Consumer Law & Policy Blog

Report By NCLC and CFA: Refund Anticipation Loans With A Twist

     The National Consumer Law Center and the Consumer Federation of America have just issued a report exposing new forms of tax refund anticipation loans (RALs), called "pay stub" and "holiday" RALs. The report and the groups' press release explains that consumers now have the opportunity for crushing debt at triple-digit interest rates well before tax season arrives.  The report's conclusion is blunt:  "Pay stub and holiday RALs represent a new and more insidious threat to the tax refunds and Earned Income Tax Credits of low-income taxpayers."  Definitely worth reading.

"Tort Reform"/Prop. 64

    by Brian Wolfman

    Today, over at Point of Law, Ted Frank has this post on a number of "tort reform" items, including the American Tort Reform Association's new report on what it views as class action abuse.  ATRA's basic claim is that consumer class actions today are largely driven by lawyer greed and left-leaning interest group politics and not by a desire to compensate people who have been harmed.  For a different point of view on the movement to "reform" consumer class actions, see Ira Rheingold's earlier post on this blog.

    Also in today's Point of Law post is a discussion of the current litigation before the California Supreme Court presenting the question whether California's Proposition 64 silently amended the state's consumer protection statutes to require consumer reliance at the same time that it expressly added stricter standing requirements.  The Point of Law discussion links to previous posts on this blog on that important litigation.

Consumer Law Classic: Testimony of a Predatory Lender

by Jeff Sovern

Though many of the postings on this blog concern breaking developments, sometimes it's uesful to bring to light something that, even though not a new development, may not be well known and still bears on an issue of today.  In that spirit, let me call your attention to the testimony of "Jim Dough," (the pseudonym of a self-described former employee of a finance company) taken during a hearing before the Senate Special Committee on Aging on March 16, 1998, titled “Equity Predators: Stripping, Flipping and Packing Their Way to Profits.”  The testimony helps explain how predatory lenders persuade consumers to agree to terms that are not in their best interests.  Unfortunately, the link connects only to the prepared testimony, and interesting points were also made during "Mr. Dough's" discussion with Senator Breux.  For that reason, and fot those who don't want to read the entire statement, I'm going to paste in here some of the highlights of the testimony, drawn from both the prepared statement and the colloquoy:

Finance companies try to do business with blue-collar workers, people who haven't gone to college, older people who are on fixed incomes, non English-speaking people and people who have significant equity in their homes. In fact, my perfect customer would be an uneducated widow who is on a fixed income -- hopefully from her deceased husband's pension and social security -- who has her house paid off, is living off of credit cards, but having a difficult time keeping up her payments, and who must make a car payment in addition to her credit card payments.

* * * [W]e were trained to sell the monthly "savings," that is, how much less per month the customer would be paying if we flipped the loan. In reality, the "savings" that we were trained to sell to customers were just an illusion. The uneducated customer would jump for the "savings," thinking that he would have more money to buy other things.