Consumer Law & Policy Blog

More on the HHS Report on Pre-Existing Conditions

Yesterday, we blogged about the soon-to-released report of the Department of Health and Human Services estimating that up to 129 million non-elderly Americans suffer from pre-existing conditions as defined under the Affordable Care Act. (Beginning in 2014, the Act will generally prohibit insurers from disadvantaging customers and prospective customers on the ground that they already suffer from illnesses or other adverse health conditions.) The new HHS report itself is here. You also may be interested in HHS's press release and in reading more about the Affordable Care Act's policies on pre-existing conditions.

Paper on the History of Credit Reporting

Kenneth Lipartito of Florida International University has written The Narrative and the Algorithm: Genres of Credit Reporting from the Nineteenth Century to Today.  Here's the abstract:

Credit reporting is a contested process whereby parties with distinct interests (borrowers, lenders, and intermediaries) jointly construct the form, method, and style of credit assessment. In contrast to theories that argue information should grow more secure and credit relationships more transparent over time, the conflicted struggle over representation produces different styles or “genres” of credit evaluation that are compromises between the interests of the different parties. Thus, in the United States, trade credit reporting in the nineteenth century evolved an enduring narrative reporting style, incorporating heterogeneous forms of information not easily reducible to a single quantitative score. Lack of institutions for sharing information between creditors, legal precedents, and strong resistance among borrowers to overly intrusive surveillance made the narrative report the best means to handle the diverse business credit market. By contrast, lenders in the consumer credit market established information sharing capabilities, which were enhanced after World War II when banks developed the credit card and card verification systems. Fair credit laws in the 1960s and 70s actually reinforced the move to quantitative scoring based on information shared among creditors, eventually institutionalizing the FICO score as the prime method of consumer credit evaluation.

HHS Study Finds Up to Half of U.S. Has Pre-Existing Health Conditions

The Department of Health and Human Services will release a study today showing that tens of millions of Americans have pre-existing conditions, according to this article in the Washington Post. Republicans in Congress and the health care industy say the numbers are bloated to underscore the need for the 2010 health care legislation, which most Republican legislators want to repeal. Here's an excerpt:

As many as 129 million Americans under age 65 have medical problems that are red flags for health insurers, according to an analysis that marks the government's first attempt to quantify the number of people at risk of being rejected by insurance companies or paying more for coverage. * * * Republicans immediately disparaged the analysis as "public relations." An insurance industry spokesman acknowledged that sick people can have trouble buying insurance on their own but said the analysis overstates the problem. The study found that one-fifth to one-half of non-elderly people in the United States have ailments that trigger rejection or higher prices in the individual insurance market. They range from cancer to chronic illnesses such as heart disease, asthma and high blood pressure.

Lawsuit Loan Sharks?

Check out this New York Times article on the lawsuit loan industry, which loans money to people with pending lawsuits for a cut --- sometimes a huge cut -- of the proceeds if the suit succeeds. The industry is unregulated, and, as the article explains, some people are urging better disclosure of loan terms and that the industry be subjected to consumer protection laws applicable to many other loans.

One Foreclosure Defense Lawyer's Unusual Tactics

The LA Times reports that California foreclosure defense lawyer Michael Pines advises his clients after their homes have been foreclosed to break into and squat in them. In fact, he's done it himself on behalf of clients: "The 58-year-old attorney admits to breaking into homes at least half a dozen times, ... leaving the clients to squat in their homes while he defends their legal right to possession. His unconventional methods have gotten him fined by a judge in San Diego, arrested in Newport Beach and threatened with contempt — and jail — in Ventura." The Times article suggests that the squatting strategy may make it easier for Pines to be paid: "'I tell my clients that if you're living in a house for free, you should be able to afford to pay a lawyer,' Pines said, adding that he usually charges an hourly rate of $650."

Foreclosure Reform

Let's assume we can all agree that foreclosures ought be accompanied by proper documentation and that a great many foreclosures accompanying the financial crisis were not. Less clear is what can or should be done about it looking backward. Voiding foreclosures may not be the answer (legally or otherwise). After all, many of the properties have been resold to new homeowners and reversing transactions on tens of thousands (or more) properties may not be the best way to emerge from an economic downturn. I just don't know.

But future reform is another question. Are the states considering legislation aimed at avoiding these problems in the future? This Washington Post article discusses legislation being debated in Virginia that would impose penalties on lenders who foreclose based on false documents, require banks to keep current records on loan status in government offices (including public filings whenever ownership changes), and give homeowners up to 45 days (rather than the current 15) to oppose a foreclosure in court. According to the Post, "The Virginia Bankers Association strongly opposes the overhaul, saying it would gum up the process."

Health Care Reform in 2030

There's no need to work for a single-payer health care system or to worry about the Patient Protection and Affordable Care Act's repeal because Ezra Klein of the Washington Post has written the definitive work on exactly what the health care system will look like in 2030. The current Congress's efforts to repeal the Affordable Care Act will fail (okay, that's an easy one), and the Supreme Court will uphold the Act's individual mandate. What else? Here's Klein's most playful prophecy:

[I]n 2019, at the urging of President Bobby Jindal, Congress passed the Health Care Equality Act, the third major phase of health-care reform. It fulfilled long-held conservative hopes when it moved Medicaid and Medicare onto the exchanges [created by the Affordable Care Act] and allowed seniors and low-income Americans to choose between the government behemoths and private insurance. But it also opened both programs to all Americans - making them akin to the public option that Democrats had been unable to pass in 2010. And as part of the deal, both were given more freedom to use a flood of comparative data in deciding what treatments to cover or refuse, which allowed them to finally stop paying for volume and begin paying for quality.

Prentiss Cox Paper on Property Assessed Clean Energy Financing Programs

Prentiss Cox of Minnesota was particularly impressive at last May's Teaching Consumer Law Conference in Houston.  Now he's written Keeping Pace?: The Case Against Property Assessed Clean Energy Financing Programs.  Here's the abstract:

Property Assessed Clean Energy (“PACE”) is a method of public financing for energy improvements through special assessments on local government property taxes. Interest in PACE exploded from its origination in 2008, with almost half the states rapidly enacted legislation enabling local governments to use their property collection power for this purpose. The growth in PACE is now suspended, and existing programs have been put on hold, in the face of opposition from the federal secondary mortgage market regulators. Governments and environmental advocates supporting PACE have initiated litigation against the federal regulators and are seeking passage of federal legislation to revive the programs. This Article argues that the theory underlying PACE is fundamentally flawed. PACE has been promoted as an alternative to traditional real estate financing that resolves the impediments to homeowners investing in alternative energy and energy efficiency. A careful analysis of these claims demonstrates that PACE in actual practice will operate similarly to most other types of real estate financing, and that the efforts to reconstruct PACE programs through litigation or legislation are misplaced. Instead, PACE programs should be radically restructured or should be considered a creative yet failed experiment offering valuable lessons for future residential energy investment programs.

New NCLC Practice Tools

The National Consumer Law Center has just released 16 new NCLC publications, is accepting web registrations for an upcoming Fair Debt conference, and will conduct a January 20 webinar on auto dealer insolvency's impact on consumers.   

1. Eight NCLC Treatise Updates: Automatic subscribers just received the Winter 2010 Updates. Others can order at www.nclc.org/updates

• Truth in Lending (7th ed. 2010) (2 volumes, 1498 pp.): new laws and rules create substantive requirements for mortgage loans and credit cards  
• Fair Credit Reporting (7th ed. 2010) (1138 pp.)
• Student Loan Law (4th ed. 2010) (694 pp.)
• Repossessions (7th ed. 2010) (860 pp.)
• Consumer Law Pleadings (Website and 2010 Index Guide) (656 pp. guide)
• Consumer Bankruptcy Law and Practice 2010 Supplement (394 pp.
• Unfair and Deceptive Acts and Practices 2010 Supplement (350 pp.)
• Consumer Arbitration Agreements 2010 Supplement (328 pp.)

  2. Eight Recent NCLC REPORTS Issues (contact publications@nclc.org for back issues or to subscribe):

• Consumer Credit & Usury Ed.: Nov./Dec.: FRB bans yield spread premiums, steering; remedies for TIL credit card violations; Sept/Oct: Mortgage discrimination class litigation; NCUA raises usury cap for small loans; municipalities regulate pay day lenders
• Deceptive Practices & Warranties Ed. Nov./Dec.: Importance of little-known federal record retention requirements; selecting and using a forensic document examiner Sept./Oct.: Implications of FTC's new Mortgage Assistance Relief Services Rule on consumer attorneys; 10 things every attorney should know about CROA
•  Bankruptcy & Foreclosures Ed.: Nov./Dec.: State law mandates of loss mitigation as foreclosure pre-condition; Social Security benefits excluded from projected disposable income in ch. 13 Sept/Oct.: Robosigning just tip of the iceberg; testimony in bankruptcy case signals trouble for mortgage industry
• Debt Collection & Repo Ed: Nov./Dec.: Important new Circuit Court of Appeals FDCPA decisions; courts dismissing debt buyer collection suits Sept./Oct: FDCPA requirements for mortgage loss mitigation process; new Senate and FTC proposals; new FDCPA cases

3. The Fair Debt Collection Practices Conference is in Seattle, March 3-4, 2011. Register online at: www.nclc.org/conferences-training/fair-debt-collection-practices-conference.html. Get up to speed on your first debt collection abuse cases and proceed to more in-depth sessions on developing fair debt collection cases and a fair debt collection law practice. Faculty includes the top Fair Debt Collections Lawyers from across the country. CLE credit.

4. NCLC Webinar Series has resumed: January 20 at 2PM: Dealers Going Out of Business, Leaving Consumers Out of Luck. Contact jhiemenz@nclc.org for this and future webinars. Go to www.nclc.org/conferences-training/webinars.html for FREE downloads of past webinars.

What Is The Legal Status Of A Property Bought After An Unlawful Foreclosure?

Alan White and I blogged last week about the decision from the Massashusetts Supreme Judicial Court in U.S. Bank v. Ibanez that nixed foreclosures by major banks because the banks could not document title to the properties. Now, Paul McMorrow has penned this article in the Boston Globe on the ruling discussing, among other things, the legal status of property bought after an insufficiently documented foreclosure. He writes:

Last week's Supreme Judicial Court decision, in which the court upended a pair of Springfield foreclosures and upbraided Wells Fargo and US Bank for maintaining sloppy records is great news for homeowners facing foreclosure. Mortgage-servicing banks, which were in the habit of trading mortgages around like cheap baseball cards, will be forced to slow the pace of foreclosures even more, and carefully verify that they actually own the mortgages on the properties they want to foreclose on. But the decision brings uncertainty to buyers of foreclosed properties — buyers who might not have clear title to their homes anymore. * * * Because of the Ibanez case, and the staggering volume of sloppy paperwork that accumulated during the housing boom and bust, those other 44,000 foreclosures are suddenly subject to new scrutiny. It’s highly unlikely that just two properties, out of more than 44,000, were seized based on deficient records. I took a random sample of 30 foreclosure deeds from Chelsea (one of the cities hit hardest by foreclosures) since the beginning of 2006. Of those 30 foreclosure cases, 10 had paperwork on file with the Registry of Deeds that raised the sort of chain-of-custody concerns at the heart of the Ibanez decision. In one case, no mortgage was on file with the registry. Another showed no paperwork assigning the note to a mortgage servicer. In other cases, mortgage originators didn’t sign off on documents transferring the notes into mortgage pools, or transfer paperwork was filed after a foreclosure occurred. All of the properties have since been re-sold. * * * [The decision in Ibanez] presents a series of terrible questions to anyone who bought a foreclosed house from a big bank. Among them: Is my mortgage valid? Will I be able to refinance or sell my home? Do I even really own my house?

I am not an expert on these issues, and perhaps there are easy answers to these questions. Are there?