the applicable commitment period,' 'as of the effective date of the plan,' and 'will be applied to make payments,'" wrote 5th Circuit Judge Jennifer Elrod in an opinion joined by Judges Carolyn Dineen King and James Dennis." ...more...
"âTheyâve done the math on their account and theyâre very angry,â said Corey Calabrese, a Fordham Law student who is an administrator of the schoolâs walk-in clinic for debtors at Manhattan Civil Court. Public sentiment is on their side, she added: âFor the first time, Americans are no longer blaming the borrower but are looking at the credit card companies.â
(Thatâs certainly true in the mortgage crisis. According to a Quinnipiac University poll in February, 62 percent of those polled blamed lenders âwho loaned the money to people who may not be able to pay it back.â Only a quarter blamed homeowners.)" ...more...
"WEBCAST: The Senate Committee on the Judiciary, Subcommittee on Administrative Oversight and the Courts will hold a hearing entitled "The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?" on Thursday, July 23, 2009 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building." ...more...
"Durbin represents a somewhat lonely crowd. Not only is the bankruptcy-reform proposal anathema to Republicans, but the Obama administration, once a cheerleader for the change, has abandoned the legislation altogether. Without the active backing of the White House, a cramdown bill that passed the House in March was shot down in the Senate less than two months later. Still, Durbin has vowed to bring it back to the Senate floor this year. But, a crowded legislative calendar, including sweeping health care and climate change reform, heâs running out of opportunities.
....
Adam Levitin, housing expert at the Georgetown University Law Center ,... estimates that 30 percent of all families who bought homes in the last five years currently owe more than their homes are worth." ...more...
"According to Mike Lillis of the Washington Independent, leaders of the Senate Judiciary Committee have scheduled a hearing for tomorrow morning titled: "The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?" The answer to that question seems clear. Anger is simmering in Washington over bureaucratic delays in the Obama administration's "Making Home Affordable" plan, which has secured only 50,000 successful loan adjustments since it was launched in April. Meanwhile, foreclosures continue to stack up. Already this year, the Center for Responsible Lending estimates that 56,872 new foreclosures have been filed in Illinois alone. After his bill died in the Senate this spring, Durbin said he wanted to revisit the issue as soon as possible. The hearing tomorrow will hopefully give us some sense of whether that is going to happen." ...more...
"Friday, two freshmen representatives -- Dina Titus, from suburban Las Vegas, and Colorado's Jared Polis, representing Boulder, Vail and some of the tonier suburbs of Denver -- joined Republicans to vote against Mr. Obama's top-priority health-care overhaul when it faced a vote in their House Education and Labor Committee. One reason was a one-percentage point-surtax on couples earning between $350,000 and $500,000 -- gradually increasing to 5.4 percentage points on earnings more than $1 million -- to pay for it." ...more...
"The fact that four old clients, all in their fifties and sixties, are all going back to ground zero via bankruptcy tells me a new wave of defaults is beginning.
None of these persons fit a bad-credit profile or an irresponsible-person profile. They all have a history of outstanding credit scores and hard work and strong savings. They have been ruined first by bad investments in real estate. Two of four are self-employed, and bad times in business have killed the chance for a turn around and getting through it. One of four borrowed irresponsibly on credit cards. Negative equity for all of them destroys all reason for struggling to keep up. In a way they have all been impoverished to their debt for years. Itâs obvious they should pull-the-plug." ...more...
"Many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.
Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company." ...more...
"The state's unemployment rate rose to 15.2% in June. It was the highest of any state since March 1984, when West Virginia's unemployment rate exceeded 15%.
Michigan, which has been battered by the collapse of the auto industry and the housing crisis, has had the highest unemployment rate in the nation for 12 months in a row." ...more...
"New figures show the number of people in trouble with their mortgages continues to rise. According to foreclosure listing service RealtyTrac Inc, more than 336,000 households received at least one foreclosure-related notice in June. That's 33 percent higher compared to June of last year." ...more...
"It would create a one-stop financial protection agency for consumers, with authority over financial products from credit cards and home mortgages to payday loans. Proponents say the measure would stop people from getting mortgages, for example, that they don't understand and can't pay for. Opponents say the new entity would create unnecessary bureaucracy and shrink consumer choices.
Committees on both sides of the Capitol started working on the legislation this week. The Senate banking committee heard from Assistant Treasury Secretary Michael Barr. He said that even with half a dozen regulators out there, the system has major gaps.
"The present system of consumer protection is not designed to be independent or accountable, effective or balanced," Barr said. "It is designed to fail."" ...more...
"The nonpartisan Congressional Budget Office estimates that Obamaâs plan to switch to federally funded direct student lending, instead of guaranteeing loans by private companies, would save $87 billion over 10 years. The administration has said the savings would be directed into other programs including Pell Grants to help low-income families afford college." ...more...
"Bank of America Corp., the biggest U.S. bank by assets, said net charge-offs on its credit-card trust rose to 13.86 percent in June from 12.5 percent a month earlier.
Payments overdue by 30 days or more fell to 7.73 percent from 7.95 percent in May, according to data posted today by the Charlotte, North Carolina-based lender on it Web site.
Bank of Americaâs charge-off rate was the highest among five U.S. credit-card issuers that reported today, and one of only two that climbed from the previous month." ...more...
"Bankruptcy holds traps for the unwary. There is always a learning curve for attorneys to know the written rules and the unwritten rules of practicing bankruptcy. The bankruptcy court and bar are supportive of their fellow practitioners and provide assistance and opportunities for education and sharing of ideas. If you are new to bankruptcy practice, take advantage of that assistance." ...more...
"Banks and other private lenders made about $56.7 billion in government-guaranteed loans during the 2008-2009 school year; the direct loan program lent about $20.1 billion to students.
Under the proposal from Rep. George Miller, all new federal student loans -- the largest source of college aid -- would be made by the government's direct lending program as of July 1, 2010." ...more...
"The prepackaged bankruptcy under discussions by Cubs officials would be designed to clear the team of liabilities and make its sale easier, sources close to the team said." ...more...
"The total number of lawsuits filed by consumers against accounts receivable management firms claiming violations of the Fair Debt Collection Practices Act (FDCPA) increased nearly 30 percent from May to June this year." ...more...
"The federal student loan system has become fundamentally predatory due to the Congressional removal of standard consumer protections, combined with congressionally sanctioned collection powers that are stronger than those associated with all other loan instruments in our nation's history. These actions by Congress have, predictably, created an inherently predatory, state-sponsored lending and collection system where the motivations of the various functional elements of the system are fatally misdirected." ...more...
"Pope Benedict XVI on Tuesday called for a radical rethinking of the global economy, criticizing a growing divide between rich and poor and urging the establishment of a âtrue world political authorityâ to oversee the economy and work for the âcommon good.â" ...more...
"To most people, bankruptcy is a four-letter word. But when all else fails, declaring bankruptcy can be an honest and time-tested legal maneuver to save your house from foreclosure.
If nothing else, filing for bankruptcy protection will buy you some breathing room, which is particularly important in "non-judicial" states where the clock on foreclosure starts as soon as your lender posts a notice that it intends to accelerate your note." ...more...
"Sponsored by Assemblyman Ted Lieu, D-Torrance (Los Angeles County), AB350 is supported by the industry's two main trade groups, who say they want to weed out unscrupulous firms giving the business a bad name." ...more...
"Despite what the ads say, "This is not an easy way to get out of your debts," she says. Settling for less than the full amount can do serious harm to your credit score, and the debt that is canceled can be taxed as income." ...more...
"For people who choose to defer benefits until age 66, it generally takes about 12 more years to collect as much as if you started getting checks at 62. So you break even, so to speak, about age 78, according to Avram Sacks, a Social Security law analyst for CCH, a tax and accounting information service. âIf you are in good health, and you expect to live to 78 or longer, then the advantage goes to the person who waits,â he says. âBut thatâs assuming weâre all prophets and we know whatâs going to happen tomorrow, and we donât all know.â" ...more...
"The 8th U.S. Circuit Court of Appeals reversed a bankruptcy court and a district court and found that attorney Mark Allen Jesperson could not discharge more than $360,000 in student loan debt in a Chapter 7 proceeding.
The two lower courts had found that repaying the "shockingly immense" debt would create an undue hardship for Jesperson. But the appeals court on Wednesday determined that his "self-imposed limitations," which resulted in a gross income of $48,000, were no excuse for nonpayment." ...more...
"Are there any nonprofit or government agencies that provide free consultation or advice about applying for bankruptcy?" ...more...
"A full three quarters of loan volume of the payday lending industry is generated by borrowers who, after meeting the short-term due date of the loan, must re-borrow before their next pay period" ...more...
"It's certainly true that Dodd has been a standout consumer advocate in the Senate. Recently, he shepherded credit card reform legislation that reined in some of the industry's more abusive practices. But he hasn't been able to escape the perception that he's way too cozy with K Street and the industries he oversees and out of touch with his own constituents. Not that Dodd has done much to dispel that image. Until now, that is." ...more...
"The American Bankruptcy Institute said that consumer bankruptcy filings in the first half of 2009 are higher than at any point since bankruptcy reform in 2005, and are on pace to hit levels seen before the legislation passed." ...more...
"Despite massive government efforts to bolster the credit market, banks are pulling back severely on card lending." ...more...
"A soaring unemployment rate is causing more Americans to fall behind on loans of all types in record numbers, according to data released Tuesday by the American Bankers Association.
In the first quarter of 2009, the ABAâs composite ratio of delinquencies across eight loan types reached its highest level since the association began tracking late payments in 1974." ...more...
"Valley Chapter 7 filings jumped from 4,407 to 8,938. Statewide, Chapter 7 filings jumped 98.4 percent from 6,211 to 12,322.
All filings were up 92.1 percent in the Valley (from 5,711 to 10,973) and 88.3 percent statewide (from 8,003 to 15,071)." ...more...
"The were about 124,800 bankruptcy filings in June which, spread over the 22 business days in the month, is a daily bankruptcy filing rate of 5,672. In May, the daily bankruptcy filing rate was 6,038." ...more...
"Card loss rates have been closely tracking the unemployment rate over the past year, according to Fitch Ratings. The firm expects credit card performance to âdeteriorate further over the balance of the year as unemployment rises and card portfolios contractâ according to a recent analysis report." ...more...
"The papers collected on this site are written by Bankruptcy Project Fellows. Many of the papers are empirically based, and most are about bankruptcy, consumer law, and related areas." ...more...
"Use pulldown menus to view bankruptcy filings by district and date" ...more...
"Why congress should adopt Obamaâs proposal for a consumer financial protection agency" ...more...
"As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed." ...more...
"At issue: Coercing debtors into waiving rights they don't know they have." ...more...
"At issue is a section of the law that prohibits âdebt relief agenciesâ from encouraging clients to take on more debt in advance of a bankruptcy filing. The provision was intended to prevent knowledgeable advisors from getting consumers deeper into debt so that a judge might rule favorably in a bankruptcy hearing." ...more...
"The study of medical bankruptcies has been under attack for not taking proper account of the effects of the change in bankruptcy law in 2005. The authors are accused of leaving this out of the article, or at least obscuring its effects, and the suggestion is that this has been intentional. However, reading the study I find that they deal directly with this issue:" ...more...
"Total credit card debt outstanding can contract on a monthly basis if consumers pay off their balances at a quicker rate than they make purchases on the cards. U.S. banks have been slashing credit limits over the past two quarters, making less credit available to consumers. But the figure can also drop when banks increase their credit card chargeoffs." ...more...
"Before Congress passed the âBankruptcy Abuse Prevention and Consumer Protection Actâ (BAPCPA) in 2005, dealing with car loans in Chapter 7 cases in most states was pretty simpleâif you made your payments you could keep your car, and if you didnât, even though the car finance company could repossess the car, you wouldnât be personally liable for any deficiency.
This has changed.
Now, you are given three options. ..." ...more...
"unaffordable bills directly contributed to 92 percent of medical bankruptcies, and loss of income due to illness caused 40 percent. Many people lose their heath insurance after suffering an illness or injury. A quarter of businesses that offer health insurance cancel coverage immediately when an employee suffers a disabling illness, and 25 percent more cancel coverage within a year, according to the study." ...more...
"Medical problems contribute to a large proportion of bankruptcies. I wonder how much a health care plan that protects people from losing everything when serious illness hits would have helped to soften the economic crisis" ...more...
"Harvard study finds 50 percent increase from 2001" ...more...
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"helps determine exemptions if you have moved your domicile from one state to another state within the past year or so." ...more...
"our citizens declare bankruptcy at a rate that astonishes the rest of the world.... Nonetheless, our system works so well that other nations are trying to move away from their harshly punitive treatment of insolvent debtors, and closer to our free-and-easy, all-is-forgiven model." ...more...
"9th Circuit held (in an issue of first impression for the court) that the section 401(k) plan loan was not a âsecured debtâ or a ânecessary expenseâ of the debtor." ...more...
"Issue: Is the repayment of a secured loan against the debtorâs 401(k) deductible on the means test? Holding: No." ...more...
"America's wealthiest families are pouring millions into slashing the estate tax - and some Democrats are siding with the super-rich" ...more...
"The Senate voted overwhelmingly on Tuesday to put new restrictions on the credit card industry, passing a bill whose backers say will make card-issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.
The 90-to-5 vote, following a 357-to-70 vote in the House on April 30, made it likely that President Obama will have a measure on his desk before the Memorial Day recess." ...more...
"First, letâs lay out the things we know will change because of the new legislation. The bill is chock-full of new rules, which will take effect at various points in the year after President Obama signs the final legislation." ...more...
"How bankers took power, and how they're impeding recovery." ...more...
"âBinding oneself financially is not something that trumps every other need,â added the Rev. Brian Daley, a Jesuit priest and professor of theology at the University of Notre Dame. Scripture suggests that the redistribution of property is also a reasonable thing to do. âYou just canât mention it in public in the United States,â he said. âOur notion of capitalism is so absolutized that we give it a quasi-religious value.â" ...more...
"A bill introduced recently in the New Jersey General Assembly would require debt collection agencies operating in the state to provide debtors with additional information about their accounts, a copy of the Fair Debt Collection Practices Act (FDCPA), and would increase fines per violation to at least $10,000.
The proposal, A3839, was introduced by Democrat Assemblyman Paul Moriarty of Gloucester. Moriarty said of the bill, "Debt collectors may have a responsibility to get consumers to make good on what they owe, but they also have an obligation to treat consumers with respect and within the rule of law."" ...more...
"New York Cityâs recently passed collection law, Int. No. 660-A, could present a country-wide threat for the debt collection industry if other legislative bodies use the new rules as a model for their collection laws.
The amended law passed in mid-March. (âNYC to Require Debt Buyers to Register as Collection Agencies,â March 17, 2009)." ...more...
"Oregon state legislators are tightening the reins on the accounts receivable management industry.
Last Wednesday, the Oregon House of Representatives and the Senate passed Senate Bill 328, which gives the Oregon Attorney General authority to sue any collection agency in the United States that practices unjust collection tactics against Oregon residents." ...more...
"Critics of the 2005 reform say filing is more tedious, more difficult and costlier for ordinary debtors. They also believe the reform benefited banks over consumers." ...more...
"Dozens of specially trained agents work on the third floor of DCM Services here, calling up the dear departedâs next of kin and kindly asking if they want to settle the balance on a credit card or bank loan, or perhaps make that final utility bill or cellphone payment.
The people on the other end of the line often have no legal obligation to assume the debt of a spouse, sibling or parent. But they take responsibility for it anyway." ...more...
"In re Simpson, --- F.3d ----, 2009 WL ------ (9th Cir. Feb 2009)(single-premium annuity here does not qualify as exempt property under California Code of Civil Procedure Sec. 704.100 where debtor purchased it as an individual and annuity was not established for debtor by employer)" ...more...
"Issue: Where the debtor intends to surrender collateral which will result in substantial ânet disposable income,â can that be the basis for dismissal of the case under 707(b)(3)? Holding: Yes." ...more...
"Mr Obamaâs chances of being any more successful depend on whether his team has correctly diagnosed what is driving the wave of foreclosures. Is it that homeowners cannot afford to pay; or is it that they are declining to do so, because their homes are now worth less than their mortgages, the phenomenon known as negative equity?
Both factors play a part, but economists are divided on their relative importance. One school thinks that, even in cases of negative equity, most homeowners will not default if they can afford the paymentsânot least because defaulting will wreck their credit records. A second school believes that once the home is worth less than the mortgage, homeowners have a significant incentive to walk away even if they can make the payment, since in many states lenders cannot then pursue them for the shortfall." ...more...
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"âBefore the reform, overindebted households might file bankruptcy and get rid of their credit card debt, and that would free up income to pay the mortgage,â Morgan said. âThe new law blocks that escape route and forces better-off households to continue paying credit card debt, which makes it harder than before to continue paying the mortgage.â" ...more...
"The glut of clients is a welcome turn of events for bankruptcy lawyers" ...more...
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""You can't swing a dead cat in Wilmington without hitting a bankruptcy lawyer,"" ...more...
"Issue: Does the debtorâs admission that he did not keep business records establish a prima facie case that his discharge should be denied such that summary judgment is appropriate? Holding: Yes" ...more...
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"A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
Their incomes, meanwhile, remained static over those six years, according to the study, which used data from the 2007 Consumer Bankruptcy Project, a joint effort of law professors, sociologists and physicians. Researchers surveyed 2,500 households nationwide that filed for bankruptcy in February and March 2007." ...more...
"Most people want to repay their debts and turn to bankruptcy only as a last resort. Yet when Congress toughened the bankruptcy laws in 2005, one main reason given was that there was too much "fraud" in the system. I didn't buy it then and I don't now." ...more...
"Issue: When a confirmed chapter 13 plan is completed and the discharge injunction is entered, is the unpaid portion of the student loan discharged when the lender received actual notice of its treatment in the plan and did not object?
Holding: Yes, the discharge injunction may be set aside only pursuant to FRCP60(b) and then based on a lack of sufficient notice." ...more...
"Complaints against collectors amounted to 20.8 percent of all complaints received by the FTC" ...more...
"to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes" ...more...
"Banks of all sizes will continue to hoard cash and restrict lending ways at a time when their customers need it most.
Rising default rates among consumer and commercial borrowers will challenge recovery efforts from lenders and agencies alike.
Placement levels among some creditors will surprisingly start to level off and even decrease as some credit card issuers and lenders curtail their lending ways.
Some issuers and debt buyers will flood the market with inventory at the same time, resulting in plummeting prices in both the primary and secondary markets.
Capital-constrained debt buyers who see purchase opportunities in the market might not have the financial means to capitalize on them.
A growing list of troubled banks that appear on the FDIC watch list (126 as of 8/26 up from 90 at the beginning of the year). Most of these are relatively small institutions that local businesses rely on for financing to operate or expand their business and that consumers rely on for mortgage loans.
Regulators notorious for making hasty changes in troublesome times. Just yesterday, for example, regulators proposed a new rule that would reduce the cost for healthy banks to buy distressed ones which will fuel yet another round of consolidation among local and regional banks." ...more...
"national credit card debt per credit card borrower increased 2.63 percent in the second quarter. The average credit card borrower had debts of $1,717 at the end of the second quarter.
the ratio of credit card borrowers delinquent on one or more of their credit cards declined to 1.04 percent in the second quarter of 2008, down 12.6 percent over the previous quarter. However, on a year-over-year basis the national delinquency incidence rate has risen 14.3 percent from 0.91 percent in the second quarter of 2007.
Moodyâs said that the biggest drivers of credit charge-offs â namely, the unemployment rate and bankruptcy filings â are expected to continue to rise. Card companies are responding to the current economic environment by tightening credit standards, selectively reducing credit lines, limiting credit authorizations, increasing fees and rates, and more diligently pursuing collection strategies" ...more...
"Cap One reported an annualized charge-off rate of 5.96 percent in its U.S. Card unit, down from the 6.08 percent annual rate in July. The company reported net charge-offs of $341 million in its card unit for August.
But the 30 Days + Delinquency rate rose in the card unit rose in August to 4.07 percent, compared to 3.96 percent in July.
Cap Oneâs auto finance unit, meanwhile, reported a fairly sharp increase in its charge-off rate. The annualized charge-off rate in the auto finance unit was 5.35 percent in August, up from 4.67 percent in July. Delinquencies in the auto finance unit were also up, with the 30 Days + Delinquency rate standing at 8.84 percent in August compared to 8.33 percent in July." ...more...
"seniors will be facing a âperfect stormâ of financial struggle after graduation, especially due to increased college student credit card debt
31 percent of students polled did not worry about college student credit card debt because they believed they could pay back outstanding balances once they were out of school and earning a regular paycheck." ...more...
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"The bill would require credit card issuers to give account holders 45 days notice of any increases in interest rates. Monthly bills would have to be mailed at least 25 days before the due date, up from the current minimum of 14 days, and fees could not be charged on the remaining interest-only balance of a customer who has paid their bill on time." ...more...
"More than a quarter of college students think it is reasonable to run up a debt that might take months or years to pay off to "enjoy the moment."" ...more...
"consumers continued to cut discretionary spending from their monthly budgets â with more than 69 percent of respondents to Discover indicating cut backs to entertainment expenses and 62 percent having changed vacation plans â overall spending has continued unabated. Price inflation can be singled out as one of the most prominent factors contributing to overall spending increase." ...more...
"Vote totals ran mostly along party lines, with all Democrats on the committee voting in favor of the bill and two Republicans joining their ranks. The bill, HR 5244, now moves to the full House for consideration." ...more...
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"Bankruptcy Study (PDF)
Medical Bankruptcy â Q&A;
Medical Bankruptcy â Fact Sheet" ...more...
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"Consumer reporter at USA Today that routinely writes interesting and timely articles." ...more...
"It would be a tongue-in-cheek understatement to say that many members of the collections industry are a bit sensitive to perceived criticism. They should be â thereâs a lot of it going around and it is quite wearing.
For starters, how about Julie Brill of the FTC standing before the attendees of the annual ACA International meeting in July of this year in which she basically told them, "You are either with us, or you are against us," when it comes to ensuring ethical and legal practices. (She also announced the release of a 71-page study titled "Repairing a Broken System" which details a preponderance of evidence that consumer rights are being trampled by debt collectors.)" ...more...
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