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"Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt," the New York Times reports this morning. Read "Rules Are Coming on Payday Loans to Shield Borrowers," here.
Posted by Allison Zieve on Monday, February 02, 2015 at 10:30 AM | Permalink | Comments (0)
"Car title loans," the Center for Responsible Lending explains, "are marketed as small emergency loans, but in reality these loans trap borrowers in a cycle of debt. A typical car title loan has a triple-digit annual interest rate, requires repayment within one month, and is made for much less than the value of the car."
The FTC has taken against two car title lenders for deceptive advertising. In administrative complaints, the FTC charged that lenders First American Title Lending of Georgia, LLC, and Finance Select, Inc. advertised zero percent interest rates for a 30-day car title loan without disclosing important loan conditions or the increased finance charge imposed after the introductory period ended, the FTC explained in its press release.
The FTC charged that First American Title Lending, which operates over 30 locations in Georgia, advertised a zero percent offer (in English and Spanish) and failed to disclose that the borrower had to meet specific conditions to receive that rate. The borrower had to be a new customer, repay the loan within 30 days, and pay with a money order or certified funds, not cash or a personal check. If a borrower failed to meet those conditions, the offer did not apply, and he or she would be required to pay a finance charge from the start of the loan. The company’s advertisements also failed to disclose the amount of the finance charge after the introductory period ended.
The FTC alleged Finance Select, doing business as Fast Cash Title Pawn, failed to disclose that unless a loan was paid in full in 30 days, the zero percent offer did not apply, and that a borrower would have to pay a finance charge for the initial 30 days of the loan in addition to any finance charges incurred going forward. Fast Cash, which has five locations across Georgia and two in Alabama, also failed to disclose how much the finance charge would cost a borrower after the 30-day introductory period was over.
Last July, The FTC cautioned consumers against using car title loans in a document called "Caution: Car Title Loans Can Leave You Stranded."
The Center for Responsible Lending has more on car title loans, including this video.
Posted by Allison Zieve on Monday, February 02, 2015 at 09:10 AM | Permalink | Comments (0)
The Consumer Financial Protection Bureau has this on-line interactive tool for estimating what a consumer should pay for a home mortgage. Plug in loan type, amount, length, down payment, FICO credit score, location, etc., and the tool spits out the approximate market interest rate in the relevant location and the total cost of credit. The CFPB says it is basing the tool's answers on "data [that] comes from actual lenders [which] is updated every day." (emphasis added)
And go here for the agency's explanation of "the 7 factors that determine your mortgage interest rate": credit score, home location, home price and and loan amount, down payment, loan term, interest rate type, and loan type.
Posted by Brian Wolfman on Monday, February 02, 2015 at 08:50 AM | Permalink | Comments (0)
by Peter Holland
In anticipation of the CFPB’s forthcoming study on forced arbitration in consumer contracts, we can expect lots of rhetoric from industry about how arbitration is more consumer friendly than litigation, and that it results in better outcomes (i.e. more money) for consumers. (If this were really so, then how could a company justify these added losses to their shareholders)?
It is not often that the general public gets a peek behind industry messaging, so this article and related podcast (especially starting at 8:44) are a particular treat. Although industry may describe forced arbitration as a consumer protection measure, when talking amongst themselves, they describe it as “silver bullet” which can magically kill consumer claims. Judge for yourself:
“What if there existed a single argument that could be made in many consumer cases that would successfully remove the matter from Court and likely end the case in its entirety?
Surprisingly, such an argument exists, though it is often overlooked in the defense of debt collectors and debt buyers.”
The answer, according to the author, is to force the case out of court and into arbitration, where the claims will never be pursued because of the cost. The lawyer in the podcast says that once a court orders arbitration, it is “very rare” a case actually goes to arbitration, and he can only think of 2 cases over the past several years that went to arbitration after the case was stayed or dismissed in court. One of the reasons he offers is that plaintiff’s attorneys don’t want to spend their own money on arbitration.
So, in the words of one prominent lawyer, industry has a “silver bullet” which kills almost all disputes because of economic barriers and an inability to find lawyers. Nice system.
Posted by Jeff Sovern on Sunday, February 01, 2015 at 05:31 PM in Arbitration, Debt Collection | Permalink | Comments (1)
George Washington is having what looks like a terrific Consumer Protection Conference under the auspices of the ABA Antitrust Section on February 12. More information available here. Among the panels is a debate between my co-author Dee Pridgen and Howard Beales on advertising substantiation. As for how timely that is, see Steve Gardner's post on Friday about the DC Circuits POM opinion.
Posted by Jeff Sovern on Sunday, February 01, 2015 at 04:41 PM in Advertising, Conferences | Permalink | Comments (0)