Kodak Dumps the Oscar Theater, Proving that Contract Rejection is like No Fault Divorce: There is No Defense

Just under a month ago, Eastman Kodak filed for chapter 11 and now it is doing what many chapter 11 debtors do, trying to decide which of its contractual obligations it’ll honor and which it won’t. Back in 2000, Kodak signed a $74 million deal to get its name displayed atop the fancy Los Angeles theater that hosts the Oscars. Since Kodak has not yet paid the full freight for this naming, it has now decided to end the relationship, just like that. Kodak has decided that the benefits of having the company's name on the 3,300- seat theatre don’t justify the ongoing costs.

Payday Loans are First Target of New Consumer Protection Chief

Richard Cordray’s first CFPB hearing will be held today and will focus on the practices of payday lenders. Seventeen states and the District of Columbia already outlaw payday loans, but in all of the others, lenders can and do charge 400% interest or more, on loans against consumers' next paycheck. Under terms of the 2010 Dodd-Frank Act, the CFPB could not regulate payday lenders or other nonbank entities that provide financial products until its director was in place. As Republican senators were blocking Cordray's confirmation, President Barack Obama used a recess appointment to install him last month. Cordray's first order of business was to launch the bureau's nonbank supervision program, from which today's hearing springs. Consumer advocates are very hopeful that the CFPB will use its authority to scrutinize industry loan records and marketing materials and gauge their compliance with federal laws. According to Jean Ann Fox of the Consumer Federation of America, consumer groups also hope that the CFPB will develop new rules regarding industry practices deemed unfair, deceptive and abusive.

Carter Doughtery of Bloomberg News just posted a more detailed description of the CFPB's current inquiry into payday lending.

Twinkies at Risk

At least it’s not Tastykakes, right Philadelphians? But seriously, historians with a sweet tooth should be feeling a little uneasy after Hostess’ chapter 11 last week, precipitated by runaway pension and medical benefits claims and a tough economy. Tough is right. If people are too broke to buy Twinkies, things really have reached an all-time low.Interstate Bakeries, which owns Hostess brands, claims to have over $950 million in pension claims.

Twinkies have an interesting history. According to wikipedia, Twinkies were invented in Schiller Park, Illinois in 1930 by James Alexander Dewar, a baker for the Continental Baking Company. Realizing that several machines used to make cream-filled strawberry shortcake sat idle when strawberries were out of season, Dewar conceived a snack cake filled with banana cream, which he dubbed the Twinkie. He said he came up with the name when he saw a billboard in St. Louis for "Twinkle Toe Shoes". During World War II, bananas were rationed and the company was forced to switch to vanilla cream. This change proved popular, and banana-cream Twinkies were never widely re-introduced.

In 1988, Fruit and Cream Twinkies were introduced with a strawberry filling swirled into the cream. However, the product never caught on and was soon dropped. Vanilla's dominance over banana flavoring would be challenged in 2005, following a month-long promotion of the movie King Kong. Hostess saw its Twinkie sales rise 2 percent during the promotion, and in 2007 permanently restored the banana-cream Twinkie to its snack lineup.

Twinkie sales for the year ended December 25, 2011 were 36 million packages, down almost 2% from the prior year. Hostess claims that more customers are choosing healthier foods, implying that it may need to invent a healthy Twinkie in order to avoid liquidation and attract new investors.

Maryland Courts Require More Proof in Debt Collection Cases, Ringing in Some Debt Collection Cheer

In many states, a creditor or debt collector can easily obtain a default judgment with just a person’s name, last known address and Social Security number, and the judgment can follow the person around for years despite that the debt was never proven. Due to a flood of uncontested debt collection cases in Maryland, its high court has just ruled that for all cases filed on or after January 20, 2012, collectors and creditors must produce actual proof that the debtor incurred the debt. This can be done by producing a copy of a signed bill or contract, or other evidence of the debt. Debt buyers also must prove they actual hold the debt through a valid purchase, a common stumbling block for collecting debt buyers. In making this decision, the Maryland Court of Appeals (which is Maryland’s high court) took into consideration that many cases end in default judgments, a problem Nationwide. The decision also evidences a distrust of those pesky (often fraudulent) affidavits. Let’s hope other states decide to follow suit and put collectors to their proof.

Foreclosure Statistics for New Mexico: These Just Out

Foreclosure statistics obviously vary from local jurisdiction to jurisdiction, as well as from one time period to the next. For example, sometime back in 2008, New Mexico was 36th in the nation in the number of foreclosures, obviously lower than average. Now it is 11th in the nation. Right now, one in every 452 Santa Fe homes and one in every 550 Albuquerque homes is in foreclosure, and about 15,000 cases are filed each year, about half in Albuquerque. The lack of lawyers reported by the New York Times in February of 2011 is still palpable. Attorney Angelica Anaya-Allen, from the United South Broadway Corporation, which defends foreclosures in New Mexico, did an analysis of the reported decisions in all foreclosure cases in Santa Fe over a two year period. She found that of the 828 reported decisions that favored lenders during the one-year period in which she looked, 600 were default judgments. Ms. Anaya-Allen reports that out of the 15,000 cases filed per year, she’d be surprised if more than 500 borrowers, or roughly 3%, were represented. 

NPR Reports that Debtors' Prisons Are Alive and Well

Although debtors' prisons are illegal across the country, you can apparently still end up in jail for an unpaid bill. I first came across this reality reading one of Lea Shepherd’s (Loyola Chicago) law review articles, Creditors Contempt. NPR  tells the story of Illinois debtor Robin Sanders in Illinois, who was stopped by police for a loud muffler but taken directly to jail on an arrest warrant for failure to appear at a hearing on an unpaid medical bill, all in a lawsuit she was unaware of. Similar stories have been reported in Indiana, Tennessee and Washington, and all involve selling debt to a collection agency, that then files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest. According to the story, despite that debtor’s prisons were outlawed early in our country’s history, one-third of all states still allow people who have not paid bills to be jailed.

Big Banks Finance Payday Lenders: You Knew that but did you Know some also Make payday loans?

This video is totally worth you 2 minutes. It describes big banks in rather unflattering terms (as parasites, for example) but the main thing I got out of it is that big banks finance payday lenders. Yes, it is true that the same banks that received TARP bailout money are funding payday lenders.  The payday lenders include Advance America, Cash America and ACE Cash Express, which allow customers to borrow against future paychecks, and which charge an average interest rate of 455 percent on top of fees of $15-18 per $100 loaned. These lenders depend on the big banks' financing for their business.  Moreover, Wells Fargo, Fifth Third Bank, and U.S. Bank, all make their own payday loans too.Talk about double dipping!

Consumers Beware of Gas Well Leases, Especially Around the Holidays

For those contracts professors who teach Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962), there is a modern version this 1962 case going on right now in the gas drilling context. In the venerable Peevyhouse case, Willie and Lucille Peevyhouse owned a farm that contained coal deposits, and entered into a contract with Garland Coal & Mining Co. allowing Garland to strip mine the coal, in return for a royalty. In the contract, Garland promise that the land would be restored once they were done. The court refused to enforce the clean-up provision, however, finding it incidental to the main purpose of the contract. The land was left a hot mess.

Change.org Petition Plays Part in BoA Debit Fee Reversal

In early October of 2011, Bank of America announced that it would begin charging its customers an additional $5 users fee for using its debit cards. In my financial literacy class the weekend after the announcement, some students were resigned to it, some furious, but we all vowed to switch banks if we banked at BofA. Yet we all also knew what would happen next, if history was any indication. Other banks would follow suit and eventually we’d all get charged the fee, which would just go up even more over time. It turns out, at least for now, the ending is happier. People mobilized around recent college grad Molly Katchpole’s online petition requesting a reversal of the fees.The petition was brilliant in its simplicity, stating simply this:

Greetings,
I'm writing to express my deep concern over Bank of America's decision to charge customers $5 a month to use their debit cards when making purchases.

The American people bailed out Bank of America during a financial crisis the banks helped create. You paid zero dollars in federal income tax last year. And now your banks profiting, raking in $2 billion in profits last quarter alone. How can you justify squeezing another $60 a year from your debit card customers? This is despicable.

Do You Remember How Overdraft Protection, Overdraft Fees, and Free Checking Used To Work?

Calling everyone in the over-40 set to help me remember something. When dealing with those old-fashioned things called “checks,” how did your own overdraft protection used to work?  My recollection is that, back in the day, as long as a person had a certain level of creditworthiness, the bank used to cover your check in a discretionary manner. Then, as I recall, middle class people were encouraged to set up various protections to keep checks from bouncing, such as automatic transfers from savings or a line of credit to cover overdraft accounts.  Why don’t more people use these? Is it because they do not qualify? I keep hearing about $35 and even $39 overdraft fees, on both debit and check transactions, like in the New York Times blog today, and wondering who is paying them. Apparently lots of people, since the $38 billion in overdraft fees earned by lenders in 2009, is double what lenders made off these fees in 2000. Is this the ultimate example of banking for the “haves” versus the “have-nots?”

Consumer Credit Levels Reach Their Lowest Point in over a Year

According to a recent Reuters story, consumers are reluctant to hold debt due to the U.S. Credit rating downgrade and debt problems in Europe. The economy is shaky so people are apparently less willing to carry tons of debt. Consumer credit fell $9.50 billion in August after rising $11.92 billion in July, the report said, which is well below economists’ expectations of a $7.75 billion increase.

Revolving credit, which mostly measures credit card use, dropped $2.27 billion in August after falling $3.56 billion in July. Non-revolving credit, which includes mostly auto loans, fell $7.23 billion, the largest decline since August 2008, after rising $15.48 billion in July.
"Consumers are extraordinarily sensitive to economic conditions and as things started to look a bit more sour, they stopped using their credit card," said Steve Blitz, a senior economist with ITG Investment Research in New York. While this story paints this as a bad thing for the economy as a whole, it speaks well of consumers’ efforts to protect themselves in this economy.

 

Big Change in Graduate School Loans Flew Under the Radar

When Congress recently compromised on balancing the budget, it chose to “save” Pell grants for undergraduates by throwing Stafford Loan for graduate students under the bus. It is unclear why this particular horse trade was necessary, and I am not even saying it was the wrong thing to do, but I do think people who might care (law students, law professors) should at least know about the change.

Exemption Policy: Sometimes it Doesn’t Pay to be Debt Free

We have two married 60-something friends who are artists in Santa Fe and own a very simple home with a rental house in the front. The house is tiny by all but New York City standards, and since their income is always in flux (some months several grand, many months nothing at all), they live very close to the bone. No credit card debts, no car payments, no mortgage.  The only fixed expenses they have are their $1,000 a month health care policy and a few utility bills. Generally, they get along just fine, but last month, when he ended up in the hospital for 5 days for literally swallowing wrong. 

Somehow, they now allegedly owe $30,000, despite the expensive health care policy. I know, there is supposed to be a $5,000 deductible limit per person, but there is something about a pre-existing condition etc. etc. She called to ask:  “they can’t take our house to pay a hospital bill, can they?” Given its location, this property is worth a lot, so we all know the answer. 
Now I know that no one exemption scheme can work for everyone, but these people have done everything right. They have lived a Dave Ramsey debt-free life, and while they could have saved more in traditional retirement vessels, they relied on Santa Fe’s outrageous real estate values to set them up for life. So I ask you, are our exemption policies out of sync with reality? Do they work for most people most of the time? I am suddenly dubious.      

The FTC File Suit To Crack Down on Abuses by Internet Payday Lenders

I recently presented a paper at the University of San Francisco School of Law, after which Professor Jesse Markham sent me a link about the FTC’s power to regulate payday loans.  I have been a bit fixated on what the CFPB what might be able to do to regulate these products, particularly the entirely unregulated wolrd of internet payday loans (see my brief musings on that topic in the Harvard Business Law Journal), but I had no idea this had also caught the attention of the FTC.

A recent post on the FTC’s web page describes a District Court case brought by the FTC against Payday Financial, LLC, doing business as Lakota Cash and Big Sky Cash, who allegedly send documents to their borrowers’ employers that mimic a garnishment by the Federal government,

Minnesota Attorney General Sues 5 Internet Payday Lenders for Automatically Extending Loans

The five lenders, Flobridge Group LLC, Silver Leaf Management and Upfront Payday, all of Utah; and Integrity Advance and Sure Advance LLC,  were each sued separately for violating Minnesota’s small loan laws.  The total U.S. market for Internet payday loans is estimated at $10.8 billion. These suits allege various violations, including automatic extensions of the loans and rolling the loans over by paying off an old loan with proceeds from a new one, as well as a failure to be licensed in the state.   The reporter who wrote this story  tried to call one lender and got a  voicemail system that kept looping back through the list of options after pressing "0" for "all other inquires." One of the options included pressing 3 "if you would like to extend your loan for another two weeks." A customer-service representative at Sure Advance LLC of Delaware asked for an inquiry to be sent to an email address. No response had arrived by late Tuesday.

Phone calls to one borrower, Diane Briseno's, home in Maplewood came from India, the Minnesota attorney general's office discovered. Her caller ID showed the call was from the State of Minnesota. Briseno's son, 20, had started applying for a loan online but never completed the form. Regardless, he had left enough information that the phone calls started almost immediately. When Briseno called back to a toll-free number, she was told her son had taken out a $700 loan and needed to pay $6,000 immediately.

Americans are Innumerate and Broke

And not just the ones I tell stories about from my clinical law teaching.  Some of our readers have written in to say that these clients of ours, these title loan and payday loan customers, are idiots or worse yet, should be institutionalized for their stupidity. Most of my stories about our clients have to do with not being able to do complex math.

Now we learn that most consumers think that 36 months is longer than three years.  And these are “regular” Americans, not those dullards who use sub-prime credit.  A study in the Journal of Consumer Research proved that as a result of something called the “unit effect,” no doubt a behavioral bias similar to framing, “people typically fail to realize that the unit of quantitative information is arbitrary.”

As one cool math blog reports, this “unit effect” leads to anomalous conclusions: to most consumers, the difference between an 84-month warranty and a 108-month warranty looks bigger than the difference between a 7-year and a 9-year warranty. A 95 out of 100 rating looks better than 9.5 out of 10. Is it any wonder at all that interest rates stated by the month or bi-monthly make it hard to calculate the cost of credit?

Is it That Hard to Find a Good Payday Loan? One Woman Paid $900 in Undisclosed Fees

Following our prison visit in clinic this past week, we promised to report on a brand new (to us) scam, one involving a company that helps people “find” payday lenders. My student Bridget Mullins reports on it here.

One woman I saw at the prison had a question about a predatory lending scheme (if you can call it lending really) that I had never heard of before. She told me that she was looking for a payday loan so she went to a website that offered to find her a good payday loan. At some point she was asked to enter in her bank account info, but she didn’t read the fine print and she didn’t understand that they were actually charging her for this “service.” She never got a payday loan from this company, and it ended up costing her $900 in overdraft fees at her bank.  We have no idea how much the finder charged or how many times they ran these unauthorized fees through, so we tried to find out what might've happened.

Prisoners: When it Comes to Debtor-Creditor Issues, They’re Just Like Us

Once or twice a year, students from the University of New Mexico School of Law Clinic visit a women’s prison to provide brief legal services to those incarcerated there. We always assumed most of  inmates’ questions dealt with family law, so my group, the Business and Tax Clinic (the “B & T Clinic”), never went. This year, our Qualified Tax Expert, Professor Pamelya Herndon wanted to attend, and three of our students joined her. Professor Herndon suspected that at least a few of the women would have tax or consumer issues that we might be able to assist with. When our posse got to the prison, they were amazed by the demand for our services. Our mini-group was at least as busy as the groups answering questions about guardianships, divorces and parenting plans. Sixteen of the 64 women that were served that day had questions about taxes and debt. 

Thanks for the Insurance Memories (and Lessons), Professor Schwarcz

This past week we were lucky to be edified by guest blogger Professor Daniel Schwarcz from the University of Minnesota School of Law. I bet Daniel is a great teacher. I mean, the guy can make insurance interesting, if not downright scandalous!

There was tons of foot traffic in the way of comments on Daniel’s blogs, especially the one about whether you can predict if your own insurer will pay large claims, and the one about how lenders should be handing insurance payouts when a home is in default or foreclosure. Daniel finished with his own Top 10 for  insurance reform. By the way, regarding his nutritional labels, this exact idea has been floated as a way to make disclosures more meaningful in all consumer contexts. Now let's just hope the regulators are listening.

 

 

Welcome Guest Blogger and Insurance Guru Daniel Schwarcz

This week we are a happy to welcome guest blogger Professor Daniel Schwarcz from the University of Minnesota School of Law. Daniel has done some great research in the area of property and casualty insurance and consumer protection. He is also very interested in consumer perspectives in health insurance and regulatory design in general. We blogged about one if his articles on April 22, 2011, and his work has gained national attention  elsewhere as well. 

We know Daniel writes lots of articles as well as a widely used textbook on insurance law, but we are excited to hear some of his more informal musings about all things debtor-creditor, especially about the disconnect between transparency in the credit world and the lack of transparency in insurance. Thanks Daniel, and enjoy the blogspace!

Banks Refusing to Honor Their Own CD Maturity Dates? We have the Answer!

Has anyone faced this issue? Karen Talley in my law school’s IT Department did. She received a notice from Bank of America, stating that “Your CD will be maturing soon. The account number, maturity date, and other information pertaining to your CD are listed below:

Account Number:    XXXXX
Current Product: FIXED TERM CD
Current term:    18 months
Maturity date:    April 23, 2011

The notice then said “You have 7 calendar days after the maturity date to make changes to your account. If no changes are made, your CD will automatically renew to the new term and maturity dated noted above. To make a change:  Come see us. Simply stop by the banking center nearest you to talk with us about your options…”

Karen appeared on April 30, 2011 to close this out and the bank said it rolled over the days before. The way I do the math, it should not have rolled over until April 30, the day she arrived to close and cash in the CD. This one day difference cost Karen $1026.04. 

What Can The CFPB Do To Regulate Payday Lenders?

Even though the CFPB cannot cap interest rates on payday loans, there is still plenty that the CFPB can do to regulate these lenders. But what should the Bureau do? Some of the trickiest aspects of the payday lending issue have nothing to do with interest rates, and everything to do with how the loans are marketed and used.

Even the staunchest consumer advocate would likely look favorably upon a loan product that allowed people who could not otherwise get credit to borrow money for occasional, unexpected, emergency expenses. I suspect that most would agree that this would be a good and useful loan product even if it cost $15 or $20 for every $100 borrowed, as long as the product were used only occasionally to smooth consumption. This would be true even if the annual interest rate was over 500%. In a way, the annual percentage rate interest would not matter much because the loans would be truly short term, both in design and marketing, as well as actual use. 

Phoney Contest Scams get More Realistic

Uh oh, look what my dad got!  

Our attorney general’s office reports getting dozens upon dozens of claims about these every year.  I guess it is obvious that it is a scam, but I am not sure the average person would know it.  The check looks incredibly real and even has an ink mark.

  What should you do if you see one of the these?  If it comes from Canada, you should call the Canadian Anti-Fraude Centre at

Toll Free: 1-888-495-8501
Toll Free Fax: 1-888-654-9426
Email: info@antifraudcentre.ca
Website: http://www.antifraudcentre-

Call for Papers on Regulation in the Fringe Economy

Jim Hawkins, Jean Braucher and I, put together a symposuim proposal on frindge banking products, and we were very fortunate to have Washington and Lee School of Law (home of the illustrous Professor Margaret Howard) accept our proposal. As a result, the law school is now making the follwing call for papers. 

The symposium Regulation in the Fringe Economy will be the most significant attempt to date by legal scholars to address the vexing legal and social issues created by lenders on the fringes of the economy who offer payday, auto title, for-profit college, and refund anticipation loans. A complete list of confirmed participants and their paper topics is available at the conference website: http://law.wlu.edu/fringe.

Are There Things You Can Do Now to Make for a Better Retirement Later?

An  article in this morning’s Wall Street Journal money insert, Ready to Retire? Here is a Five Year Retirement Plan, made me high-tail it to the gym. Thinking about retirement is both scary and fun, and we'va all seen plenty of mistakes made on the way to retirement. Sure, people have failed to save enough, but most of the mistakes I am talking about have nothing to do with money. People just don’t think through how they’ll spend their time in retirement and then they age overnight when they find they have nothing meaningful with which to define themselves, and even nothing to think about when they get up in the morning. This article gives readers hands-on how-to steps for planning retirement, with one part about the money and one part about the rest, for each of the five years prior to retirement.

The Truth About Title Loans and Repossession

Susan Price filed for bankruptcy in 2005, when she became disabled. She now receives $980 a month in disability payments and her rent is $550. Not so bad unless you consider her last move to make ends meet. She borrowed $4,000 to make it through the holidays and pay off some bills, using her $10,000 Jeep as collateral. The jeep was the last vestige of her formerly middle class life. Under her eighteen-month loan, she pays $581.47 a month, and will pay over $10,466.46 to pay off the $4,000 loan.  At least Susan’s loan includes some principal. Another client, Sean, paid $11,516 total, on a $1,500 interest-only title loan. He paid over $10,000 in interest on the loan, which was renewed forty times before the borrower buried his pride and asked his parents to pay off the $1,500 in principal.

Supreme Court Ruling in A.T. & T. v. Concepcion Approves Class Action Bans in Consumer Contracts

What a depressing day in the law of consumer protection. We’ll get to that in a minute, but in the meantime, I heard a humorous radio program this morning in which Europeans were complaining about how you never know the real price of anything in America. Things seem cheap, but once you consider the taxes, the tipping, the hidden ad-ons, the price is so much more.  There is no transparency. Boy, they don’t know the half of it. At times it seems everywhere you turn, you find a scam or an unauthorized fee. Thank goodness for the legal system, right? The way we can all fight back?

Ahem...not so fast. Most Americans can’t access attorneys. A Huff Post article reports on a world-wide survey, that ranks the U. S. lowest among 11 developed in providing access to justice to its citizens, and lower than some third-world nations.

Some Banks Charge Business Customers Merely for Running Checks Through Their System

We all know that banks are allowed to charge customers for things that do not cost them anything, but I guess I just assumed that they did this only to consumers. Silly me. 

I just bounced a check. Long story but my dad sometimes shares bank account numbers with nice people who call him on the phone to “confirm” these numbers. After an incident like this, if I learn of it, I close the account and some checkbooks sometimes survive the whole thing. Today, dad’s tailor called to say a check we wrote was on an account that could not be found, and that as a result, she (the tailor) was charged $12 for processing our “bounced” check. Say what? This is a totally new one on me. Anyone else heard of this? I know for a fact that the larger customers do not generally pay these fees, but I am curious what you all know. Bankrate.com, my go-to for things like this, ran one story on these fees, but there is little else out there.  If you are a business and you pay these fees, it’s time to shop for a new bank.

Meaningfully Shopping for Insurance is Next to Impossible

Anybody who cares about consumer rights should take a look at this recent article by Professor Dan Schwarcz, a law professor and insurance expert from the University of Minnesota Law School. This guy actually gets his jollies reading insurance policies, and what he has learned can help you. Well, sort of….. In reality, what he has learned can educate you, anger you, and hopefully motivate you to help solve a tricky problem, namely that consumers don’t generally get to see their policies until they’ve signed on. Policy terms also vary a lot, but no one seems to know this. It is a classic case of consumers shopping solely on the basis of price, when other things like coverage matter more. According to Professor Schwarcz, consumers have access to virtually no information about the things that matter most in an insurance policy. 

How Credit Card Companies Get Around the Card Act

Want to do a riddle?  Try this.

Mrs. Marquez wrote herself a $5,000 check from her credit card company....you know, those ones that come in the mail with the bill? Her family makes just $40,000 a year, but the card company approved this loan, under an offer advertized as 0% interest for one full year, starting April 1, 2010, a transaction clearly covered by the Card Act. In July of 2010, Ms. Marquez needed another $5,000, so the company allowed her to take out another $5,000, same terms, with the 0% deal expiring on July 1, 2011. The fee was $150 per transaction, not bad in and of itself. The Marquez' diligently paid on the loan so that they'd pay the whole first $5,000, in full, by April 1, 2011. Now the credit card company says they owe interest at some huge amount, on an amount close to $5,000? Can the company do this? Hint:  The Card Act requires that payments be applied to the highest interest portion of the loan first (after the minimum payment), but both loans are allegedly interest only.

Employers and Consumers: Read this Before You Buy Insurance

Two sad insurance stories follow, with one happy one at the end. I hope to get a conversation going about which companies pay claims and which don’t.

First, check out this clinic case. Ms. Garcia, a 60 year- Spanish-speaking housekeeper suffered an injury requiring surgery in June of 2010. Because of the surgery and recovery, she could not work at her job at a chain hotel. She applied for disability under the insurance contract her employer provided with Met Life. Met Life received Ms. Garcia's claim for disability in June, and denied her claim a month later on the basis that the injury was a pre-existing condition. Yet Ms. Garcia had been working at the same job since 2003.  MetLife only became the insurance carrier in January on 2010, when the employer hired a new insurer for disability. The employer went to bat for Ms. Garcia, informing Met Life that because she was a pre-existing policy holder, her condition was covered when MetLife took over the policy. 

Funding Your Buddy's Bachelor Party Through A Payday Loan?

You probably know that title lenders and payday lenders are not just looking for customers who are faced with an emergency.  According to the lenders’ ads, there are many great reasons to take out such a 300% loan.  This ad, however, takes the cake.

Servicemen and Debt: Know Your Rights

If you don’t personally go to war, you might not think about what being deployed does to your pocketbook. Of course, American civilians regularly take on debt, like mortgages, student loans, credit card debt and so on. Active duty troops, particularly reservists, live in both worlds, sometimes as civilians, sometimes in active duty. This on again off again relationship with credit can wreak havoc on finances, a lesson some are learning the hard way.  Yet service persons in active duty get special rights in foreclosure, as well as in bankruptcy after they return. 

First, only a judge can authorize a foreclosure on a protected service member’s home, even in states where court orders are not required for civilian foreclosures. Moreover, a judge can act only after a hearing where the military homeowner is represented. The law also caps a protected service member’s mortgage rate, as well as rates on all other credit,  at 6 percent.

Gap in Cost of Credit for Haves and Have-nots Broadens Further

I can remember when the Card Act first came out. Many professionals, including some of my colleagues, bemoaned the loss of perks for the well-heeled. They were all sure that from now on, since the card companies could no longer boost rates on existing balances or in the first year of a card relationship, or charge more than $25 in late fees, annual fees for all were going up and points and other perks were going down. Did it happen? Nope. At least not for the good credit risks. Quite the contrary.

An AP story  that ran in many papers across the country today confirms a trend toward very beneficial credit deals for the rich. The story reports that while people with excellent credit used to get 44% of all offers mailed, they now get 64% of those offers. The offers are also better than ever for this demographic. One premium card offers five times the typical rewards and waives the annual fee for people with $50,0000 in the bank. Some of the balance transfer cards offer 18 months without interest! Some cards even eliminate those irritating foreign transaction fees. No doubt, the lenders plan to make their money on merchant fees on these cards, since many in this demographics don’t pay late and don’t carry balances. 

Offers to the well-off but less fastidious in credit cleanliness are worse than before. These B-listers are getting card offers at higher interest rates and higher annual fees than before. This is the demographic from which card compares will make up for lost fees resulting from the Card Act. As for the ones with poor credit habits and little funds? They are getting fewer offers, period.

RALs - Will They Become Extinct?

Refund appreciation loans, or RALs, are among the priciest loan transactions out there.  Customers pay a fee (frequently 40% to 700% if expressed as an APR) to get their tax refund early.  The fees can be much higher.  I saw one where a consumer was owed a $4,000 tax refund, and paid $1,000 of that to a RAL provider, in order to receive the remaining $3,000 two weeks earlier than the customer otherwise would have.  In some parts of the country, for example in Indian Country, RALs seem like the only option.  This year I also saw a very well known tax preparers advertise FREE tax return preparation, only to find out they were actually providing high-fee RALs.  Not so free…..

But the RAL gravy train may be almost over.  The FDIC just ordered one of the last underwriters of the products to stop backing the controversial loans. The FDIC told Kentucky-based Republic Bank & Trust Co. that the loans are unsafe and unsound now that the IRS no longer offers banks its debt indicator, a tool loan providers used to determine whether a taxpayer had outstanding tax liabilities that could be garnished from a tax refund.