Contact Us


Federal Trade Commission warning on car sales

Thursday, March 26th, 2015

Operation Ruse Control: 6 tips if cars are up your alley

When it comes to car advertising, truth should be standard equipment. That’s the message of Operation Ruse Control, a coast-to-coast and cross-border sweep by the FTC and state, federal, and international law enforcers aimed at driving out deception in automobile ads, adds-ons, financing, and auto loan modification services. TheFTC cases offer 6 tips to help keep your promotions in the proper lane.

1.    Avoid practices that turn add-ons into bad-ons.  Two of the FTC actions involve add-ons – extra products or services tacked on to the sale, lease, or financing of a car. Typical add-ons include extended warranties, guaranteed automobile protection (GAP) insurance, credit life insurance, undercoating, and the like. According to the FTC, California-based National Payment Network deceptively claimed in online ads and through a network of authorized dealers that car buyers who bought its biweekly payment program would save money. What consumers weren’t told was that the cost of the add-on often outstripped any savings. The FTC says that was a material fact that should have been disclosed upfront. In a related action, the FTC sued New Jersey dealerships Matt Blatt Inc. and Glassboro Imports LLC for pitching NPN’s deceptive add-ons and pocketing hefty commissions. To settle the case, NPN will provide consumers with $2.475 million in refunds and fee waivers. The dealerships will turn over an additional $184,000.

2.  Don’t low-ball your pitch.  Three of the Operation Ruse Control cases challenge allegedly deceptive advertising by auto dealers.  Some crossed the line by using headlines to tout bargain prices while failing to disclose – or failing to adequately disclose – the true cost of the deal. For example, ads for Cory Fairbanks Mazdaof Longwood, Florida, pitched “used cars as low as $99.” But according to the FTC, $99 was just the minimum bid for cars offered at a liquidation sale and that didn’t include substantial mandatory fees. In a similar vein, the FTC says the dealership’s ads included photos of loaded cars without clearly explaining that some pictured features – like spoilers and sunroofs – weren’t included in the price.

3.   Steer clear of deceptive “zero sum” games.  Just as Seinfeld billed itself as a show about nothing, ads for Ross Nissanof El Monte focused on nothing, too – as in “$0 INITIAL PAYMENT, $0 DOWN PAYMENT, $0 DRIVE-OFF LEASE.”  The California company made the same claims in Spanish language ads. Other ads promised “$0 down*, 0% APR financing*, 0 payments*, and 0 problems.” Well, the FTC had a problem with – among other things – the deceptive use of “zero.” The dealership’s “$0 at lease inception” deal wasn’t applicable if consumers wanted the cars in the ads for the advertised monthly payment. What about “$0 down payment?” The FTC says people, in fact, had to pay a down payment to finance the vehicles for the monthly payment featured in the ads. And “0% APR?” The annual percentage rate for financing those cars for the advertised payment was way more than 0%. (The complaint against Cory Fairbanks Mazda made similar allegations about deceptive “zero” claims.)  The message for dealers:  Don’t lure customers in with misleading “zero” promises.

4.  If strings are attached, make them clear to consumers upfront.  That’s the message of the FTC’s settlement with Jim Burke Nissan in Birmingham, Alabama. According to the complaint, the dealership highlighted eye-catching prices without clearly explaining what the vehicle would really cost consumers. For example, in some cases, what appeared to be the full price was actually what people would have to pay after they ponied up a down payment of as much as $3,000. Other ads featured prices that factored in special discounts or rebates that weren’t available to everyone. For example, some prices applied only to recent college grads, a restriction not prominently disclosed. The ads didn’t tell prospective buyers without a freshly-inked sheepskin that they’d have to pay more. (The Cory Fairbanks complaint includes a similar charge that the company didn’t clearly explain that the advertised discount or price had qualifications – for example, that it was available only to prior Mazda owners.)  What can other dealers take from the cases? Clearly disclose material restrictions and limitations.

5.   Fineprint footnotes and buried “disclaimers” are non-starters.  The FTC says ads for Jim Burke Nissan, Ross Nissan of El Monte, and Cory Fairbanks Mazda all included variations on a deceptive theme: fineprint footnotes, unclear “disclaimers” that consumers had to scroll down to see, or other buried information that didn’t meet the agency’s “clear and conspicuous” standard. Advertisers often ask how big a disclosure has to be, but it’s more than a matter of font size. A clear and conspicuous disclosure is one sufficient for consumers to actually notice, read, and understand it.

6.  Give credit laws the credit they’re due. The actions against all three dealers allege that they violated provisions of federal credit statutes. One common pothole: using certain “triggering terms” under the Consumer Leasing Act, Truth in Lending Act, Reg Z, or Reg M without making required disclosures. For example, if you advertise monthly lease payments, that kicks in a requirement under the CLA that you disclose other facts about the transaction – like the total amount due at lease signing, whether a security deposit is required, and the number, amount, and timing of scheduled payments.

Also part of Operation Ruse Control: a law enforcement action against Florida-based Regency Financial Services and CEO Ivan Levy. According to the FTC, the company charged financially-strapped consumers upfront fees to negotiate changes to their car notes, but often didn’t provide anything in return. A federal judge froze the defendants’ assets and entered a Stipulated Preliminary Injunction.  Litigation continues in that case.



Thursday, March 26th, 2015

March 26, 2015



Proposal Would Cover Payday Loans, Vehicle Title Loans, and Certain High-Cost Installment and Open-End Loans

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) announced it is considering proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that tend to rack up excessive fees. The strong consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products, and certain high-cost installment loans and open-end loans.


“Today we are taking an important step toward ending the debt traps that plague millions of consumers across the country,” said CFPB Director Richard Cordray. “Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay. The proposals we are considering would require lenders to take steps to make sure consumers can pay back their loans. These common sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”


Today, the Bureau is publishing an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback from small lenders, which is the next step in the rulemaking process. The proposals under consideration cover both short-term and longer-term credit products that are often marketed heavily to financially vulnerable consumers. The CFPB recognizes consumers’ need for affordable credit but is concerned that the practices often associated with these products – such as failure to underwrite for affordable payments, repeatedly rolling over or refinancing loans, holding a security interest in a vehicle as collateral, accessing the consumer’s account for repayment, and performing costly withdrawal attempts – can trap consumers in debt. These debt traps also can leave consumers vulnerable to deposit account fees and closures, vehicle repossession, and other financial difficulties.


The proposals under consideration provide two different approaches to eliminating debt traps – prevention and protection. Under the prevention requirements, lenders would have to determine at the outset of each loan that the consumer is not taking on unaffordable debt. Under the protection requirements, lenders would have to comply with various restrictions designed to ensure that consumers can affordably repay their debt. Lenders could choose which set of requirements to follow.


Ending Debt Traps: Short-Term Loans

The proposals under consideration would cover short-term credit products that require consumers to pay back the loan in full within 45 days, such as payday loans, deposit advance products, certain open-end lines of credit, and some vehicle title loans. Vehicle title loans typically are expensive credit, backed by a security interest in a car. They may be short-term or longer-term and allow the lender to repossess the consumer’s vehicle if the consumer defaults.


For consumers living paycheck to paycheck, the short timeframe of these loans can make it difficult to accumulate the necessary funds to pay off the loan principal and fees before the due date. Borrowers who cannot repay are often encouraged to roll over the loan – pay more fees to delay the due date or take out a new loan to replace the old one. The Bureau’s research has found that four out of five payday loans are rolled over or renewed within two weeks. For many borrowers, what starts out as a short-term, emergency loan turns into an unaffordable, long-term debt trap.


The proposals under consideration would include two ways that lenders could extend short-term loans without causing borrowers to become trapped in debt. Lenders could either prevent debt traps at the outset of each loan, or they could protect against debt traps throughout the lending process. Specifically, all lenders making covered short-term loans would have to adhere to one of the following sets of requirements:


  • Debt trap prevention requirements: This option would eliminate debt traps by requiring lenders to determine at the outset that the consumer can repay the loan when due – including interest, principal, and fees for add-on products – without defaulting or re-borrowing. For each loan, lenders would have to verify the consumer’s income, major financial obligations, and borrowing history to determine whether there is enough money left to repay the loan after covering other major financial obligations and living expenses. Lenders would generally have to adhere to a 60-day cooling off period between loans. To make a second or third loan within the two-month window, lenders would have to document that the borrower’s financial circumstances have improved enough to repay a new loan without re-borrowing. After three loans in a row, all lenders would be prohibited altogether from making a new short-term loan to the borrower for 60 days.


  • Debt trap protection requirements: These requirements would eliminate debt traps by requiring lenders to provide affordable repayment options and by limiting the number of loans a borrower could take out in a row and over the course of a year. Lenders could not keep consumers in debt on short-term loans for more than 90 days in a 12-month period. Rollovers would be capped at two – three loans total – followed by a mandatory 60-day cooling-off period. The second and third consecutive loans would be permitted only if the lender offers an affordable way out of debt. The Bureau is considering two options for this: either by requiring that the principal decrease with each loan, so that it is repaid after the third loan, or by requiring that the lender provide a no-cost “off-ramp” after the third loan, to allow the consumer to pay the loan off over time without further fees. For each loan under these requirements, the debt could not exceed $500, carry more than one finance charge, or require the consumer’s vehicle as collateral.


Ending Debt Traps: Longer-Term Loans

The proposals under consideration would also apply to high-cost, longer-term credit products of more than 45 days where the lender collects payments through access to the consumer’s deposit account or paycheck, or holds a security interest in the consumer’s vehicle, and the all-in (including add-on charges) annual percentage rate is more than 36 percent. This includes longer-term vehicle title loans and certain installment and open-end loans.


Installment loans typically stretch longer than a two-week or one-month payday loan, have loan amounts ranging from a hundred dollars to several thousand dollars, and may impose very high interest rates. The principal, interest, and other finance charges on these loans are typically repaid in installments. Some have balloon payments. The proposal would also apply to high-cost open-end lines of credit with account access or a security interest in a vehicle.


When lenders have the ability to access the consumer’s account or have a security interest in a vehicle, consumers may lose control over their financial choices and these longer-term loans can turn into debt traps. The CFPB’s proposals under consideration for longer-term loans would eliminate debt traps by requiring that lenders take steps to determine that borrowers can repay. Just as with short-term loans, lenders would have two alternative ways to extend credit and meet this requirement – prevent debt traps at the outset or protect against debt traps throughout the lending process. Specifically, lenders making covered longer-term loans would have to adhere to one of the following sets of requirements:


  • Debt trap prevention requirements: Similar to short-term loans, this option would eliminate debt traps by requiring lenders to determine at the outset that the consumer can repay the loan when due – including interest, principal, and fees for add-on products – without defaulting or re-borrowing. For each loan, lenders would have to verify the consumer’s income, major financial obligations, and borrowing history to determine whether there is enough money left to repay the loan after covering other major financial obligations and living expenses. Lenders would be required to determine if a consumer can repay the loan each time the consumer seeks to refinance or re-borrow. If the borrower is having difficulty affording the current loan, the lender would be prohibited from refinancing into another loan with similar terms without documentation that the consumer’s financial circumstances have improved enough to be able to repay the loan.


  • Debt trap protection requirements: The Bureau is considering two specific approaches to the debt trap protection requirements for longer-term products. Under either approach, loans would have a minimum duration of 45 days and a maximum duration of six months. With the first, the proposal being considered would require lenders to provide generally the same protections offered under the National Credit Union Administration program for “payday alternative loans.” These loans have a 28 percent interest rate cap and an application fee of no more than $20. With the second, the lender could make a longer-term loan provided the amount the consumer is required to repay each month is no more than 5 percent of the consumer’s gross monthly income; the lender couldn’t make more than two of these loans within a 12-month period.


Restricting Harmful Payment Collection Practices 

Lenders of both short-term and longer-term loans often obtain access to a consumer’s checking, savings, or prepaid account to collect payment through a variety of methods, including post-dated checks, debit authorizations, or remotely created checks. However, this can lead to unanticipated withdrawals or debits and transaction fees. When lenders attempt to get repayment through repeated, unsuccessful withdrawal attempts, consumers are charged insufficient funds fees by their depository institution and returned payment fees by the lender, and may even face account closure. These fees add to the spiraling costs of falling behind on these loan products and make it even harder for a consumer to climb out of debt. To mitigate these problems, the Bureau is considering proposals that would:


  • Require borrower notification before accessing deposit accounts: Under the proposals being considered, lenders would be required to provide consumers with three business days advance notice before submitting a transaction to the consumer’s bank, credit union, or prepaid account for payment. The notice would include key information about the forthcoming payment collection attempt. This requirement would apply to payment collection attempts through any method and would help consumers better manage their accounts and overall finances.


  • Limit unsuccessful withdrawal attempts that lead to excessive deposit account fees: Under the proposals being considered, if two consecutive attempts to collect money from the consumer’s account were unsuccessful, the lender would not be allowed to make any further attempts to collect from the account unless the consumer provided a new authorization. This would limit fees incurred by multiple transactions that exacerbate a consumer’s financial woes.


A factsheet summarizing the proposals under consideration is available at:


A factsheet summarizing the Small Business Review Panel process is available at:


An outline of the proposals under consideration will be available on March 26 at:

A list of questions on which the Bureau will seek input from the small business representatives providing feedback to the Small Business Review Panel will be available on March 26 at:



This is the first public step in the CFPB’s efforts to reform the markets for these products. In addition to consulting with the Small Business Review Panel, the Bureau will continue to seek input from a wide range of stakeholders before continuing with the process of a rulemaking. Once the Bureau issues its proposed regulations, the public will be invited to submit written comments which will be carefully considered before final regulations are issued.




Wednesday, March 25th, 2015


Ocwen speeds exodus from mortgage servicing with latest, massive MSR sale

Nationstar buys in bulk, expects more deals soon

house money

In what’s becoming a weekly occurrence,Ocwen Financial (OCN) announced Tuesday that it will sell off another massive agency mortgage servicing rights portfolio.

The company is set to sell a $25 billion MSR portfolio toNationstar Mortgage (NSM), just over a month after agreeing to sell another $9.8 billion portfolio of agency servicing to Nationstar.

According to Ocwen, this latest portfolio consists of approximately 142,000 loans owned by Freddie Mac andFannie Mae.

“This transaction, on top of the one announced in February between Ocwen and Nationstar, furthers our announced corporate strategy and demonstrates the strong working relationship we have developed with Nationstar,” Ron Faris, Ocwen’s chief executive officer said.

The announcement is the latest in a string of agency MSR sales for Ocwen, which said in December that it plans to exit agency servicing entirely.

“We estimate the difference between our $1.1 billion book value and fair value of our agency MSRs is between $400 and $500 million dollars,” Faris said at the time.

“In addition to potentially realizing these gains, we have the potential to free up $200 to $300 million currently allocated to fund agency advances,” Faris added. “This strategy has the potential to free up over $1.7 billion of capital to invest in new businesses, to reduce leverage, or to return to shareholders over time.”

Earlier this month, Ocwen said that it is “on track” to sell agency MSRs for approximately $55 billion in unpaid principal balance in the next six months for prices “significantly above” its estimated carrying value.

As part of that plan, Ocwen announced last week that it agreed to sell a $9.6 billion mortgage servicing rights portfolio to Green Tree Servicing, a subsidiary of Walter Investment Management (WAC).

That announcement came on the heels of reports that Ocwen intended to sell a $45 billion portfolio of agency servicing to JPMorgan Chase (JPM).

According to Ocwen, the latest sale to Nationstar is subject to a definitive agreement and requires Freddie Mac, Fannie Mae and Federal Housing Finance Agency.

Nationstar CEO Jay Bray said that the deal might not be the last one between the two companies.

“This transaction builds upon our strong track record of portfolio acquisitions while serving the needs of homeowners, and we look forward to expeditiously closing and boarding this portfolio,” Bray said. “We will continue to work cooperatively with Ocwen as they evaluate the sale of additional agency portfolios and look forward to continuing discussions with all counterparties.”

The companies did not disclose financial terms of the deal and expect the transaction to close before mid-year.

Guests loathe them, yet resort fees are on the rise

Tuesday, March 24th, 2015


Don’t look now, but those reviled mandatory resort fees are on the rise — and in places you might not expect.

Orlando is the surprise No. 1 destination for the surcharges, which can cover everything from the hotel gym to a Wi-Fi connection, according, a site that specializes in resort fee data.

A record 107 hotels in the world’s theme park capital charged an average of $11.57 a night in fees, over and above their room rates. Orlando is followed by Miami, where 100 hotels charged an average $20.04 per night in fees, and Las Vegas, where 93 hotels charged an average $20.06 per night.

“More hotels are charging resort fees this year,” says Randy Greencorn,’s co-founder. A late 2014 survey by the American Hotel & Lodging Association echoes his findings. It noted that the number of hotels charging resort fees had more than doubled since 2012, rising from 3% of hotels to 7% last year.

Last time we checked on America’s resort fee pandemic, customers were complaining loudly, major hotel chains claimed they wanted to eliminate the fees, and the Federal Trade Commission (FTC) was nipping at the heels of the hotels with strongly worded warning letters.

Resort fees aren’t always clearly disclosed at the time a hotel rate is quoted. That makes room rates look cheaper than they really are. After tacking on a mandatory fee, the price can balloon by anywhere from $15 to more than $100 a night.

READ MORE: 8 ‘gotcha’ travel fees and how to avoid them

So what happened? Many guests stopped griping, accepting the fees as inevitable. Hotels interpreted their silence as a license to not only continue charging the fees, but to raise them. Properties openly disclosed the unwanted extras on their websites. And the FTC waved a “mission accomplished” banner on the issue, saying it just wanted people to know about these surcharges.

Travelers seem less inclined than ever to dispute a resort fee on their bill. The latest guest surveys don’t even mention the mandatory surcharges, apparently because it’s such a non-issue.

Clint Arthur remembers how he recently discovered a $60-a-night resort fee at the St. Regis Bahia Beach Resort in Rio Grande, Puerto Rico. While fees aren’t as common on the island, the hotels that have them take no prisoners. Puerto Rico’s resort fees are the most expensive in the country. An average guest pays an extra $34.10 per night, according to

Arthur, who offers TV training seminars around the country, says the fee came as a shock, adding a total of $600 to his final bill. “And that’s on top of their already-high room rates,” he says. The St. Regis’ resort fee, which covers the use of its tennis courts, driving range, paddle boards and gym, is disclosed on its website one screen after you’ve selected a room during the booking process, driving the final quoted price up by $60 per night. But there’s hardly a mention of it anywhere else.

“Of course I paid the fee,” says Arthur.

When it comes to resort fees, the hotel industry rhetoric seems to have shifted. Instead of acting embarrassed by these surcharges, they are emboldened. Resort fees allow hotels to keep their room rates low, they offset expenses like in-room Wi-Fi and shuttle services, and they can “use resort fees as revenue drivers,” explains Katelyn Stuart, a spokeswoman for Paramount Hospitality Management, which operates three Orlando hotels. She says while some guests complain, it’s usually because they booked through a travel agent who failed to tell them about the “mere” $9 a day fee which, to be fair, is $2.57 below the Orlando average.

Greencorn warns that it’s becoming a free-for-all. Many hotels without resort-like amenities are adding surcharges to their rooms and then broadsiding guests with them when they check in. Part of the reason is that airlines have had so much success with separating a ticket from items like carry-on luggage or confirmed seat assignments, an act referred to as “unbundling.” Hotels feel it’s their right to do so, too, and they believe the government will let them.

Here’s why: In late 2012, the FTC warned 22 hotel operators that their online reservation sites might violate the law by offering a deceptively low estimate of their hotel room cost. But instead of eliminating resort fees, as some predicted, hotels simply improved their disclosure, with the government’s blessing. Hotels saw that as a green light to add more fees, as long as they told their customers.

Ironically, the resolution may come courtesy of the airline industry. The Department of Transportation (DOT) Advisory Committee on Aviation Consumer Protections, a four-person panel that advises the Secretary of Transportation primarily on airline issues, plans to review hotel resort fees at an upcoming meeting. That could set the wheels in motion for the DOT to require online travel agencies to quote a full price for a hotel up front. And that could finally kill resort fees for good.

Thanks, airlines.

How to avoid resort fees

Stay away from “resort” areas. You’re likely to find these unwanted extras in popular resort areas in Arizona, Colorado, Florida and Hawaii (see list). Stay away from them if you want to avoid resort fees.

Book direct. A vast majority of hotels that charge resort fees will disclose the resort fee by the second or third booking screen when you buy directly online. Online travel agencies, and especially opaque sites like, may or may not tell you about the fee until later — if they do at all.

Read your confirmation. A reputable resort will reveal the fee on your final confirmation. If you’re not happy with it, you can always cancel

Vulture capitalists are picking us dry: Why consumer debt buyers are on the rise (editorial from Salon)

Monday, March 23rd, 2015

SUNDAY, MAR 22, 2015 10:00 AM CDT

The great recession laid waste to the U.S. economy. Now debt collectors are feasting on the carrion

Vulture capitalists are picking us dry: Why consumer debt buyers are on the rise

Good news, people: The “boom” is back! Yes, good times are here again, thanks to an economic boom that’s being generated by (of all things) bad times.

As you might know from your own experiences, tens of millions of Americans have been hit hard, knocked down and held down in recent years by the collapse of jobs and wages. This calamity has led to a second blow for millions of the same families, who find themselves suddenly buried in piles of overdue bills for credit card charges, student loans and other consumer debt.

But the good news is that there’s a bright silver lining in that dark financial cloud. Only, it’s not for the indebted families, but for a booming breed of finance hucksters known as consumer debt buyers. Believe it or not, in the warped world of high finance,”There’s gold in them thar hills” of bad debt, and where there’s gold, there are diggers.

Whenever a corporation issues a statement declaring that it’s committed to “treating consumers fairly and with respect,” chances are, it’s not.

After all, why say such a thing, when actually practicing it would make a statement unnecessary? Indeed, with names like Encore Capital Group and Sherman Financial, these miners of human misery buy bales of these unpaid bills from banks and other lenders, paying pennies on the dollar. Then they unleash packs of their hard-nosed, aggressive collectors on the families. If they still can’t extract payment, the corporate debt profiteers turn to their meanest dog: The courts.

Debt firms routinely file thousands of lawsuits a day against financially devastated Americans. They know that most debtors can’t understand the legal gibberish filed against them, can’t afford a lawyer, can’t take time off to go to a court hearing and can’t mount an effective defense against the corporate lawyers. So, some 95 percent of these lawsuits produce default judgments against hapless borrowers — meaning debt buyers can then confiscate the wages of borrowers or freeze their bank accounts.

This boom in vulture capitalism is disgusting — but, worse, it’s subsidized by us taxpayers! We pay for the judicial system — the judges, courtrooms and endless rounds of hearings. Predatory debt corporations have perverted our so-called justice system into their own subsidiary for squeezing profits out of destitute debtors.

This is why New York Attorney General Eric Schneiderman has started going after these for-profit corporate debt collectors. He found that Encore, based in San Diego, filed nearly 240,000 lawsuits against debtors in a recent four-year period, using the courts as its private collection arm. Problem is, Encore’s bulk filing of lawsuits against the hard-pressed borrowers are rife with errors, out-of-date payment data, fabricated credit card statements, etc. With debt buyers scooping up millions of overdue bills each year from lenders, tons of them are missing original loan documents, payment histories and other proof of debt.

Debt predators, however, scoot around this lack of facts by simply having their employees sign affidavits asserting that the level of money owed is accurate. Judges, overwhelmed by the unending flood of lawsuits filed by Encore et al, have accepted those affidavits as true, thus ruling in favor of the corporations. But Schneiderman found that — Surprise! — affidavits were simply being rubber-stamped by company employees, with no effort to ensure the truth of the information. An employee of one large debt-buyer testified that his corporation ran an assembly-line scheme in which he signed about 2,000 affidavits a day.

This is no minor scam — 1 in 7 adults in the U.S. is under pursuit by debt collectors. It’s hard enough for struggling families to claw their way out from under the economic crash without having lying, cheating predator corporations twist the court system to pick their pockets and shut off their hope of recovery.

Debt buyers bury hard-hit consumers in lies

Saturday, March 21st, 2015

editorial from Panama City News Herald


Published: Friday, March 20, 2015 at 02:42 PM.

Good news, people: The “boom” is back! Yes, good times are here again, thanks to an economic boom that’s being generated by (of all things) bad times.

As you might know from your own experiences, tens of millions of Americans have been hit hard, knocked down and held down in recent years by the collapse of jobs and wages. This calamity has led to a second blow for millions of the same families, who find themselves suddenly buried in piles of overdue bills for credit card charges, student loans and other consumer debt.

But the good news is that there’s a bright silver lining in that dark financial cloud. Only, it’s not for the indebted families, but for a booming breed of finance hucksters known as consumer debt buyers. Believe it or not, in the warped world of high finance,

“There’s gold in them thar hills” of bad debt, and where there’s gold, there are diggers.

Whenever a corporation issues a statement declaring that it’s committed to “treating consumers fairly and with respect,” chances are it’s not.
After all, why say such a thing, when actually practicing it would make a statement unnecessary? Indeed, with names like Encore Capital Group and Sherman

Financial, these miners of human misery buy bales of these unpaid bills from banks and other lenders, paying pennies on the dollar. Then they unleash packs of their hard-nosed, aggressive collectors on the families. If they still can’t extract payment, the corporate debt profiteers turn to their meanest dog: the courts.

Debt firms routinely file thousands of lawsuits a day against financially devastated Americans. They know most debtors can’t understand the legal gibberish filed against them, can’t afford a lawyer, can’t take time off to go to a court hearing and can’t mount an effective defense against the corporate lawyers. So, some 95 percent of these lawsuits produce default judgments against hapless borrowers — meaning debt buyers can then confiscate the wages of borrowers or freeze their bank accounts.


Use of arbitration clauses to deprive servicemembers of their rights: New York Times story

Tuesday, March 17th, 2015

Charles Beard, a sergeant in the Army National Guard, says he was on duty in the Iraqi city of Tikrit when men came to his California home to repossess the family car. Unless his wife handed over the keys, she would go to jail, they said.

The men took the car, even though federal law requires lenders to obtain court orders before seizing the vehicles of active duty service members.

Sergeant Beard had no redress in court: His lawsuit against the auto lender was thrown out because of a clause in his contract that forced any dispute into mandatory arbitration, a private system for resolving complaints where the courtroom rules of evidence do not apply. In the cloistered legal universe ofmandatory arbitration, the companies sometimes pick the arbiters, and the results, which cannot be appealed, are almost never made public.

That is the experience for many Americans who are contractually obligated to resolve their disputes with investment advisers or lenders in this way. But it is supposed to be different for the troops who are deployed abroad, say military lawyers, state authorities and Pentagon officials.

Over the years, Congress has given service members a number of protections — some dating to the Civil War — from repossessions and foreclosures.

Efforts to maintain that special status for service members has run into resistance from the financial industry, including many of the same banks that promote the work they do for veterans. While using mandatory arbitration, some companies repeatedly violate the federal protections, leaving troops and their families vulnerable to predatory lending, the military lawyers and government officials say.

“Mandatory arbitration threatens to take these laws and basically tear them up,” saidCol. John S. Odom Jr., a retired Air Force lawyer now in private practice in Shreveport, La. High-ranking Defense Department officials agree, telling Congress that “service members should maintain full legal recourse.”

Last year, a bipartisan bill that would have allowed service members to opt out of arbitration and file a lawsuit met with opposition from the U.S. Chamber of Commerce and Wall Street’s major trade group, the Securities Industry and Financial Markets Association, or Sifma.

“While we remain very supportive of the troops, we see no empirical or other evidence that service members are being harmed by or require relief from arbitration clauses,” Kevin Carroll, a managing director and associate general counsel at Sifma, said in a statement.

The trade groups’ members include a roster of financial companies that have trumpeted their hiring of veterans and their initiatives for troops returning home from war. They include JPMorgan Chase, the nation’s largest bank, and USAA, which caters almost exclusively to service members and their families.

Many banks contend — as do companies in other industries — that arbitration is a more efficient and less costly way to handle disputes. A spokesman for USAA said that the company supported the bill because it would have been “good public policy for the entire industry.” Still, USAA uses mandatory arbitration clauses in many of its financial service contracts with service members.

The clauses clamp down on frivolous litigation, including class-action lawsuits, and the cost savings allow companies to provide more affordable products to consumers, the trade organizations say.

In lobbying against the bill, several financial industry groups and a large phone company visited with the staff of Senator Lindsey Graham, Republican of South Carolina, who sponsored the legislation along with Senator Jack Reed, a Rhode Island Democrat.

The trade groups told Mr. Graham’s office that they were already working to make their arbitration procedure more accommodating to service members, according to a person briefed on those discussions who would speak only on the condition of anonymity.

“The message was, ‘Let us fix this internally,’ ” the person said. “Don’t upset the apple cart with a new law.”

The bill never made it out of committee last year, though Mr. Graham plans to reintroduce it this year.

Consumer lawyers say it is easy to understand why the industry is lobbying against an exemption for service members: One carve-out from mandatory arbitration could bolster broader calls to excise the clauses from contracts altogether.

“If you admit that these are bad for the military, then it follows that they are bad for consumers much more broadly,” said Deepak Gupta, a lawyer in Washington who has represented consumers in cases about arbitration before the Supreme Court.

The main law challenged by mandatory arbitration clauses is the Servicemembers Civil Relief Act, or S.C.R.A., military officials say. Under the law, active duty military members and their families are protected from repossession and foreclosure without a court order. It allows them to terminate any real estate or auto lease when their military orders require them to do so. And it requires lenders to reduce the interest rates on any loans to 6 percent.

Violations of those protections are widespread, according to a review by The New York Times of court records and loan contracts.

The Government Accountability Office, for example, found in 2012 that financial institutions had failed to abide by the law more than 15,000 times. Last month, Santander Consumer USA reached a $9.35 million civil settlement with the Justice Department over accusations that the lender illegally seized cars from members of the military for a period of nearly five years until 2013.

Arbitration is often stacked against service members from the start. Some of the contracts, for example, offer two possible sites for a hearing: one city on the West Coast and another on the East Coast. Consumer lawyers say the companies invariably pick the city that is farther away from where the customer lives.

But the real power of the clauses, the lawyers say, is that they make it virtually impossible for consumers to band together in a broad legal challenge.

Instead, companies can battle claims one by one. And alone, few consumers can afford to take on companies at all, especially if their disputes revolve around a few hundred dollars. Debt collectors promoted such benefits in an industry newsletter, describing mandatory arbitration as a “silver bullet” that could “successfully remove the matter from court and likely end the case in its entirety.”

When Matthew Wolf, a captain in the Army Reserve, was deployed to Afghanistan a year into a 39-month car lease, he turned in the car, an Infiniti, to the dealership and asked for a refund of $400 he had put down toward future monthly payments — his right under the S.C.R.A.

Nissan, which is the parent company of Infiniti, balked at Captain Wolf’s request, refusing to give him back the money. Captain Wolf and his lawyer, Thomas Booth Jr., sued Nissan on behalf of service members facing similar predicaments. But because of an arbitration clause in his lease, the lawsuit was dismissed and his dispute was sent to arbitration.

In arbitration, he was told that the fees for the case could total $8,200 — or nearly 21 times what he said he was owed.

In a statement, a spokesman for Nissan’s Infiniti unit said, “We continue to work with Mr. Wolf to resolve his complaint.”

Despite arguments that arbitration is more efficient and less expensive than court, military lawyers say cases can drag on for years.

It took more than four years after Sergeant Beard’s car was repossessed before an arbiter ruled on his case against Santander Consumer. Although Sergeant Beard was awarded $6,500, the arbiter denied his requests that Santander compensate him and his family for the wrongful repossession.

For Sergeant Beard, the real issue is all the other troops who have been victimized.

“I tried to fight for everybody, but it only ended up with me,” said Sergeant Beard, who adds that such repossessions “will destroy soldiers in combat by putting them in a position where they can’t help their loved ones.

In a statement, a spokeswoman for Santander Consumer said that since 2012, “the lender has used systemic controls to prevent improper repossessions of vehicles,” including the vehicles of military members protected under the S.C.R.A.

In the action against Santander late last month, Justice Department officials emphasized that the auto lender used an arbitration clause to undercut a class action brought by a military member whose car was seized.

That soldier, according to people briefed on the matter, was Sergeant Beard

Private justice is justice denied, regulator’s study shows — editorial from St. Louis Post Dispatch

Sunday, March 15th, 2015


We Americans cherish our right to a day in court, yet most of us have signed that right away in some of our most important financial dealings.

Banks, phone companies and other businesses commonly tuck a mandatory arbitration clause into the fine print of their contracts. When you click “I accept” or sign on the dotted line, you’ve guaranteed that any dispute you have with the company will be handled in a privately run system with far different rules than the state or federal courts.

Congress, concerned that this system was tilted against consumers, asked the Consumer Financial Protection Bureau to study how often consumers were signing their rights away. The answer, which the CFPB provided last week in a 700-page study, is almost all the time.

Nearly all mobile phone and payday loan contracts have mandatory arbitration clauses. So do 44 percent of checking accounts and 53 percent of credit cards — and the credit-card figure would be far higher if several big banks, including Bank of America, hadn’t dropped the arbitration language a few years ago to settle an antitrust suit.

Banks argued that arbitration allows them to keep costs low, which results in better pricing. Bankers obviously don’t want to spend money on lawyers, but the CFPB report casts doubt on whether consumers see any benefit.

The credit-card antitrust settlement provided a convenient case study. Banks that gave up the arbitration language didn’t raise their rates or turn down more card applicants, the CFPB found, so there’s “no evidence of arbitration clauses leading to lower prices for consumers.”

The study also makes the arbitration process look one-sided. Among cases decided by the American Arbitration Association in 2010 and 2011, consumers won a total of $400,000. Companies won $2.8 million in judgments against consumers.

Maybe arbitration is, from the banks’ point of view, simply a more efficient way to collect disputed debts. It also puts them beyond the reach of class-action lawyers.

If a consumer has been overcharged by a few hundred dollars, a lawyer with access to the courts might take the case and find other aggrieved borrowers. Having a mandatory arbitration clause, says Washington University law professor Michael Greenfield, “makes it very difficult to find an attorney.”

The opportunity for discovery — or calling witnesses to uncover evidence — is limited in arbitration, and the arbitrators themselves may have a subtle pro-bank bias.

“If an arbitrator comes up with a big award in favor of the consumer, that arbitrator is unlikely to be chosen by a business the next time,” Greenfield says.

Until they run into a problem, most consumers don’t realize that they have signed away their right to sue. The CFPB surveyed credit-card users, and three-quarters of them didn’t know whether they had arbitration clauses. It’s not something people consider when shopping for a card or a bank account.

Greenfield believes the system is abusive and needs to be changed. “One can waive constitutional rights, but the method that’s used in this context is a joke,” he says.

Change could come from the CFPB. The Dodd-Frank Act, which required it to conduct a study, also authorizes the agency to limit the use of mandatory arbitration clauses.

Bankers will fiercely oppose any such regulation. They enjoy having their own private justice system, but consumers clearly are better off in the real courts.

Debt Collector ‘Boiler Rooms’ Threatened Arrest, FTC Says

Saturday, March 14th, 2015

from St. Louis Post Dispatch  —  this describes complaints we frequently receive

The voicemail would be enough to give anyone chills.

“Hello, this is Detective Jeff Ramsey. I am attempting to touch bases with (you)… I will be back out to your place of residence … between the hours of 4 and 6 p.m. You are to have two forms of identification, no firearms or narcotics or loose animals on the premises. This is concerning allegations in correlation to check fraud.”

There was no Detective Ramsey, or a need to put away the dogs – but there were many consumers around the country who sent money to a set of debt collection companies operating near Buffalo, N.Y., after being told they would be arrested, alleges the Federal Trade Commission in a lawsuit filed against the Four Star Resolution collection agency. In two separate lawsuits filed recently against Four Star and Vantage Point Services LLC, the FTC and New York State Attorney General’s office says consumers paid $45 million after such threats. Both firms have currently suspended operations because of a temporary restraining order. The lawsuits offer a glimpse into a world the FTC describes as “boiler rooms” where collection agents would allegedly say or do almost anything to motivate consumers to pay up.

During a similar call cited in the FTC’s lawsuit against Vantage Point Services, the collector warned a consumer in Whatcom County, Wash., to put away the dogs or children, lest they get harmed during a coming arrest.

“Please make sure that if there are any large dogs or firearms on the premises, they’re out of the immediate harm’s way of myself and the uniformed officer…(and) have adequate supervision for any minor children in the home,” the lawsuit alleges.

The phone number listed for Vantage Point Services listed with the Better Business Bureau was not accepting calls.

Linda Joseph, an attorney representing Four Star, said the FTC did not give the firm the opportunity to defend itself before essentially shutting it down with the temporary restraining order.

“We believe there has been a very serious violation of due process,” she said.

In the Vantage Point Services lawsuit, the FTC alleges that consumers were told they could face extradition from their homes for alleged debts, some agents warned. One was allegedly told he would be extradited from Florida and jailed in Michigan under a recent bill signed by Florida Governor Rick Scott. In another case, a collection agent told a consumer working in South Korea as a civilian administrator for the Air Force that they would be arrested and extradited back to the U.S. to deal with a debt, the FTC said.

The threats were made more believable by liberal use of caller ID spoofing, the FTC claims. One consumer living in Franklin County, Ohio, was told she would have to turn herself in regarding felony charges — and the call appeared to have been placed from a phone number at the courthouse. Another consumer received calls that appeared to come from a district attorney’s office in Texas, the FTC alleges.

Consumers targeted for collection weren’t the only ones who received the intimidating calls, according to the FTC. The lawsuit alleges that one target’s mother was contacted and told “if her daughter did not make a payment, Defendants would process a warrant that day and have the daughter picked up, handcuffed, and imprisoned for a minimum of 120 days.” In another case referenced in the suit, a work supervisor was called. And in still another example, a friend was called and told a sheriff would be visiting the victim’s house because the consumer had committed “identity theft” by using the friend’s information to write a “bad check.”

The FTC and New York Attorney General claim Vantage Point Services used many different business names, including names of fictitious law firms and actual government entities. Vantage Point Services also placed calls using more than 500 phone numbers, the suit claims.

One claim against Four Star alleges that an operator simply said to a consumer, “It’s the government you’re messing with!”

There was also a wide variety of name-calling: Consumers were called “f—ing no good liar,” “idiot,” “dummy,” ”piece of scum,” “thief,” “dirtbag,” “scumbag,” or “loser,” the lawsuit alleges.

Two Four Star employees signed affidavits this week attempting to persuade U.S. District Court to allow the firm to resume operations, saying that the firm had hired a compliance officer and was already working with the Consumer Financial Protection Bureau and the Better Business Bureau to improve its operations. Joseph provided the affidavits to

“I understand that portions of my business need improvement,” said Travell Thomas, an owner. “But I also believe that Four Star — a company devoted to hiring minority, disabled and veteran employees — should be afforded every opportunity to show it has responsible employees.”

Ronald Williams, the compliance officer at Four Star, objected to the FTC’s description of the firm as a “shady debt collector,” and said he had worked to train employees to stay on the right side of the law — employees at the firm has signed notices warning them that impersonating government officials was against the law, for example.

“(I’m) not pretending that Four Star’s operations did not have problems that need to be improved upon, but debt collection is a difficult business,” he said.

In the Vantage Point Services case, the temporary restraining order issued in January against the firm has been extended while both parties argue over imposition of a permanent injunction. The temporary restraining order in the Four Star case has been extended until May 8, according to the FTC; Joseph, Four Star’s attorney, said she was filing a motion to reopen the business this week.

FTC’s Spotlight on Debt Collectors

The FTC has stepped up prosecution against debt collectors operating against the law — the agency filed a record number of Fair Debt Collection Practices Act lawsuits in 2014. Partly because of the attention those lawsuits have attracted, the number of complaints against debt collection firms have also soared — from 205,000 in 2013 to 280,000 in 2014.

The kinds of practices alleged in these two lawsuits follow a script of tactics banned by theFair Debt Collection Practices Act. It’s illegal for collectors to misrepresent who they are, to impersonate law enforcement and to use intimidation tactics such as threatening arrest. It’s also illegal to contact third parties (without the consumer’s explicit consent or a court’s permission), and to refuse to provide supporting documentation when consumers request it, as occurred in many of these collection attempts, the lawsuits allege.

“Today’s action should make it clear that nobody is above the law, and when shady debt collectors engage in illegal and abusive business practices, they will be held accountable,” said Attorney General Eric Schneiderman. “The use of threats, including the threat of arrest, to collect debts is unconscionable, and I am pleased to partner with the FTC to stand up for consumers against these bad actors.”

Consumers who are contacted by a debt collector should immediately ask for verification of the debt — paperwork supporting the alleged debt. If an agent refuses, you may file a complaint with the FTC and your state attorney general’s office. If the firm continues to contact you, you may send a letter demanding that it ceases contact with you. A series of sample letters for dealing with debt collectors are available at the CFPB website.

Chicago Daily Law Bulletin story about 7th Cir decision in our Fridman case

Friday, March 13th, 2015

Panel: Online payment valid on day clicked


Diane P. Wood

Frank H. Easterbrook
By Patricia Manson
Law Bulletin staff writer
Banks and other entities that service mortgages must credit any payment made through their websites at the time the borrower approves the payment, a divided federal appeals court has held.The 7th U.S. Circuit Court of Appeals rejected the argument that the federal Truth in Lending Act allows mortgage servicers to wait until an electronic transfer of funds is completed before crediting a payment.

Such a holding, the majority wrote, would be contrary to Congress’ intent.

“The interpretation we adopt promotes an important purpose of TILA: [T]o protect consumers against unwarranted delay by mortgage servicers,” Chief Judge Diane P. Wood wrote in an opinion joined by Judge David F. Hamilton.

In a dissent, Judge Frank H. Easterbrook contended his colleagues were misinterpreting TILA’s requirement that a mortgage servicer credit a payment “as of the date of receipt.”

Under Section 1639f(a) of TILA and an implementing regulation, Easterbrook wrote, an instruction to make a payment is not actually a payment.

“We should read the statute and regulation to mean what they say: [L]enders must give credit when they receive payment,” he wrote.

Elena Fridman’s mortgage is serviced by NYCB Mortgage Co. LLC. Her payments are due on the first of each month, but she has a 15-day grace period before she is required to pay a late fee.

Borrowers may authorize payments on their mortgages through NYCB’s website.

Every business day, NYCB puts all the authorizations it received before 8 p.m. into an Automated Clearing House file.

The following day, NYCB uses the ACH file to request that funds be transferred from the borrowers’ bank accounts.

NYCB credits payments made through its website two business days after the payment is authorized.

Late on Dec. 13, 2012, or early the next morning, Fridman accessed NYCB’s website and authorized a mortgage payment from her account at Bank of America.

NYCB placed the authorization into an ACH file on Dec. 14 and credited Fridman’s mortgage account for the payment on Tuesday, Dec. 18, which was two business days later. It charged her a late fee of $88.54.

Fridman sued NYCB, alleging TILA required it to credit her payment on the day she submitted the authorization.

U.S. District Judge Sara L. Ellis ruled in favor of NYCB, and Fridman appealed.

In its opinion Wednesday, the 7th Circuit majority wrote that a mortgage servicer decides how quickly to collect a payment when it receives a check or gets authorization on its website or over the phone to transfer funds.

Without TILA’s requirement that payment be credited on receipt of the “payment instrument,” the majority wrote, “the servicer could decide to collect payment through a slower method in order to rack up late fees.”

But Easterbrook countered that fear of losing business would prevent a mortgage servicer from engaging in such tactics.

“Playing games would put its reputation at risk,” he wrote. “Users of the Internet proclaim their grievances loudly, and many sites rate merchants based on users’ observations.”

The case is Elena Fridman v. NYCB Mortgage Co. LLC, No. 14-2220.

Daniel A. Edelman of Edelman, Combs, Latturner & Goodwin LLC argued the case before the 7th Circuit on behalf of Fridman.

“I think Judge Wood got it right,” he said.

An authorization made through a website, he said “is an electronic form of a paper check.”

And TILA requires a payment made with a check to be credited when the mortgage servicer receives the check, he said.

Edelman rejected Easterbrook’s assertion that concern over borrowers’ reaction to underhanded conduct would keep mortgage servicers in line.

Servicers don’t care what borrowers think of them, he said.

Instead, he said, servicers have an incentive to collect late fees from borrowers so they can keep their own costs down and attract more business.

“Where Judge Easterbrook went wrong is thinking market forces constrain bad behavior on the part of mortgage servicers,” Edelman said.

LeAnn Pedersen Pope of Burke, Warren, MacKay & Serritella P.C. argued the case on behalf of the bank.

She is still analyzing the ruling, Pope said.