Consumer Law & Policy Blog

Video on Predatory Credit Card Lending to College Students - Take Two

Yesterday, I blogged about a video produced by Americans for Fairness in Lending concerning predatory credit card lending to college students, with the video imbedded.  I just learned that daily email subscribers from this blog were not able to see the imbedded video.  So, for those folks, here's the video.  Enjoy.

Americans for Fairness in Lending Releases Cartoon Video on Predatory Lending

Check out this video by Americans for Fairness in Lending on credit card company tactics.

The video focuses on efforts to drive college students into debt.  In that regard, you might want to look at this law review article: Maxed Out College Students: A Call to Limit Credit Card Solicitations on College Campuses, by Creola Johnson, a Professor at Ohio State law school.

District of Columbia Passes Payday Lending Bill

As you may have heard, a close vote on a procedural motion in the U.S. Senate today means that the residents of the nation's capitol may not get the right to vote any time soon. But not all of today's news about democracy in the District of Columbia today was bad. D.C.'s City Council has the power to enact local legislation and today it voted to pass the Payday Loan Consumer Protection Act, which will make payday lenders subject to the District's 24% interest rate cap. Although the bill had been the subject of some intense and questionable industry lobbying efforts that continued up until the last minute, the members of the Council voted overwhelmingly in favor of it. The only dissenting vote was cast by D.C.'s unpredictable former mayor, Marion Barry, who originally cosponsored the bill but then made a bizarre about-face for which he still hasn't provided a satisfactory explanation.

FTC Warns Mortgage Brokers and Media About Deceptive Ads

The FTC has sent more than 200 warning letters about ads that may be deceptive or violate TILA.  The FTC statement gives the following examples of some of the ads the FTC discovered:

[S]ome ads touted rates as low as “1%” but failed to disclose adequately:

• that the stated rate was a “payment rate” – not the interest rate – that applied only during the loan’s initial period;
• that low advertised payments applied for only a short period; and
• the loan’s Annual Percentage Rate, the uniform measure of the cost of credit that enables consumers to shop for and compare mortgage offerings.

You can read more here,

Times Reports on Mortgages, Regulation of the Toy Industry, Junk Mail, and More

Another weekend, another collection of articles on consumer law issues from the Times.  Today's issue contains the "About New York" column by Jim Dwyer, headlined "Fighting an Outbreak of Mortgages Too Good to Be True," about the Foreclosure Prevention Project at South Brooklyn Legal Services.  The column reports on an offer one client, Tilton Jack, received for a one percent mortgage.  An excerpt:

In fact, the rate was 1 percent — but for one day. On the second day, it increased to 8.13 percent. Now, it is 8.77 percent. But those jumps are not what is sending his mortgage into a financial death spiral.

Under the terms, Mr. Jack’s monthly payment is set as if the mortgage cost just 1 percent, even though it is much more. So the seemingly low rate is a trap: every month, the unpaid interest is being piled onto his principal. When it reaches 110 percent of the original loan, the payments will be adjusted to the full 8.77 percent — on the principal that has been swollen by the unpaid interest.

“The principal has been increasing ever since he got the loan, and his payments will go from $1,100 a month to over $3,000,” said Navid Vazire, a lawyer with the Foreclosure Prevention Project who is representing Mr. Jack.

If only lenders used their imaginations for something more constructive than end-runs around the TILA disclosure rules.

Yesterday's issue contained an article titled "Toy Makers Seek Standards for U.S. Safety" about calls by toy manufacturers for federal regulation.  The stated goal is to reassure consumers about safety.  This contrasts with an editorial in Thursday's paper titled "Consumers Left in the Cold" which criticized Mattel for thinking "that the nation’s threadbare consumer protections are still too stringent and should best be ignored."  The editorial noted that Mattel has been fined by the Consumer Product Safety Commission for failing to report hazards timely.  The editorial also castigated the Bush administration's treatment of the CPSC. 

Thursday's paper contained several interesting articles on consumer issues, including one titled, ""Democrats Prepare Bills to Tighten Loan Rules."  Among the proposals:  barring mortgage brokers from steering borrowers who could qualify for prime loans to more expensive subprime loan and bans on hidden brokerage fees (a.k.a. yield-spread premiums) and prepayment penalties.  Another article, headlined, "Panel Questions Financial Advisers for the Elderly,"  reported on a congressional hearing.  Finally, "For-Profit Crusade Against Junk Mail" describes organizations trying to cut down on junk mail, including efforts to create a "do not mail" list similar to the "do not call" list. 

Avoiding Foreclosure

Check out this article for publication in tomorrow's Washington Post on avoiding foreclosure.  The on-line version's teaser says: "There are plenty of ways to avoid foreclosure: Refinancing, persuading the lender to modify the terms of the loan, selling the house or filing for bankruptcy protection, to name some. But there are also plenty of pitfalls."  CL&P blogger Ira Rheingold, Executive Director of the National Association of Consumer Advocates, is quoted extensively in the article.

Times Articles on Lemons, Nonprofit Payday Loans, Responses to the Mortgage Meltdown, and More

It's time for another roundup of recent New York Times articles on consumer law, including some articles that don't have anything to do with the mortgage crisis.  On Sunday, the Times ran a piece on cars that had been declared lemons but that were nevertheless resold without being so designated.  An excerpt: 

To see what happens to lemons, Experian Automotive, which specializes in collecting and analyzing automotive data, picked at random 1,000 Florida vehicles that were branded lemons, from a list on a state Web site. Experian found that 555 had been taken out of the state. And four-fifths of those 555 cars no longer had titles branding them as lemons, according to an analysis conducted for The New York Times.

The article also notes that some states require that lemons be so labeled, discusses litigation by those who have unwittingly purchased such lemons, reports on the FTC's failure to act, and quotes consumer advocates as suggesting a national database of lemons is needed.

Today's paper included a report on nonprofit payday loans, while yesterday's included an editorial titled "The College Credit Scam" in which the Times called upon colleges that allow credit card issuers to solicit students on campus to take steps to protect vulnerable students, an issue that is highlighted in the documentary "Maxed Out."  The editorial concluded "Congress, when it convenes next week, should move forward with planned legislation that would tighten federal supervision over the credit card industry while improving disclosure laws and outlawing deceptive practices."

But the mortgage meltdown has also come in for its share of attention.   Last Friday the Times reported here on state statutes intended to limit the damage from subprime lending.  North Carolina, Maine, Minnesota, and Ohio have enacted such statutes and other states are considering them.  And an article in today's paper reports on possible federal responses to the problem.

Subprime Mortgage Advertising Still At Full Throttle

Today's Washington Post has this article indicating that, despite the crunch in the subprime mortgage market, advertising to subprime borrowers has been largely unaffected.

Presidential Candidates Express Views on Home Mortgage Credit Crunch

Spurred by the rise in foreclosures and the crunch in the subprime mortgage market, the presidential candidates have weighed in with their views and some proposals for reform.  Check out this article in today's Washington Post surveying the situation.  The candidates' proposals, as described in the article, are remarkable for their lack of specificity.  It's hard to know whether that reflects the candidates or the reporting.

Washington Post: "Maxed Out" Prescient About Mortgage Loan Market

Today's Washington Post explains in this short article that although the movie "Maxed Out," directed by James Scurlock (pictured to the left), received only a modest reception when it hit movie theaters in March, it was "right on the money" in depicting the country's debt crisis, as evidenced by recent troubles in the subprime loan market.  The CP&L blog has discussed "Maxed Out" on several occasions, including here and here.