What To Do When Creditors Sue

NEDAP Blasts Capital One/ING Merger Approval

Marcy Einhorn, Esq. — Fri, 17 Feb 2012 21:10:46 +0000

Here, unedited, is NEDAP’s press release, criticizing approval of this merger:

STATEMENT

FOR IMMEDIATE RELEASE

February 17, 2012

CONTACT:

Sarah Ludwig or Alexis Iwanisziw, 212-680-5100

NY GROUPS BLAST FEDERAL RESERVE FOR APPROVING BEHEMOTH CAPITAL ONE-ING MERGER

Fed Ruling Puts Country at Risk and Rewards Bank

Engaged in Predatory Practices

New York groups today blasted the Federal Reserve Board for approving Capital One’s application to acquire ING Direct and create the fifth largest bank in the country.

“The Fed’s approval of this acquisition makes clear that the agency has learned nothing from the financial meltdown and global economic collapse, and has chosen instead to serve the bidding of banks over the public,” said Sarah Ludwig, co-director of NEDAP, one of six New York groups that spoke out today against the Federal Reserve’s decision. “The Fed has blatantly disregarded serious systemic risk issues, as well as powerful evidence of Capital One’s predatory practices in New York’s low and moderate income neighborhoods and communities of color.”

“The Federal Reserve has permitted the creation of yet another behemoth bank, despite overriding public interest in preventing banks from becoming too big to fail,” said Ruhi Maker, senior attorney with the Empire Justice Center in Rochester.

In a detailed comment letter presented to the Federal Reserve last fall, the New York groups called on the agency to deny Capital One’s application. In addition to systemic risk concerns, the letter cited Capital One’s inadequate community and small business lending in New York City, as well as numerous case examples of the bank’s abusive debt collection practices. In 2010 alone, Capital One filed more than 37,000 debt collection lawsuits in New York City’s civil courts – almost one in five of all such lawsuits filed that year.

“Approval of the acquisition unjustly rewards Capital One by allowing it to expand,” said Lauren Breen, an attorney with the Western New York Law Center. “Given the bank’s notoriously unethical and illegal debt collection practices, the Fed’s decision is a travesty.”

The New York groups joined with the National Community Reinvestment Coalition in expressing disappointment in the Federal Reserve’s approval of the acquisition.

# # #

The New York groups include DC 37 Municipal Employees Legal Services, Empire Justice Center, Legal Services NYC-Bronx, MFY Legal Services, NEDAP, and Western New York Law Center.

176 Grand Street, Suite 300 | New York, NY 10013 US

Crusading Prosecutor Needed

Marcy Einhorn, Esq. — Mon, 16 Jan 2012 13:55:36 +0000

Plea negotiations are underway for a big culprit in the mortgage meltdown in Queens County, however, the problem goes far beyond any individual actor. As described in today’s NYT’s, what is needed is a full-throttle investigation into the highest levels of decision making for the reckless lending and heedless securitization by the banks. The call has gone out for Obama to take a leadership position on this inquiry, and create an interagency task force to pursue civil and criminal wrongdoing at the institutions that had the greatest impact on creating the mortgage bubble. Multiple Federal agencies would need to cooperate with the investigation, including the SEC, the IRS, bank regulators. Someone like NY’s AG Schneiderman might need to be at the head of the task force. Schneiderman is conducting a comprehensive investigation of the mortgage chain, useful information in pursuing those who created the bubble.

Cordray Describes Focus of CFPB

Marcy Einhorn, Esq. — Thu, 12 Jan 2012 13:51:10 +0000

As reported by the Center for Responsible Lending: Nonbank financial firms will become a primary focus for the agency, including money transfer agencies, credit bureaus, and private mortgage lenders given that nearly 20 million Americans use their services and pay about $7.4 billion in fees annually. Cordray noted, “Many subprime loans during the housing bubble were made by nonbank mortgage brokers. Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them. But we must establish clear standards of conduct so that all financial providers play by the rules.”

CFPB Welcomes Whistleblower Tips

Marcy Einhorn, Esq. — Wed, 11 Jan 2012 15:00:13 +0000

The CFPB welcomes, and expressly protects, whistleblowers who have information about possible violations of Federal consumer financial protection laws. Section 1057 of the Dodd-Frank Act protects employees and their representatives from retaliation for reporting on vendors, contractors, and competitors who may have violated these laws. A recent press release advises:

Knowledgeable sources with information about potential violations of Federal consumer financial laws may email their information to whistleblower@cfpb.gov. Informants alsohave the option of calling toll free to (855) 695-7974 and following the instructions tospeak to a CFPB employee. You may elect to provide information anonymously. However, providing your name and contact information may facilitate any subsequent investigation and successful remediation of illegal conduct. If you choose to disclose your identity and contact information to the Bureau, you may still request confidentiality. To the extent consistent with law enforcement needs, the Bureau will not disclose your identifying information and will maintain your confidentiality as permitted by federal laws such as the Privacy Act, the Freedom of Information Act and any applicable Bureau regulations.

Pew Study of Bank Fees Reported on in Hispanic Business News

Marcy Einhorn, Esq. — Fri, 28 Oct 2011 22:02:52 +0000

This article is reprinted from the Hispanic Business News:

High Fees, Charges Cause Bank Depositers To Close Accounts

Oct. 27, 2011

Angela Carter, New Haven Register, Conn.

In Connecticut, 73,000 Households — or 5.3 percent — are unbanked, meaning they lack a checking or savings account, and the numbers are significant nationwide.

According to a 2009 survey by the Federal Deposit Insurance Corp., 31 percent of U.S. households that closed a bank account cited either service charges, minimum balance requirements or overdraft fees as causes for leaving the mainstream banking system.

Frustration with the banking system is one of many economic and social factors fueling the Occupy Wall Street, Occupy New Haven and other ancillary Occupy protests.

Even more recently, The Pew Charitable Trusts examined state-by-state data on costs associated with maintaining a checking account. In October 2010, Pew collected data from the nation’s 10 largest banks by deposit volume but no individual state had data for all of them.

As of June 30,2010, seven of these 10 banks held 43 percent of all deposits in Connecticut, according to the FDIC.

Pew’s study of these data sources, collected from various points in time, shows the median monthly fee in Connecticut and the U.S. for checking accounts is $8.95; the median minimum combined balance to waive the monthly fee is $1,500 in Connecticut, compared to $2,500 nationally; the median overdraft penalty fee is $35 in the state and the U.S.; and the median overdraft transfer fee (after the penalty is imposed) is $10 statewide and nationwide.

Pew Wednesday released a state-by-state breakdown of banking fees. See it at www.nhregister.com.

Income Based Loan Repayments

Marcy Einhorn, Esq. — Thu, 15 Sep 2011 19:15:48 +0000

Today’s NYTimes reports on new federal statistics about student debt and a little-known program to help students repay their loans when they fall on hard times after graduation. This program is known as Income-Based Repayment, and you can find information about how it works here: http://www.ibrinfo.org/how.vp.html

There’s been a spike in student loan defaults that’s attributable not only to the bad economy, but to the for-profit college industry, which is growing at a fast clip. Those schools account for only 10% of college students but fully 50% of student loan defaults.

Here are some more statistics:

overall student loan defaults for the fiscal year that ended on 9/30/09 rose to 8.8% from 7% the year before;

in the for-profit sector, 15% of borrowers who began repaying loans defaulted during the first two years of repayment, up from 11.6% the year before;

the for-profit loan default rate is more than 2X’s the default rate for public colleges, and more than 3X’s the rate for nonprofit private schools.

The “gainful employment” rule would make these for-profit schools more accountable for these default rates. But there’s been a lot of push back against the rule from, you guessed it, the for-profit college industry lobby.

If you know someone in default, or facing default on their student loans, be sure to check out the possibility of Income-Based Repayment plans.

Student Loan Bankruptcy Bills Pending

Marcy Einhorn, Esq. — Tue, 02 Aug 2011 13:12:06 +0000

A coalition of Democrats have proposed bills in both the House and Senate which would offer bankruptcy protection to students who have taken out private student loans.

Back in the 70′s when the Bankruptcy Code was being revised, private student lenders managed to carve out an exception for themselves and students were denied the protection of listing their private student loans in a bankruptcy petition, a carve out that has never been given to any other private lender. The thinking at the time was to encourage private investment in higher education, but the carve out is back firing now when student loan defaults are over $1trillion, higher than even the amount of credit card defaults.

Although Federal student loans have many protections for students who are struggling to repay, such as loan consolidation, Income Based Repayment Plans, and other extended repayment options, even cancellation under certain circumstances, there are no such protections for student loans with private lenders.

In the Senate, S. 1102, The Fairness for Struggling Students Act of 2011 has been introduced by Senator Al Franken and is designed to amend the Bankruptcy Code in a similar fashion for the protection of student borrowers with private student loan debt.

The bills now pending would alleviate some of the disastrous consequences of these unpaid loans for students who, in some cases, are starting out with many thousands of dollars of private student debt.

H.R. 2028, introduced in the House on May 26, 2011 by Congressman Steve Cohen, of Tennessee, is intended to amend “the federal bankruptcy code to remove qualified educational loans as an exception to discharge from bankruptcy.” The bill has been referred to the House Judiciary Committee’s subcommittee on Courts, Commercial and Administrative Law.

If you’re a student with private loans, would this bill help you? Please be sure to post a comment and let us know.

This is the full text of H.R. 2028:

112th CONGRESS 1st Session H. R. 2028

To amend title 11 of the United States Code to modify the dischargeability of debts for certain educational payments and loans.

IN THE HOUSE OF REPRESENTATIVES

May 26, 2011

Mr. COHEN (for himself, Mr. DAVIS of Illinois, Mr. CONYERS, Mr. GEORGE MILLER of California, Mr. GRIJALVA, Mr. ACKERMAN, Mr. BERMAN, Mr. TOWNS, Ms. MOORE, Mr. BISHOP of New York, Mr. DOYLE, Mr. STARK, Mr. JOHNSON of Georgia, Mr. RYAN of Ohio, Mr. WATT, Ms. CHU, and Mr. POLIS) introduced the following bill; which was referred to the Committee on the Judiciary

A BILL

To amend title 11 of the United States Code to modify the dischargeability of debts for certain educational payments and loans.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Private Student Loan Bankruptcy Fairness Act of 2011′.

SEC. 2. EXCEPTIONS TO DISCHARGE.

Section 523(a)(8) of title 11, United States Code, is amended–

SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of the enactment of this Act.

(b) Application of Amendments- The amendments made by this Act shall apply only with respect to cases commenced under title 11 of the United States Code on or after the date of the enactment of this Act.

Sallie Mae tuition insurance: buyer beware

Marcy Einhorn, Esq. — Sat, 23 Jul 2011 13:26:58 +0000

Among the financial services Sallie Mae offers to students and parents has recently been added a tuition insurance plan in partnership with Next Generation Insurance Group. According to the NY Times, however, the plan reimburses at different rates for physical and mental health withdrawals from school. While physical causes for withdrawal result in 100% tuition reimbursement, mental health withdrawals from school are only reimbursed at 75%, and often require a multi-day hospital stay. The irony is that mental health issues are most likely to be the reason a student will have to withdraw from school.

There are some underwriters who offer equal coverage for physical and mental illness withdrawal but Sallie Mae chose to partner with a provider who insists on disparate treatment.

Federal law now mandates equal coverage for mental and physical illness where employers offer insurance for mental health, however tuition insurance is only based on health, but is not actually health insurance and therefore doesn’t fall within these rules against disparate treatment.

According to Ken Libertoff, a Vermont consumer advocate, parents need to be aware that there is a fatal flaw in these plans.

Premiums for Sallie Mae’s tuition plan can go as high as $599 for $50,000 of coverage. But students can get free insurance for $5,000 of coverage, and following the article in the NY Times, Sallie Mae started offering 100% mental health coverage to students who take the free coverage.

One forgiving provision in Sallie Mae’s coverage allows students to purchase the coverage even after the school year has begun, allowing a backdoor out for students whose mental health issues may be in check at the beginning of the year, and want to give school a try, only to realize that they’re in over their heads, emotionally, and need to drop out for mental health reasons.

Whether Sallie Mae will equalize its coverage for both physical and mental health issues on all its tuition insurance policies remains to be seen.

Debt Deception in Mid-America

Marcy Einhorn, Esq. — Mon, 18 Jul 2011 16:26:47 +0000

Today’s WSJ reports that debt collectors in mid-America have the luxury of being able to pick from among several local courts, and local judges, before they commence a debt-collection lawsuit.

And pick they do!

Seems some judges out there are known for running unsupervised settlement conferences, and some courts allow their clerks to hand out collection industry questionnaires as if they were court documents. The way this plays out is that many well intentioned consumers who are showing up to have a fair hearing, are turning their otherwise exempt assets over to debt collectors, by agreeements which have not been reviewed by a judge.

If you’re out in mid-America and getting sued by a collector for a credit card company, do your homework. You have rights! And one of them is not to be deceived by court personnel. Another is to have your case heard by a judge!!! No matter what the debt collector’s lawyer threatens you with. Go before a judge, and create an appealable record, so that if the first judge is in the debt collector’s pocket, a higher tribunal can review the case and give you the fair hearing that you deserve.

All of this takes time, and guts. But if you know the debt collector is trying to screw you, don’t allow the court to escape it’s duty and responsibility to provide you with a fair, impartial venue for settling the case

Core Functions of the new CFPB

Marcy Einhorn, Esq. — Sun, 17 Jul 2011 03:54:54 +0000

Again, straight from the new agency’s website, these are the core functions of the CFPB:

The consumer bureau will work to make sure that consumers have the information they need to understand the terms of their agreements with financial companies. It will also work to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own.

Congress established the CFPB to protect consumers by carrying out Federal consumer financial laws. Among other things, the consumer bureau will:

Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws
Restrict unfair, deceptive, or abusive acts or practices
Create a center to take consumer complaints
Promote financial education
Research consumer behavior
Monitor financial markets for new risks to consumers
Enforce laws that outlaw discrimination and other unfair treatment in consumer finance