predatory lending

Illegal Signs Show Predatory Lending is Alive and Well

At MinnPost, Bill Lindeke reports on a silent war going on in Minneapolis and St. Paul. Predatory lenders staple their signs to utility poles and plant them in boulevards, and do-gooders like St. Paul City Council member Amy Brendmoen and North Minneapolis activist Jeff Skrenes take them down. It has even escalated — literally. Skrenes carries a 10′ ice scraper to reach the signs, which the lenders are posting out of reach to try to keep them up longer.

The signs are illegal, and the people and companies posting them are generally engaging in some form of DIY predatory lending — offering a bad deal to people struggling with a mortgage that was probably a bad deal to begin with. It must work, because the signs keep going up even though people like Brendmoen and Skrenes keep taking them down.

But there are better options for homeowners struggling with a mortgage. Both the Minnesota Homeownership Center and Habitat for Humanity have phone hotlines and can help homeowners figure out what they can do. The best option is almost certainly not taking a fraction of the equity in cash or converting bad mortgage into a bad contract for deed.

High Interest Rates Only Work if You Hide Them

In the wake of the CARD Act, credit card interest rates are rising. This should not be a surprise, since the CARD Act forces lenders to put the true cost of a credit card front-and-center. Credit card issuers cannot advertise a low rate and then use fees to jack up the true cost of the card.

By forcing this sort of honesty, the CARD Act has exposed a secret: high interest rates aren’t the result of the market. If consumers know that a card has an interest rate of, say, 79.99%, they won’t pay it.

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Predatory Lenders Target American Soldiers

Members of the armed forces bear some heavy burdens, but those burdens don’t always take the form of terrorists and enemy combatants. In recent years, soldiers and veterans have faced plenty of adversity on the home front, too, from healthcare issues to combat pay questions.

They also face an assault from predatory lenders, which clog towns with military bases almost to the exclusion of “regular” stores that have price tags instead of installment plans.

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Subprime Credit Cards Adapt to New Regulations

New regulations designed to stop credit card lending abuses cap the first-year fees a credit card issuer may charge at 25% of the credit limit. So First Premier Bank is doing just that, charging $75 for a credit card with a $300 limit. But since the new law does not limit interest rates, First Premier Bank cards come with an interest rate of 79.9%.

That is $20 per month on a $300 balance.

Before the new law, First Premier Bank offered a card with a $250 that came with $256 in first-year fees. These cards are sometimes called “subprime credit cards” because of the awful fees that stack up. They are also sometimes referred to as “payday credit cards” for the oppressive fees on small balances, which are similar to many payday loans.

How does First Premier Bank justify its cards? Odysseas Papadimitriou, CEO of CardHub.com, says that “[e]ven when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit.”

Maybe so, but the First Premier Bank card racks up fees so fast there may not be any credit to rely on, anyway.

This credit card’s newest trick? A 79.9 percent interest rate | StarTribune

Consumer Complaints in 2008: the Top 10

The National Associaion of Attorneys General released their list of the top 10 sources of consumer complaints for 2008, and the winner is: debt collectors!

No surprise there, after all, what other profession has been the bane of the poor since before Christ? Evil enough that Shakespeare took time to write about one in Venice.

Second place, car salesmen. Horse traders have not been around as long, which may be the reason debt collectors beat them to the glory.

Predatory lending, the scourge of the economy, only reached number 6.

Here is the list:

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Payday loans under fire in the Minnesota legislature

There are two bills (HF0914 & HF1471) pending in the Minnesota legislature. HF0914 would eliminate payday loans entirely. HF1471 would impose some regulations on payday lenders and adds a private right of action for consumers, with attorney fees and costs.

Minnesota Public Radio has more on why payday lending is under scrutiny and at risk of becoming outlawed in Minnesota:

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Payday loans can be a cycle of debt | MPR

Enacted Payday Lending Legislation – 2008 Session

Enacted Payday Lending Legislation – 2008 Session | Nat’l Conference of State Legislatures (via Payday Lending Association)

Predatory Lending Association: dedicated to extracting maximum profit from the working poor

The website of the Predatory Lending Association* is chock-full of great information for payday lenders, such as racial profiling tools, tips on lending to members of the military (no, 20 payday loan stores by a military base are not too many), and a working poor finder, which uses Google Maps to help predatory lenders find concentrations of working poor to target. (You can even overlay the military and working poor maps for extreme targeting!)

There is a lot more information there that is helpful to predatory lenders, but that consumers might find interesting, as well.

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Predatory lending made worse by Bush Administration

In case you missed it over Valentine’s Day, Elliot Spitzer, consumer rights hero, wrote a great J’accuse piece in the Washington Post . In the piece, Spitzer rightfully accuses the Bush Administration through the OCC of actually making the predatory lending problem worse by first trying to ignore the problem, then when the States Attorney Generals started taking action, Bush & Co. used the OCC to block the States from not only enforcing their own laws, but also from enforcing even federal laws.

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Barack Obama on the subprime mortgage crisis

Here is a short video from Democratic presidential candidate Barack Obama in which he promises to create a ten million dollar fund to help keep people in their homes and a tax deduction for homeowners who do not itemize on their income tax returns.

[via Consumer Rights Watch]