Seven years after Congress banned payday-loan companies from charging exorbitant interest rates to service members, many of the nation’s military bases are surrounded by storefront lenders who charge high annual percentage rates, sometimes exceeding 400 percent.
The Military Lending Act sought to protect service members and their families from predatory loans. But in practice, the law has defined the types of covered loans so narrowly that it’s been all too easy for lenders to circumvent it.
“We have to revisit this,” said Sen. Dick Durbin, D-Ill., who chairs the defense appropriations subcommittee and is the Senate’s second-ranking Democrat. “If we’re serious about protecting military families from exploitation, this law has to be a lot tighter.”
Members of the military can lose their security clearances for falling into debt. As a result, experts say, service members often avoid taking financial problems to their superior officers and instead resort to high-cost loans they don’t fully understand.
The Department of Defense, which defines which loans the Military Lending Act covers, has begun a process to review the law, said Marcus Beauregard, chief of the Pentagon’s state liaison office.
The act mainly targets two products: payday loans, usually two-week loans with annual percentage rates often above 400 percent, and auto-title loans, typically one-month loans with rates above 100 percent and secured by the borrower’s vehicle. The law caps all covered loans at a 36 percent
That limit “did do a great deal of good on the products that it covered,” Holly Petraeus, the Consumer Financial Protection Bureau’s head of service member affairs, said in an interview. “But there are a lot of products that it doesn’t cover.”
Representatives from payday and other high-cost lenders said they follow the law. Some defended the proliferation of new products as helpful to consumers.
Read about the “400 Percent Loan” here:
Lenders Target Naive Military with Usurious Payday Loans
Judgments against unsuspecting consumers for defaulted loans are being churned out by debt collectors like Midland Funding, using robo-signed affidavits of debt as substitutes for properly investigated, properly documented debt.
Robo-signing is the mass-production of “sworn” affidavits used to prove outstanding debt in lawsuits against consumers. Most common among large debt collectors and debt buyers, the person signing has no personal knowledge of the facts of the debt and doesn’t make any effort to investigate when swearing under oath that the debt is valid. Thus, the signature, which is supposed to evidence proof of good faith of a claimed debt, is entirely lacking in credibility or evidentiary value. Unfortunately, debt collectors engaging in this practice when filing lawsuits against consumers, are successful in winning judgments because their practices either go unchallenged by unsuspecting consumers or have become so common as to be accepted by the court.
Until a flurry of recent class-action lawsuits, robo-signing usually flew under the radar, as the courts turned a blind eye to the rubber-stamping practice because it allowed cases to be processed through the system faster, even if it sacrificed fairness and justice. In a case against Midland Funding, LLC, for example, employees testified to signing up to 400 affidavits a day; and a lack of documentation and disregard for proper procedures resulted in consumers being victimized (aka “railroaded”) into being held accountable for debts either paid or not owed. In some cases, liens were secured against titles to homes, wages were garnished and information was sent to credit reporting bureaus, devastating credit for many Americans and their families. This in turn increased the cost of credit or caused credit applications to be denied entirely until the robo-derived judgments were satisfied.
Legal advocates have for years loudly cried foul over the absence of documentation by collectors suing consumers in small claims court and the tolerance by the courts in allowing it to continue. To understand how heinous the robo-signing method is in the real world, watch the cartoon shown in this link: Robo-signing machine.
Philadelphia Inquirer reporter John Timpane discovered that he was a victim of Identity Theft when a criminal filed a false tax return using his Social Security Number. After dealing with the IRS, FTC, multiple credit agencies and other organizations, he’s discovered a few tricks to help consumers foil Identity Theft.
Since the mid-2000s, there has been a relatively cheap, sometimes free way to combat new-account fraud: a security freeze. The trouble is, it doesn’t make any money for the credit-reporting agencies that trade in your personal data, so Experian, Equifax and TransUnion do little to publicize it. In essence, the bureaus are encouraging you to pay monthly fees for credit-monitoring and -alert services, so you’ll be quick to discover, after the fact, that you’ve been victimized. Meanwhile, they’re almost hiding a better alternative: By giving you control over who can obtain data from your credit report, a security freeze can block new-account fraud before it happens.
How do you impose a security freeze (also known as a credit freeze)? Because they were required by a series of state laws mostly enacted half a dozen years ago, the details vary. But according to the Consumer Financial Protection Bureau, 47 states plus the District of Columbia now authorize freezes, and the bureaus voluntarily offer the service to at least some residents of Alabama, Michigan and Missouri, the holdouts.
As a New Jersey resident, a consumer is entitled to a free “security freeze” – the name varies state to state – from each of the three major credit bureaus. A consumer might have to pay $5 for a temporary thaw if he wanted to give a particular creditor access to his credit file, or give any creditor access for the next week or two – say, if he knew he was about to go car shopping and wanted to obtain a variety of loan offers. Isn’t that a hassle, too? Perhaps, and that’s what the credit bureaus will warn you about if you choose to freeze your credit file. But for most people, shopping for more credit is hardly an everyday thing.
The New Jersey Department of Banking and Insurance explains Jersey’s procedures here – a consumer would have to make requests by certified mail, which adds a little extra cost. Pennsylvania allows each credit bureau to charge $10 to impose a freeze, but that fee is waived for victims of identity theft.
When it comes to financial security, our laws and rules sometimes seem to have it backwards. Armed with your name, address, and Social Security number, an imposter might find it easier to get $1,000 in “instant credit” in your name in the checkout line of Home Depot than you’d find it to get $200 – from your own bank account – at a nearby ATM.
Article source – read more here: Credit bureaus’ little secret: A cheap way to foil ID theft
After allegedly misleading consumers into paying unnecessary fees and falsely threatening consumers with lawsuits, defendants in a debt collection operation have agreed to settle Federal Trade Commission charges.
The FTC alleged in its complaint that the defendants – a debt buyer and a debt collection law firm, both based in Mississippi – violated the FTC Act and the Fair Debt Collection Practices Act by deceptively charging consumers a fee for payments authorized by telephone. According to the FTC, the defendants led consumers to believe that the fee was unavoidable when, in fact, those who paid by mail or online did not incur the fee. The FTC also alleged that the companies violated the laws by falsely threatening to sue consumers as a means of getting them to pay. A debt collector is prohibited by law from using false, deceptive, or misleading representations or tactics when collecting a debt.
Under the terms of the proposed settlement, the defendants will pay $799,958 in restitution for consumers. The defendants also are barred from making any misrepresentations when collecting a debt, including false claims that consumers must pay an extra fee when making payments on a debt or that they will be sued for not paying a debt.
According to the complaint, debt buyer Security Credit Services, LLC, and Jacob Law Group, PLLC have worked together since 2006 to collect debts nationwide. Security Credit buys consumer debt accounts, and contracts with Jacob Law to collect on them. The complaint alleges that Jacob Law called and pressured consumers to immediately make payments on their debts by authorizing electronic checks or credit or debit card payments over the phone. Jacob Law allegedly told consumers they were required to pay an additional fee of $18.95 for this service, but routinely failed to mention that they could avoid the fee by mailing the payment or paying online. Since 2008, the defendants have collected at least $799,958 in fees from consumers.
Source: Mississippi-Based Security Credit Services LLC Ordered to Stop Deceiving Consumers Through Debt Collection Scandal – also see the FTC.
Before announcing its acquisition today of Asset Acceptance, Encore Capital Group (aka “Midland Funding”, “Midland Credit Management” and “MCM”) boasted that it has one out of every nine collection “accounts”. In the $200 million purchase of Asset Acceptance, Encore is adding millions more in receivables to its portfolio, claimed from financially distressed consumers.
Encore Capital, though MCM has been accused of numerous Fair Debt Collection Practices Act (FDCPA) violations including deceptively collecting debts past the statute of limitations, difficulty validating amounts claimed and inaccurate reporting to credit bureaus among others. While these allegations are common throughout the industry, given the size and now increased portfolio of accounts by Encore, consumers are urged to be more careful than ever and to scrutinize any collection letters they receive, to fully document disputes, to know their rights and to seek legal advice immediately if needed.
San Diego-based Encore is by measure of revenue alone, the largest publicly traded debt-buying company in the United States. The purchase of Asset Acceptance will likely bring a deluge of collection activity and pressures compelling the Wall Street-backed firm to collect on accounts to the fullest extent possible, favoring its investors, at the cost of even more consumers.
If you are contacted by Midland Credit Management, Asset Acceptance, Encore Capital or any other debt collector, be cautious, know your FDCPA rights and don’t delay in protecting yourself from the consequences that often accompany such contact.
A report by the Center for Public Integrity, says that Internet-based payday lenders operating in California, New Mexico, West Virginia and Colorado are claiming to be “tribal enterprises” of Native Americans, providing them certain benefits of sovereignty, including immunity from lawsuits and state oversight. But one sensational case in Kansas is gaining media attention and calling to light how widespread the practice really is.
Filed in Kansas City last year, a Federal Racketeer Influenced and Corrupt Organizations (RICO) class action lawsuit claims that the owner of a payday loan company, a felon, used a so-called “rent-a-tribe” scheme to avoid criminal and civil liability for illegal loan practices.
According to court records, Scott A. Tucker is not licensed to issue payday loans, and cannot obtain a license, due to his felony convictions for mail fraud and making false statements to a bank. Tucker disregarded his past and entered into a rental agreement with the Miami Tribe of Oklahoma in 2003, and later with the Santee Sioux Tribe in 2005.
Under the Miami of Oklahoma contract, Tucker agreed to provide $5 million in capital to the tribe in exchange for permission to staff his office on tribal lands, allowing him he believed, to use the Tribe’s name as a front, and giving him immunity from state and federal lending laws.
One plaintiff in the case states that he received a loan from Tucker’s company in the amount of $300 but an interest rate of 608.33 percent, far in excess of the maximum rate allowed by Kansas law.
As a “tribal enterprise” Tucker operated various payday loan trade names, including United Cash Loans, which provided money online from an office in Overland Park, Kansas.
Until January 2012, payday lenders were regulated by a patchwork of laws without federal oversight. Today however, the Consumer Financial Protection Bureau (CFPB) provides supervision to ensure compliance with federal laws so that the type of arrangement described above can be shut down.
Action News Reports Palisades Collections Waged War on United States Military Veteran with Impeccable Credit Score
CreditLaw.com attorney, Amy Bennecoff, sat down with Action News’ Nydia Han to talk about the case of Frank Stack v. Palisades Collections, warning viewers about the deceptive practices of the New Jersey-based debt collector and advising consumers of their rights under the Fair Debt Collection Practices Act (FDCPA).
Out of nowhere in early May 2012, Vietnam veteran Frank Stack began being bombarded with phone calls from debt collector Palisades Collections for a credit card debt he paid 10 years earlier. In support of his assertion, Stack told Palisades that he has passed numerous government-mandated background checks for jobs he has held with nothing showing up and has a current credit score of 780. But Palisades ignored him and continued their pursuit.
It was bad enough that Stack was being contacted at all hours of the day on his home and cell phones, but the debt collector contacted him repeatedly as he worked at McGuire Air Force Base as a ground security coordinator with U.S Customs & Border Protection. Stack told Action News he simply wants the harassment to stop.
Since 2005, there have been 598 federal lawsuits filed against Palisades, and an overwhelming majority alleged violations of the Fair Debt Collection Practices Act (FDCPA), according to court documents. Of those, 95 suits were filed in 2012, and there were seven new suits as of mid-February 2013.
See more: Debt collector accused of harassing innocent consumers
With 12.5 million Americans unemployed and many facing inevitable debt harassment, consumers are turning to online payday loans, often with obscene interest rates in excess of 500 percent, to make ends meet. To the financially strapped, worrying about today has displaced planning for tomorrow, virtually assuring future financial problems, ruinous effects to their credit report and the potential for liens on home or seizure of property from default.
While several states are fighting to ban what many officials consider to be legalized loan sharking, big-name banks like JPMorgan, Chase, Bank of America, and Wells Fargo have found inventive ways to profit by supporting the payday lending industry. Acting as a behind-the-scenes partner, some large banks enable payday lenders to withdraw loan repayments automatically from borrowers’ bank accounts, even in states where such loans are banned. In other situations, the same banks are allowing payday lenders to debit checking accounts even after the consumer has tried to stop such withdrawals.
While lenders counter that debtors are free to stop such deductions, cooperative banking agreements often require at least three days notice or more before the next withdrawal. Even then, there are no guarantees that the account will not be debited as some banks do not honor instructions and others are too slow to stop payments before they are made.
Why do large banks help payday lenders? The payday loan arrangement can provide a big payoff to them as withdrawals often cause an avalanche of account fees such as overdrafts, minimum balance requirements, withdraw limits, and surrender of interest. According to a report released this month by the Pew Charitable Trusts, “roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts” (Silver-Greenberg). To banks, revenue from fees and costs is coveted “free” money, in which the aftermath of tougher financial regulations that have curtailed fees on debit and credit cards then replaces money lost from those former practices.
While there is no definitive list of all the lenders who lend support to payday lending activities, it is estimated that roughly three million Americans took out an Internet payday loan in 2010, according to the July reporting of the Pew Charitable Trusts.
Consumers beware, even your “friendly” bank may not be as friendly as you think.
Silver-Greenberg, Jessica. “Major Banks Aid in Payday Loans Banned by States.” NYTimes.com. 23 February 2013
Residents of Minnesota are turning to high-interest payday loans and other services outside the mainstream banking system, controversial enterprises that operate through a loophole to dodge state restrictions.
The demand for these types of loans more than doubled in recent years, from 170,000 loans in 2007 to 350,000 in 2011, the highest reported to the Minnesota Department of Commerce in state history.
While 15 other states forbid such lending practice, Minnesota lawmakers have been largely unsuccessful in several attempts to crack down on these practices. Lenders have used the loophole to charge higher rates and grant bigger loans than state lawmakers had previously allowed. And they have successfully lobbied against tighter rules.
Their Minnesota borrowers paid fees, interest and other charges that add up to the equivalent of average annual interest rates of 237 percent in 2011, compared with typical credit card rates of less than 20 percent, according to data compiled from records at the Minnesota Department of Commerce. The rates on loans ranged as high as 1,368 percent.
In all, Minnesotans paid these high rates on $130 million in such short-term loans in 2011, some of it to companies headquartered outside Minnesota. That is money the borrowers did not have available to spend at local grocery stores, gas stations and discount shops.
“This exploitation of low-income consumers not only harms the consumer, it also places a needless drag on the economy,” wrote Patrick Hayes, in an article for the William Mitchell Law Review.
Demand for high-interest payday loans soars in Minnesota
On February 20th, the Federal Trade Commission (FTC) announced victory, at least temporarily, in halting unauthorized credit card transactions involving thousands of consumers. The scammers charged credit cards for non-existent goods and services totaling more than $25 million, targeting financially vulnerable consumers who had at some point prior to the transaction, applied for a pay day loan. Consumer advocates see this as a red flag that other scammers are sure to follow suit.
According to the FTC complaint, victims of the scam orchestrated by Ideal Financial Solutions had never contacted the self-proclaimed “debt relief service”, nor authorized debits to their bank accounts or credit cards when the company placed a charge, usually for about $30, on their account. Victims who disputed the charges were then told these related to financial counseling or loan matching services, or obtained assistance in completing a payday loan application. What is still unclear is how Ideal Financial Solutions acquired the consumers’ financial information, however it was discovered that several victims had recently applied for payday loans online. Pay day loan companies regularly sell that same personal financial data to others for a fee.
Consumers, specifically those who have secured pay day loans via the internet, are urged to check and re-check bank statements and identify any transactions that are not recognized. According to the FTC, victims of the Ideal Financial Solutions suffered significant impact from the transactions placed, including overdrafts and institutional penalties, that caused other bills to be unpaid and a lower credit rating of affected consumers.
If any consumer learns that they have been affected by this scam, they are urged to contact their bank or credit union to dispute the charges immediately. For additional protection of sensitive information, consumers should check their credit reports for free at www.annualcreditreport.com and contact a consumer advocacy lawyer as soon as possible to reverse the impact as quickly as possible.