“If someone makes you a loan that’s illegal, either because they don’t have a license or they violate usury laws, you’re not under any obligation to pay it back,” said Norman Googel, an assistant attorney general in West Virginia.
In trouble from an online payday loan? You might not have to repay it.
Guest post by Frank Pipitone.
Unless you have been hiding under a rock, you have heard or read about the looming student loan economic crisis. The National Association of Consumer Bankruptcy Attorneys (NACBA) refers to this coming crisis as the student loan “debt bomb.” A brief look at the NACBA report and the startling statistics explains why they coined this explosive title.
Over 37 million Americans are currently saddled with student loan debt with the total amount owed in excess of 1 trillion dollars. While these numbers are frightening, some of the trends outlined in the report are more concerning:
Wells Fargo got in major trouble for applying payments first to fees, then to the principal of a mortgage. And because it pissed off a New Orleans bankruptcy judge by fighting the case for five years while the homeowner’s lawyers worked without pay. (From Bloomberg Law)
Today, the Consumer Financial Protection Bureau made the following announcement:
When we build our own software or contract with a third party to build it for us, we will share the code with the public at no charge. Exceptions will be made when source code exposes sensitive details that would put the Bureau at risk for security breaches; but we believe that, in general, hiding source code does not make the software safer.
Bravo!
NPR’s Planet Money put together a series of minimalist economic posters. Here’s one, but you should check out the rest.
Debt settlement is basically debt collection by another name. Out of one side of their mouths, debt settlement companies promise creditors they will help them get paid. Out of the other side of their mouths, debt settlement companies promise consumers great “deals” to resolve their debts. In order to appear more effective (or trustworthy, maybe), many debt settlement companies go to great lengths to appear to be law firms, while putting WE ARE NOT YOUR LAWYER disclaimers in the small print to attempt to avoid violating unauthorized practice of law regulations.
At best, consumers spend a lot of money to get settlements they could easily have gotten themselves with a few phone calls. At worst—and far too often—consumers spend a lot of money and get nothing.
Tonight, I received the following official-sounding message from “the Transaction Review Department of Wells Fargo Bank” asking me to “verify recent transactions on [my] credit Visa card.” While I do have a Wells Fargo business card, this message doesn’t sound quite right. First, I’ve never heard anyone refer to a “credit Visa card.” Second, as far as I can tell, Wells Fargo does not have a “Transaction Review Department.” Third, there are no unusual charges to my account—by me or anyone else.
I haven’t called the number, because I’m pretty sure this is a phishing attempt, and I’m not interested in giving the phisher in question any verification that it has the correct phone number.
It is just good enough that many people would probably respond. I’m quite certain those who respond will be asked for their account information, and would find their cards maxed shortly after.
Be on the lookout for scams like this. Don’t believe anything that doesn’t sound right, and don’t ever give out your account information over the phone.
The Consumer Financial Protection Bureau has started looking into regulating non-bank financial industries now that it has a chief. For starters, it is looking at debt collectors and credit reporting agencies. Says CFPB chief Richard Cordray, “Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks.” (Hat tip: CNN)
Payday lending traditionally happens in seedy storefronts, often in low-income neighborhoods and around military bases. Not any more! Eager to get in on the next big subprime lending bubble before it bursts, big banks are brushing up on their loan shark chops and opening payday lending divisions.
So what’s the problem, here? Well, payday loans from banks typically carry annual interest rates as high as 365%. That means if you took out a $10 loan, it would cost $46.50 to pay it back. It doesn’t feel so bad because payday loans are supposed to be short-terms loans, but the typical payday loan customer uses payday loans often enough that he or she is actually paying that kind of interest.
Banks are especially interested because they tend to hold the payday loan customer’s deposits, as well. Payday loan customers wind up paying more in overdraft fees, and are more likely to lose their bank accounts. In short, it’s bad news for consumers.
The Center for Responsible Lending is watching this trend, and has more information about big bank payday lending.
Today, Minnesota Governor Mark Dayton vetoed a package of tort-reform bills passed by the state legislature earlier this week. I was particularly happy to see his reasons for vetoing SF 429, which would have rendered many consumer and civil rights statutes effectively unenforceable in Minnesota. Here’s a choice excerpt from Governor Dayton’s veto letter for that bill:
Over 300 Minnesota statutes require the shifting of attorney fees to the wrongdoer—all of which would be negatively impacted by this legislation. Deployed military personnel, farmers, vulnerable adults, and victims of workplace harassment, wrongful termination, and discrimination are just a few of the classes of individuals that would be harmed by this legislation.
