postings by Nathalie Martin

Couples and Money

posted by Nathalie Martin

Wow, our guest bloggers have been working hard for us and you! Nice job Amy and John.  I myself got a little wrapped up in my intensive financial literacy class this year, and am finally here to report on our experiences. First up, a conversation about couples and money. I hope you readers will join me.

It seems many people are still in financial trouble these days and it’s taking a toll on their relationships. Every so often you hear a crazy statistic about how people (lots of them) lie to their partners about money and also how financial cheating is as serious or more serious than actual cheating.   For example, see this from the Huffington post.  Or this from cnn money. 

I always wonder where and how these pollsters are collecting their data. Are we talking about lying in answers to questions like “did you give your brother $5,000?” or more like “You missed the auto detailing day at work and had your car detailed at the airport instead? Didn’t that cost a lot more?” Aren’t half-truths in response to these two questions two very different things?” I challenge you to keep track of the money lies you tell both big and small and then we can talk about whether they matter or not.

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Payday and Title Loan News Today

posted by Nathalie Martin

If you are interested in two fascinating stories on payday and title lending, check out these two links. The payday article is entitled Payday Lenders Using Courts to Create Modern-Day Debtors’ Prisons in Missouri, and the title loan one is called Virginia becomes hub for risky car loans.

 

Hey Dude, What’s Your E-score

posted by Nathalie Martin

Following on to my Acxiom story last week,  check out yesterday’s NYT story on e-scores.  The e-score is a private digitized ranking of consumers in the range of 0 to 99 that tells marketers your full socio- economic status, including your occupation, salary, and home value. It also reports on your distinct spending habits, such as the percentage of income spent on luxury goods, hotels, etc. Supposedly, the algorithm perfectly predicts spending and obviously knows more about us than we do. I’d like to know mine actually, but they are not available to us. The e-score process is entirely nontransparent and obviously not regulated.

Perhaps this is not news or even new, but it is interesting. The data are used to know to whom to spam, er..market, and also to know to whom to send the really great deals (the wealthier people, dud..) and to whom to send the ads for subprime loans, vocational and for-profit universities, payday loans, etc.

Customer service also differs for different scores. For example if a high-scoring person calls a credit card company, the person is directed to an elite agent, while the poor schmoes at the bottom get sent to an overseas call center. The same system is used to determine which insurance products to offer to whom.

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Zip Codes and Internet Searches Populate Database Mines

posted by Nathalie Martin

Twice now the New York Times has reported on a mysterious company in Arkansas, Acxiom, that has been collecting endless data on all of us but no one is entirely sure what they have or why they have it.  This is why neither NYT story makes perfect sense.  Something is wrong but we do not know enough about what they are doing to know what it is.  Consumers do not get to see their files according to the second article. I cannot write and get what they have on me, nor can you.

The collected data include our incomes, our family compositions, and certainly our geographic locations. The process for mining begins when a store clerk asks us at check-out for our zip codes, or perhaps when we search internet sites and input data there.  From there the sources somehow back into our e-mail and home addresses, our incomes, our buying preferences, our kids’ ages, our pets, and I am not sure what all else. 

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Learn How to Defeat Debt Collection cases Involving Junk-Debt-Buyers and Other Robo-Signers

posted by Nathalie Martin

Professor Peter Holland (U Maryland Law) has written a fantastic paper explaining in great detail how to defend against a debt-buyer-lawsuit, and possibly recover for Fair Debt Collection Practices Violations as well. Jessica Silver-Greenberg has followed on with an interesting New York Times article  in which one Brooklyn judge estimates that “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.”
 
Many of these suits are brought by companies who buy long lists of aged debt, some of which is time barred, some of which has been discharged in bankruptcy, and some of which already has been settled or collected upon. The buyers typically pay pennies on the dollar for lists of these debts, and have no receipts or proof that the debts are still due.  In fact they know little to nothing about the debt, which is typically sold as is with no representations that the debts are still due.

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Submit Paper on The Debt Crisis for the AALS by August 31

posted by Nathalie Martin

One more scholarly paper note....The AALS sections on Poverty Law and Clinical Legal Education will sponsor a joint program on January 5, 2013 at the AALS Annual Meeting, entitled The Debt Crisis and the National Response: Big Changes or Tinkering at the Edges?The program will explore ways in which our clients and communities have experienced the national debt crisis. Specifically, the program will consider the nation’s response to the crisis, considering the impact (or lack of impact) of new and proposed federal and local regulations on some of the major debt-related issues, including predatory lending, mortgage fraud, credit reporting, debt recovery, and litigation surrounding contested debt. The program will also include an advocacy-focused discussion on debt-related issues highlighting some of the new and different challenges communities face as a result of the recession. Among the questions to be considered are: What types of innovative programs exist at the local level? How are new regulatory structures being implemented? How are law school teachers, and specifically law school clinics, responding to the debt crisis? What sort of court-based or community-based programs are making headway on some of the issues affecting our clients? Where can we go from here?

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AALS Call for Papers: Securities Regulation, Financial Institutions & Consumer Financial Services

posted by Nathalie Martin

Hello Scholars! The AALS Section on Securities Regulation and the Section of Financial Institutions & Consumer Financial Services are sponsoring a Call for Papers for their joint program on Friday, January 4th at the AALS 2013 Annual Meeting in New Orleans, Louisiana. 

The topic of the program and call for papers is “The Regulation of Financial Market Intermediaries: The Making and Un-Making of Markets.” As you all know, the financial crisis witnessed numerous market failures involving an array of financial market intermediaries, including banks, broker dealers, and various kinds of investment funds (from money market mutual funds to hedge funds).

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When Serving Jail Time for Unpaid Debts Becomes a Debt Spiral

posted by Nathalie Martin

Tell me.  Are we allowed to do anything we like to those with the least power and money in our society? Are there no limits? We know that in some states, private actors have been permitted to charge 500-1,000% for loans, but what about public actors? Can you think of any debtor-credit practices that rise to the level of human right violations? This is question Chrystin Ondersma (Rutgers Newark School of Law) and I have been asking ourselves in connection with a project on which we are working.

Earlier this month, the New York Times ran a story that chronicled several people jailed for minor infractions (such as unpaid speeding tickets or other driving violations), and then charged huge prison costs after serving jail time resulting indirectly from these unpaid debts. For example, one woman was fined $179 for speeding, failed to show up at court (she says the ticket bore the wrong date), after which her license was revoked. When she was pulled over for driving without a license, her fees totaled over $1,500. Unable to pay, she was handed over to a private probation company and jailed, racking up an additional fee for every day behind bars. She’s been locked up three times for that one driving offense, serving 40 days, and now owes nearly $3,000. Another guy featured spent a total of 24 months in jail and owes $10,000 for what started out as very small dollar minor infractions. Read the article for more of the same.

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Online Payday Lenders Seek More Respect and Less Oversight: Call Them What You Like, They are Still 1,000% Long-term Loans

posted by Nathalie Martin

On-line lenders who are not tribal or offshore claim that they need the same lack of oversight that the tribal and onshore on-line lenders are getting. Otherwise, it isn’t fair to them.  Hmmm….. Fairness is as fairness does. Keep in mind that these on- line loans:

- accrue interest at twice the rate of storefront payday  loans or about 800-1,000% per annum, and 

-are designed so the fee is paid automatically out of the customer’s bank account, …over and over again, but the loan principal is never repaid. 

Lenders now request that we stop hurling derogatory epithets at them, such as er, “payday loan.”  They provide no explanation of why these loans are not payday loans but ask that we now call them “short-term, small dollar loans. Why we would call a loan like this (that is frequently kept out for months if not years) a short-term loan is beyond me.

Lenders are spending millions to lobby Congress to exclude these loans from state payday loan legislation and transfer all oversight of on-loan payday lenders from states to the Office of the Comptroller of Currency. Hello preemption! The prosed bill would also “loosen the rules for how short-term lenders disclose the total costs of the loans to consumers,” according to a Bloomberg story, by excluding any loan with an initial term of less than a year from the Truth in Lending Act. That way, I guess, customers would not know the loans carried interest rates of 800-1,000% and this would be further “fair” to these lenders.

With 35% of the payday loan market now in on-line loans, this is an incredibly important bill…to defeat. Let’s hope for a race to the top, not the bottom.

 

 

Latest Visa Fraud

posted by Nathalie Martin

A heads up regarding the latest in Visa fraud. Royal Bank received this communication about the newest scam. This is hitting the midwest with a vengance and moving. The trick here is that they provide YOU with all the information, except the one piece they want. The callers do not ask for your card number; they already have it.  By understanding how the VISA & MasterCard telephone Credit Card Scam works, you can avoid this one.

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Payday Loans and the Tribal Sovereignty Model

posted by Nathalie Martin

Think about what happens when you pit tribal sovereign immunity against effective consumer protection laws. In my view, no one wins. Yet payday lenders are now very actively seeking tribes with whom to partner, in order to get the benefits of tribal sovereign immunity.  As one might expect, the payday lenders make out big and in most cases, the tribes get very little, at least so far.

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News Flash: It is Illegal for Debt Collectors to Stalk Debtors on Facebook or Threaten to Kill Their Dogs

posted by Nathalie Martin

Do any of you read creditcards.com? It is a great source of info on various topics, not just credit cards. Today’s story featured three debt collection horror tales, as well as a state of the nation of nasty collection efforts. According to the story, in 2011, the FTC received 180,000 complaints about debt collectors, an increase of over 40,000 from 2010. In one case, a debt collector filed a lawsuit against a California debt collector, hired by a funeral home, who threatened to dig up the body of the debtor's daughter -- and also to shoot her dog. Here is a run-down of three other featured stories. 

In the first one entitled “terrorized by text,” Jessica Burke fell behind on her car payments. She called the financing company, and they agreed to give her extra time to pay. But the next day, she got a call from a man using a fake name who threatened to sue. He got her address and other private information from her cell phone company (say what?) by impersonating her father and asking to be added to her account. He called and texted and called and texted, after some time of which she called the police, who ordered the collector to stop contacting her. But the texts continued for weeks, coming from a disguised number and implying that he was watching her. In one, he called her "Porky Pig" and a "200-pound slob" and added, "I got picture messages of you today." Late one night, she says, he texted her, claiming he was outside her house.She says: "It was

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Is it Literally Impossible to Pay Off a Title Loan?

posted by Nathalie Martin

I recently published a law review article entitled Grand Theft Auto Loans with Ozy Adams.  It discusses title lending based upon data collected by the State of New Mexico.  This article cover a tremendous amount of ground, but as these things tend to go, I have now heard of two critical topics we should ahve discussed but didn't. 

We do discuss how the loans are almost always interest-only and can only be paid off all at once, not in installments.  We also talka bout how these loans are also typically entirely asset-based, meaning that if a customer has no income at all, she can still take out a large title loan. We also discuss repo rates per loan (between 5% and 22%),  repo rates per customer (between 20 and 70%), total vehicles lost once reclamation is taken into account per customer (between 13% and 60%), interest rates for title loans (most commonly 300% per annum or 25% per month), percentage of auto value lenders will lend on (25-40%), and amount returned to customer from sale proceeds after repossession and sale (next to nothing once the fees are racked up). 

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Doggie DNA Tests: Waste of Money or Legitimate Tool?

posted by Nathalie Martin

Do mutt-lovers (with admittedly too much time and money on their hands) get anything in exchange for the $75-100 they pay to find out what kind of dog they have? It depends. My advice: before ordering a doggie DNA test over the net, do lots of research. Perhaps just have the vet do it.  If you do order a test over the internet, make sure you pick one that tests for the maximum number of breeds and that gets very high marks from consumers, and carefully read the fine print. Now they tell me, the more mixed your mutt is, the less likely you are to get any info at all from the test. I’ll let you decide if the test was worth my money. Here is the dog:Image1

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Consumer Scam Review: Lower Your Interest Rate, Lower Your Credit Card Balances, and Work at Home

posted by Nathalie Martin

I have been meaning to write on several consumer scams so here are a few to avoid.

“We Can Lower Your Home Loan Interest Rate” Scams. 

We’ve all gotten the calls at home. “We can lower your interest rate.” “The banks got their bail-out, now get yours.” But imagine what it feels like if you really need that kind of help. The false hope these scams create is criminal. One of my coworkers has been going through a Chapter 13 in which her mortgage payments are really high. She got this card in the mail asking her to call 800-936-4400 and saying that they could lower her mortgage payment (currently over $1,300) to $611.01. She was very hopeful.  She called the numbers, which directed her to RMA Legal Network in Holbrook, New York, and RMA turned out to stand for Michael Alarcon. She spoke with a Bruce Thomas, a case consultant manager, who asked her for tons of very personal information. She then hung up and did a google search, which turned up a great deal of negative information on this company, including that they want $1,400 up front to even start to do a deal for you.  Red flag!

“We Can Reduce Your Credit Card Balances”

Forget it, it doesn’t work. If I’m wrong, tell me how and where you can get this help legitimately. If you have the time, follow the directions they leave on your phone and report back here.

Work at Home Scams

A third cousin got involved with one of these, and when I say scam, I mean Scam. Again, selling

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Learn about Teaching Consumer Law at Houston Law Center May 18-19, 2012

posted by Nathalie Martin

On May 18-19, the Center for Consumer Law at the University of Houston Law Center will hold its sixth bi-annual Teaching Consumer Law Conference. This year’s theme is “Teaching Consumer Law in an Evolving Economy.” I have always enjoyed this conference as it is the only one in the country devoted exclusively to teaching consumer law.  It is designed for those currently teaching consumer law, those interested in teaching, as well as those who just wants to know more about consumer law issues. More than 30 presenters will discuss issues ranging from Fringe Banking, Debt Collection and Advertising, to Foreclosure, Payments and Arbitration.  For example, I will moderate a panel with Max Weinstein of Harvard and fellow blogger Jean Braucher, discussing how to fill unmet need for foreclosure defense through foreclosure defense clinics. There also are several presentations discussing consumer law from an international perspective, as well as discussions of teaching U.S. Housing Policy, foreclosure defense clinics, consumer arbitration, international perspectives, what’s new with the FTC, substantive regulation versus disclosure, and a host of other hot topics.  . Presenters include law faculty, adjunct faculty, and practicing attorneys. For more information and a registration form, go to http://www.peopleslawyer.net/for-the-lawyers.html.  For even more information, call or e-mail Richard M. Alderman, Associate Dean, Dwight Olds Chair, and Director of the Center for Consumer Law, at 713-743-2165 or alderman@Central.UH.EDU.

 

Usury Takes a Bite Out of the Poor

posted by Nathalie Martin

Those of us struggling with the issues raised by payday and title loans are consistently told to take morality out of the equation when considering these loans. Thus, it was refreshing to hear a recent presentation by Professor Alex Mikulich of the Jesuit Social Research Institute at Loyola New Orleans entitled “From the Peril of Predatory Lending to the Hope of Economic Justice: A Religious Social Ethical Perspective.” Rather than avoiding morality questions, Professor Mikulich focused exclusively on them in his eye-opening presentation at a recent Family Impact Seminar. He noted that the loans create many unjust results, and then explained that the literal translation of the word usury in Hebrew is to “take a bite out" of the poor.   He distinguished usury from mere  “interest,” which Professor Mikulich defines as part of a mutually beneficial relationship that is good for the community as a whole.

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Cramming Funny Fees Onto our Phone Bills: Not so Funny

posted by Nathalie Martin

Two weeks in a row, the Haggler column in the New York Times focused on cramming, one of the most damning and profitable scams in the consumer world.  Cramming is tacking unrequested services onto land line bills and now cell phone bills, such as celebrity gossip news, daily horoscopes, even dating services. Our AGs office claims that cramming is one of the practices about which they get the most complaints. After reading last week’s Haggler column, I vowed to look over my consolidated bill with Century Link and Verizon (cell phones, landline, internet service) but never quite got around to it. It seemed to me the bill had stayed pretty much the same over the months and years. Sure enough, today I found a cram and am trying to straighten it out.  This can be a full-time job, which is why it is so easy to scam us in this way. Haggler also notes that while cramming is done by third parties, not phone companies, phone companies supposedly get one –third to one –half of the billions in revenues generated by this fraudulent practice, which is why some may be slow to correct the problem. If Haggler is right about the profits, shouldn't I be able to reverse this with my phone company?

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Does this Look like a Valid Credit Card?

posted by Nathalie Martin

DSCN0962I thought so.  This is actually the key to my room from a recent business trip. I guess the symbolism is that the credit card concept is also the key to life, right? It is also another example of how credit card companies have infiltrated college campuses.

Marketing $25 Billion AG Settlement to Consumers is Key to Getting Money

posted by Nathalie Martin

Our local AG's office just held a meeting for people who serve homeowners in foreclosure, to explain what the settlement means to consumers. In this blog, I share what I learned. Homeowners in each state that is a part of the settlement (sorry Oklahoma) will receive tens of millions of dollars for forgiving principal on loans, refinancing for borrowers who are current but under water, and direct payments to those whose homes were foreclosed between January 1, 2008 and December 31, 2011.  KEY FACT: Because people need to apply for these funds, education and outreach is essential. Please circulate this information as far and wide as you can.  The funds are available for three years, and funds not used are retained by the banks. Five pots of money are available, and I’ll provide the New Mexico estimates where available just so you can see the proportions, but each state’s numbers are different and most will be much higher.

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United States Sued and Settled Suit Against Major Mortgage Servicers for Unfair and Deceptive Practices

posted by Nathalie Martin

To add to Jean's post on the National AG's mortgage settlement, we now have a copy of a complaint that formed the basis for the AG settlement, in which the United States of America (along with all the states but Oklahoma) sued most of the major  servicers for committing misconduct in connection with the origination and servicing of single family mortgages. Here is the complaint (Download US v Servicers), but to give you a flavor the suit alleges, among other things, failing to discharge underwriting obligations, failing to do modification underwriting, losing the paperwork, failing to train or maintain sufficient staff to deal with the modification processes, allowing borrowers to stay in trial modifications for excessive periods of time, wrongfully denying modifications, misleading consumers in connection with modifications, and foreclosing while a customer is in modification.

Girl Scouts Add Consumer Finance to the Badges

posted by Nathalie Martin

People with young girls may already have heard about this. Girl Scouts has rolled out a few new badges just in time for its 100 year anniversary. The badges have not been changed since 1987. Good bye fashion and makeup, hello Science in Style which covers nanotechnology in fabric and the chemistry of sunscreen. The new badges include thirteen related to financial literacy, that look like this. They include money counts, making choices, money manager, philanthropist, business owner, savvy shopper, budgeting, comparison shopping, financing my dreams, financing my future, on my own, and good credit. The "Financing My Future" badge requires girls to create a plan for paying for college, and the "Financing My Dreams" badge requires demonstrated skill in budgeting. "Good Credit" requires an understanding of the various ways to borrow money and what goes into building a good credit score.

As a daily finance article put it, “most of us understand intuitively that the Girl Scouts of America aren't just about selling cookies. What you might not know is that the green-sashed entrepreneur who preys on your weakness for Thin Mints is also preparing to be your son's boss." That's girl power you can take to the bank!

Loyola Chicago Law School Hosts Symposium on the Effects of Crisis

posted by Nathalie Martin

Image1A couple weekends ago, I attended a conference at Loyola Chicago School of Law on the Effects of the Financial Crisis on Consumers.  In one panel, Creola Johnson from Ohio State University Michael E. Moritz College of Law, gave a fascinating talk on punishments that should ensue for various fakers (fake landlords), breachers (owner-landlords who are collecting rent and not paying the mortgage), deceivers (foreclosure rescue scammers), and slackers (banks and bulk property buyers), which include putting the fraudsters’ photos on big billboards, along with what they did, like this:

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CFPB to Share Information with Attorneys General

posted by Nathalie Martin

Carter Dougherty of Bloomberg reports this morning that  the Consumer Financial Protection Bureau is entering into an  information-sharing agreement with state attorneys general, that will help states enforce consumer protection laws. The agreement will “establish a general framework to share data on consumer financial protection issues,” according to an advance copy of a speech Cordray will give to the National Association of State Attorneys General later today in Washington. Cordray will also collaborate with state AGs offices on a “national strategic plan” to address abuses in various areas, but debt collection, an area regulated on both state and federal levels,  was specifically mentioned.  I can think of a couple of other areas where such collaboration would also be useful, but this is a good start.  

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

posted by Nathalie Martin

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.

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Payday Loans are First Target of New Consumer Protection Chief

posted by Nathalie Martin

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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.

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

posted by Nathalie Martin

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!

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Consumers Beware of Gas Well Leases, Especially Around the Holidays

posted by Nathalie Martin

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.

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Change.org Petition Plays Part in BoA Debit Fee Reversal

posted by Nathalie Martin

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.

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

posted by Nathalie Martin

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?”

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Consumer Credit Levels Reach Their Lowest Point in over a Year

posted by Nathalie Martin

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

posted by Nathalie Martin

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.

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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,

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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?

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

posted by Nathalie Martin

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.

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

posted by Nathalie Martin

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. 

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

posted by Nathalie Martin

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

posted by Nathalie Martin

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!

posted by Nathalie Martin

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. 

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What Can The CFPB Do To Regulate Payday Lenders?

posted by Nathalie Martin

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. 

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Phoney Contest Scams get More Realistic

posted by Nathalie Martin

Uh oh, look what my dad got!   Prize notification_Page_1

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-

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Call for Papers on Regulation in the Fringe Economy

posted by Nathalie Martin

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.

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

posted by Nathalie Martin

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.

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The Truth About Title Loans and Repossession

posted by Nathalie Martin

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.

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