Congress Wants To Close Consumer Debt Trap

A report last year from New York-based think tank Demos found that about one-third of cardholders have paid interest rates in excess of 20%, and that borrowers can incur a "cascade" of penalties and end up in a "trap" of high-cost debt.

Legislation introduced by Rep. Carolyn Maloney (D-NY) and Rep. Barney Frank (D-MA) would prohibit some of the most abusive credit card company abuses such as:

* Bait-and-switch interest rate and fee hikes for any or no reason at all during the life of the card;
* Assessing hidden and unfair interest rate charges by charging interest on balances already paid off;
* Unjustifiably maximizing interest charges by requiring consumers to pay off balances with lower interest rates before those with higher rates;
* Charging late fees when consumers mail their payments seven days in advance of the due date; and
* Applying certain unfair interest rate hikes retroactively to balances incurred under the old rate.

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Consumers Are Protected From Government Contracted Debt Collectors Says Federal Appeals Court

The Fair Debt Collection Practices Act (FDCPA) gives consumers a legal right to sue debt collectors who threaten, berate, intimidate, or make false representations about the debt or their intentions, while attempting to collect a debt.

A collection agency with contracts to collect bad checks for about half the district attorneys in California however, has been doing all of the above, and more.

American Corrective Counseling Services (ACCS) is a private debt collector that uses its contracts with prosecutors to crank out demand letters on official prosecutor stationary, threatening consumers who have written bad checks with criminal prosecution and jail unless they pay exorbitant collection fees.

Despite what the ACCS letters say, bouncing a check is only a crime where there's knowing and intentional fraud. Yet, ACCS uses the threats to extort huge fees from consumers regardless. ACCS had argued it is kind of a private police, not a collection agency and not covered by federal law protecting consumers from abusive collection practices.

The U.S. Court of Appeals for the Ninth Circuit, though, has ruled that ACCS can't shield itself from a consumer class by invoking state sovereign immunity. In its sweeping ruling, the court held ACCS practices as a debt collector not a law enforcement agency.

The collection agency has so far not threatened to arrest the judges.

Bank of America Bad For Americans

The Service Employees International Union has a message to Americans about their Bank of America credit card: Keep it in your pants.

After Business Week confirmed Bank of America has sent letters notifying some cardholders it would more than double their rates to as high as 28%, without giving an explanation for the increase they came up with an alternative: Throw it away!

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When Sallie Mae Debt Collectors Attack (the Wrong Guy)

Sallie Mae wants Christopher Null to repay his student loan immediately. The problem being he has never had a loan from Sallie Mae.

"A call comes in asking to talk to me about my student loan. I say I don't have a student loan. We go back and forth, establishing that I don't have the same Social Security Number or date of birth as the offending person, but apparently they live in San Francisco now, so of course it must be me. It always ends with them promising not to call me any more. Then they call back a few days later and we start all over."

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Failure To Prosecute Usury Laws Means Millions For Rent-A-Center

Deborah Williams walked in the door of the Rent-A-Center store under the Broadway el in Bushwick, Brooklyn. She was delivering $109 in cash, her February payment for a 27-inch television that she is buying over time.

If she does not miss any payments, she will own the television by the summer, for a total of about $900. Such televisions can be bought retail for well under $400, but that would require more money than Deborah Williams can put her hands on at one time.

If this were set up as a loan, the interest rate would be 71 percent and illegal under the usury laws. But this deal is called “rent to own.” In all other particulars, it is much like a subprime mortgage for pull-out sofas and television sets.

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Republicans Go Easy On Subprime Perpetrators

Bankrate.com, not a far left website, reviews the prescriptions of the presidential candidates on the home mortgage credit crisis.

In what some might see as a role reversal, the Republicans are soft on crime and only the Democrats have detailed fiscal plans and aggressive law enforcement strategies. Romney, Huckabee, and McCain want to freeze interest rates but are vague as to what, if anything, they would do to help distressed families struggling to keep their homes. Obama and Clinton have multi-point plans to crack down on unscrupulous mortgage brokers; mandate accurate loan disclosure; and help reduce foreclosures by making chapter 13 work for homeowners.

Student Loan Giant Sallie Mae Slapped By Stockholders In Fraud Suit

Sallie Mae is usually in the news for ripping off unsuspecting students by loading them down with more debt than they knew about, or bribing college finance officials into recommending predatory Sallie Mae loans to unsuspecting college students. You would think a company that overcharges could make a profit, but you would be wrong.

Today started with Sallie Mae's credit rating being lowered two levels to BBB- from BBB+ by Standard & Poor's Ratings Services, due to the lender's enormous operating debt.

Then a press release was issued advising if you own Sallie Mae stock, the law office of Alfred G. Yates Jr., would like to speak to you. They are suing Sallie Mae for defrauding stockholders. A class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of Sallie Mae common stock.

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NY Judge Invokes Predatory Lending Law To Halt Foreclosure

James Tierney, director of the National Attorneys General program at Columbia Law School, said trial judges across the country are beginning to question banks seeking to foreclose on homeowners.

"What I am seeing is a number of trial judges saying, 'Enough is enough, fraud is fraud.' They are kind of taking a stand," said Tierney.

In many ways, experts say, the Shearon case is a classic tale of predatory lending in the subprime market, where brokers aggressively marketed more lucrative high-cost loans to people, many of whom lacked the wherewithal to pay those loans when the market turned and home prices began to fall.

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Countrywide Bank Redlining Entire Zip Codes For Down Payment Squeeze

Redlining is the practice of arbitrarily denying or limiting financial services to specific neighborhoods, generally because its residents are people of color or are poor. Redlining is a violation of federal fair lending and Civil Rights statutes.

Despite the law, however, Countrywide Bank has sent mortgage brokers a list redlining hundreds of counties as "soft markets" with perceived risk. Countrywide said it will now require down payments that are 5 percentage points higher than from most applicants. If a loan program had previously allowed a minimum 5 percent down payment, applicants in these areas will now be required to come up with 10 percent.

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