Consumer Law & Policy Blog

Fed to Issue New Mortgage Lending Regulations Next Week

During a speech yesterday, Fed Chair Ben S. Bernanke made the following statements about the long-awaited mortgage lending regulations:

Next week, the Federal Reserve Board will issue new rules on mortgage lending, using its authorities under the Home Ownership and Equity Protection Act. These new rules, which will apply to all lenders and not just banks, will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending. We received many helpful comments on our proposal and we incorporated a number of them into the final rules.

Media reports have indicated the new regulations will be issued Monday. 

Obama on Bankruptcy

Yesterday, at Credit Slips, Elizabeth Warren posted this interesting piece on Obama's views on bankruptcy policy and his view that the law needs to be substantially revised. She explains why she thinks Obama has taken on the bankruptcy issue even though that may not be politically expedient.

Times Articles on Credit Card Law Reform, Online Privacy, and New York's Foreclosure Legislation

The weekend's consumer law harvest from the Times:

The Times reported on Saturday that Credit Card Overhauls Seem Likely.  The entire article is worth reading, but here's an excerpt:

Working with the Office of Thrift Supervision and the National Credit Union Administration, the Federal Reserve introduced its proposals in early May. It has asked for comments and expects to formalize proposals by the end of the year.

At the same time, the legislation most likely to succeed in both the House and Senate sets similar rules on consumers’ behalf. Representative Carolyn B. Maloney, the Democrat of New York who wrote the House bill, and Senator Christopher J. Dodd, the Democrat of Connecticut behind the Senate measure, said they planned to bring their measures to the floor for votes before Congress adjourns in September.

The House and Senate bills as well as the Federal Reserve require that lenders apply payments to the debt with the highest interest rate. All would ban “double cycle” billing, in which interest is charged on some already repaid debt, and all would extend the time required, currently 14 days, between a statement mailing and payment due date.

All the measures would, under various conditions, prohibit lenders from raising interest rates on existing debt. The central bank proposes that except for increases caused by changes in stated variable and introductory offers, lenders may increase interest rates only if minimum payments are more than 30 days late.

Only the Dodd bill prohibits charges for paying by mail, phone or online, and restricts marketing and offers of credit to consumers under 21.

Friday's edition included Google Told to Turn Over User Data of YouTube, about a decision that has privacy advocates concerned.  An excerpt:

For every video on YouTube, the judge required Google to turn over to Viacom the login name of every user who had watched it, and the address of their computer, known as an I.P. or Internet protocol address.

Both companies have argued that I.P. addresses alone cannot be used to unmask the identities of individuals with certainty. But in many cases, technology experts and others have been able to link I.P. addresses to individuals using other records of their online activities.

The amount of data covered by the order is staggering, as it includes every video watched on YouTube since its founding in 2005. In April alone, 82 million people in the United States watched 4.1 billion clips there, according to comScore. Some experts say virtually every Internet user has visited YouTube.

And on Sunday Bob Tedeschi had a column, Mortgage Brokers as Naysayers, about the new New York foreclosure legislation, passed by the legislature, but not signed by the Governor, at least as of the time Tedeschi's piece went to press--though the article states that the Governor is expected to sign it into law [I should note that last week I posted that the bill had been enacted by the legislature, which was premature].  More excerpts:

* * * [The bill provides] that brokers have a “duty of care” to offer appropriate loans to subprime borrowers — those with poor credit.

Brokers are asking, however, what constitutes an appropriate loan, and what happens if a borrower disagrees with a broker’s recommendation.

* * *

* * * Mr. Tricozzi[, president of the New York Association of Mortgage Brokers] said, the legislation requires brokers to weigh a borrower’s future earnings in selecting appropriate loans. For some borrowers, like pregnant women or workers nearing retirement, such prognostications might be unreliable. Yet refusal to offer loans to such borrowers could be construed as age or gender discrimination, he said.

* * *

* * * some advocates want to hold mortgage brokers to the same legal standard as stockbrokers and other financial advisers, who carry a fiduciary duty to act in their clients’ best interests and offer only “suitable” financial products. New York’s proposed law specifically stops short of the suitability standard, said Richard H. Neiman, New York’s banking superintendent.

Times Articles on Foreclosure Issues, Mortgage Fees, and College Loans

Here are links to a few articles from the Times on consumer law issues from June that I've been stockpiling:

From June 22, Bob Tedeschi's Mortgages Column, "A Close Look at All Those Fees," is about how little consumers know about the fees charged in obtaining mortgages, and which fees can be negotiated.  An excerpt:

A recent survey, done by the Center for Economic and Entrepreneurial Literacy, a Washington-based research center, asked 1,000 people in April to choose the four most relevant factors in obtaining a mortgage. Nearly 70 percent did not identify their credit score, which chiefly determines the borrower’s loan eligibility and interest rate.

* * *

Another recent study . . . by the Urban Institute, also based in Washington, found that borrowers living in an area full of college-educated homeowners paid about $1,100 less in mortgage fees than those in areas where few people attended college. The study noted racial differences as well: on average, African-American borrowers paid $415 more for their loans than white counterparts did, while Latinos paid $365 more.

I wonder if there's an ECOA violation in the different fees charged different groups.

Some New York news: On June 19, the Times ran a piece, "Court Offers Homeowners Help Avoiding Foreclosure," on a program announced by New York's Chief Judge Kaye about a new court section that will help "borrowers and lenders reach speedy settlements."  New York's legislature also just passed a bill to help homeowners, and the Governor is expected to sign it.  Back on June 1, Tedeschi did another piece, "Legal Help in Face of Foreclosure," about local efforts to establish a Nassau County program under which lawyers will be trained and provide help to consumers facing foreclosure on a pro bono basis.

On June 18, the Times published "Bill Promotes Universal College Loans."  An excerpt:

Under the proposal, lenders that participate in the federal loan program would have to extend credit to any eligible student, regardless of such things as income or the number of years of education, as long as the college is part of the program.

Perhaps the refusal to lend to students at particular schools would create ECOA issues, depending on the demographics of the student body.  In any event, it's not clear to me what effect such a bill, if enacted, would have on higher education.  If lenders would rather not lend to students at certain schools because, for example, students at those schools are unable to get jobs and so default on their loans, would forcing the lenders to continue making such loans keep the schools afloat and students attending them--only to discover that they can't get jobs later?  Or is the refusal of lenders to make loans not because of higher default rates?  Would such a law increase student loan rates generally?  Or does the federal loan program guarantee keep rates low regardless of the default rate?   

Mortgage Delinquency Rates Way Up

This morning's Washington Post: "In a sign of continuing trouble in the housing market, mortgage delinquency rates doubled over a 12-month period at Fannie Mae and Freddie Mac, the two industry giants reported yesterday." Read the whole story here.

Correction to Post That President Signed FACTA Truncation Bill

A commenter named Ted correctly pointed out that my post yesterday was inaccurate.  Here is the addition to § 1681n, the section authorizing private suits for willful violations of the FCRA, that Congress added in H.R. 4008, now known as the Credit and Debit Card Receipt Clarification Act:

d) Clarification of Willful Noncompliance- For the purposes of this section, any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and the date of the enactment of this subsection but otherwise complied with the requirements of section 605(g) for such receipt shall not be in willful noncompliance with section 605(g) by reason of printing such expiration date on the receipt.'.

The amendment does not affect suits in which sellers printed the entire credit card number on a receipt, nor will it affect suits in which consumers have suffered actual damages because a seller printed an expiration date on the receipt (which might happen, for example, if the date was printed on the receipt and someone used the receipt to make an unauthorized credit card purchase and the consumer was damaged thereby), in violation of § 1681c(g) of the FCRA.  It will, however, prevent consumers who have not been injured by the inclusion of the expiration date from obtaining statutory damages under § 1681n if the receipt also printed no more than the last five digits of the credit card number. I apologize for my sloppiness and thank Ted for pointing out the error.

AP Poll on Relationship Between Crushing Debt, Stress, and Poor Health

This blog has covered issues relating to consumer debt intensely. But we have often ignored the personal toll unmanageable debt imposes on people's lives. This long story in today's Washington Post discusses an AP-AOL poll of consumers regarding the relationship between debt and consumer health.  Here's a preview: "When people are dealing with mountains of debt, they're much more likely to report health problems, . . ., according to an Associated Press-AOL Health poll. And not just little stuff; this means ulcers, severe depression, even heart attacks."

Home Equity Loans Squeezed

Not surprisingly in light of recent events, obtaining loans and maintaining lines of credit against one's home equity are getting more difficult.  This New York Times article explains.

House and Senate Vote to Amend FCRA to Block Credit Card Truncation Suits

Congressional Quarterly's Weekly Report reports that the Senate has passed a bill, H.R. 4008, that would block credit card slip truncation suits--that is, the many suits that have been filed for violation of the FCRA provision added by FACTA barring retailers from printing on credit card receipts the full credit card number or credit card expiration date.  Because the House had already passed the bill, it now goes to the President for signature.  Blocking such suits makes sense, but if Congress was going to amend the FCRA, wouldn't it also have made sense to fix some of the other problems with the FCRA? (hat tip to Ira Rheingold)

Consumer Banktruptcies Soar Despite Restrictions Enacted by Congress in 2005

Check out this front page article in today's Washington Post discussing the significant increase in consumer bankruptcies, despite Congress's enactment in 2005 of legislation intended to tighten eligibility for bankruptcy.  As the article puts it:  "Despite the 2005 passage of a law that made it more difficult and expensive to file for personal bankruptcy, more Americans are choosing bankruptcy over destitution. Filings -- including Chapter 7, which wipes out debt, and Chapter 13, which reorganizes it -- totaled 822,590 last year, up 38 percent from 2006." The article discusses particular examples of working families so hard-pressed that bankruptcy was their only option.