Bankruptcy Questions Answered

Words of Wisdom for High School Graduates

Yesterday, my son graduated from high school.   His class selected a math/environmental sciences teacher named Nicole Brite to deliver the faculty address to the senior class.  Ms. Brite delivered a spectacular address which was meaningful, witty and thoughtful (and she received a well deserved standing ovation from both the students and the audience).

In one part of her speech, Ms.  Brite turned to the graduates and said  "now I am going to offer you some words of advice that I wish someone had said to me when I was leaving high school."   One of the points she made I think is applicable to everyone, not just high school students.

"Stay away from credit cards," said Ms. Brite.  "When you get to college, you will see tents set up by the credit card companies.  They will offer you frisbees and t-shirts and free food to entice you to sign up for a credit card.  They'll tell you that a credit card will help you build up your credit and you can use it only for emergencies.   Don't believe it.   You will be tempted to decide that an emergency takes the form of a pizza at 2 in the morning, or putting your entire fraternity's dinner on your card because no one has cash.  Credit cards will mess you up."

I hope that each and every one of the graduates in my son's class heard these words of wisdom and I wish this advice could be included in the "welcome to school" packets given to incoming freshman.

Over the years I see dozens of young adults in their late 20's and early 30's who are still dealing with thousands of dollars of college years credit card debt and the associated damaged credit ratings.   It is so easy to find oneself behind the proverbial eight ball, and digging out from a credit hole is a lot more difficult than avoiding the problem in the first place.

If your son or daughter recently graduated from high school, congratulations on an accomplishment and a milestone.   Let your graduate know that while college isn't exactly the real world, they now have assumed the capacity to get themselves in adult level financial trouble. As uninteresting as household budgeting ten years hence may seem, they most definitely do not want their college aged mistakes to lead them to a bankruptcy lawyer's office in the future.

Posted in Advice, Consumer Protection, General consumer bankruptcy info, Georgia Bankruptcy, a, address, aged, and, applicable, brite, class, class  , college, credit cards for college students, dangers of credit cards, delivered, financial advice for high school graduates, graduated, graduates, high, leaving, math environmental, mistakes, ms, named, nicole, said , school, sciences, selected, senior, spectacular, students, teacher, the, wisdom, words, years | Comments Off

The Harsh Reality of Car Title Loans

Legislators and consumer advocates have taken stands in recent years against payday loans, largely considered one of the most nefarious financial traps available to low-income consumers. But more recently, some worried analysts have taken up the torch of another type of absurdly high-cost loan: car title loans.

According to a recent post at CreditSlips, this type of loan can wreak serious financial havoc on consumers who can least afford to lose money. Here’s a look at some of the troubling numbers.

How Title Loans Work

Car title loans work like this:

• A borrower enters the lender’s storefront in need of cash.
• The lender originates a secured loan with the borrower’s vehicle as collateral. (According to sources, lenders will typically offer dollar amounts of no more than 40 percent of a vehicle’s value.)
• Interest rates on car title loans can reportedly top 300 percent, meaning that most borrowers end up paying far more than their car’s value in interest payments over the repayment period.
• If a borrower cannot afford to make payments, the lender has the legal right to repossess the vehicle used to secure the loan.
• Some lenders, it seems, also sell used cars (no doubt those repossessed from customers unable to pay).

The Hidden Dangers of Car Title Loans

As most people can see, the risk of losing your car to a car title lender is pretty high, especially given the astronomical interest rates charged and the typically limited financial means of most title loan borrowers.

But, according to a recent study, the actual cost to title loan borrowers seems to be higher than expected. Sources note that:

• At some auto title lenders, the repossession rate stands at 13.1 percent of loans - that means 1 in 8 people who go in for a loan end up getting their vehicle repossessed by the lender.
• The typical auto title borrowers will take out between 3 and five loans from a given title lender. This means that most borrowers apparently return more than once to take on high-interest, high-risk loans.

Know Your Options

While car title loans may seem like the only way out of a tight financial spot, it’s important to understand the high risks associated with them. If you’re struggling with serious debt (or know someone who is), consider seeking the help of a bankruptcy lawyer or credit counselor for guidance.

Posted in Bankruptcy and Predatory Lending, Consumer Protection, car title loans, consumer debt, payday loans | Comments Off

Lawsuit Alleges Mortgage Fraud by Deutsche Bank

News reports this week announce that the U.S. Department of Justice has initiated a lawsuit against Deutsche Bank, one of the world’s largest, claiming that the institution lied to federal regulators in order to secure taxpayer-funded insurance for less-than-secure mortgages.

Here’s a look at the details and some of the underlying issues.

The Charges against Deutsche Bank

According to the lawsuit, Deutsche Bank and its subsidiary MortgageIT:

• Initiated risky mortgage loans to homebuyers. Some of these loans may have been subprime, and since their initiation, sources indicate, about a third have defaulted.
• Lied to federal regulators. While the loans themselves may have been a bad move financially, what interests prosecutors is what happens next: that Deutsche Bank allegedly lied to officials with the Federal Housing Authority (FHA) in order to secure insurance for the shoddy loans.
• Got taxpayer-backed insurance for questionable loans. Because of its reportedly false claims that it was evaluating its mortgages for default risk, Deutsche Bank managed to secure FHA funding (which comes from tax dollars) for the questionable loans.
• Required money from the government when the loans defaulted. Now, as many as 12,500 of Deutsche Bank’s loans have apparently defaulted (meaning that the homes have gone into foreclosure), leaving the government responsible for covering the losses. The money goes to those investors who own the mortgage debt. Sources note that, to date, defaulted Deutsche Bank loans have cost the government more than $386 million.

Because of all these allegations, the Justice Department is reportedly suing the bank for $1 billion, an amount that represents the dollar amount lost plus individual penalties for each mortgage that went into default.

What Mortgage Lending Rules Were Broken?

The government’s lawsuit charges that Deutsche Bank and MortgageIT failed to follow the rules required of anyone interested in federal mortgage insurance. These rules require lenders to:

• Annually verify various records of mortgage borrowers, including credit reports, incomes and record of employment. This measure is to make sure borrowers are not at risk of defaulting.
• Examine any loan that goes into default shortly after being originated in an effort to prevent and eliminate careless lending techniques.
• Act in the government’s best interest, because any money needed to guarantee loans that defaulted would come directly from taxpayers’ pockets.

The lawsuit claims that Deutsche Bank did none of these things and so is both on the hook for the money lost by the government and responsible for paying penalties for breaking the rules of engagement for obtaining federal insurance.

Some sources suggest that the Deutsche Bank lawsuit could be the first of many; after all, reckless lending techniques were fairly common during the housing boom that touched off the current recession.

Posted in Bankruptcy and Predatory Lending, Consumer Protection, Economy, Mortgage, Mortgage Foreclosure, predatory lending | Comments Off

Study: More Drug Manufacturers Cutting Deals to Keep Prices High

The Federal Trade Commission announced this week that according to a recent study, there has been an increase in the number of drug companies engaging in pay-to-delay deals with generic drug producers.

The FTC has denounced the actions, and with good reason: medical costs are one major contributor to many personal bankruptcy filings of U.S. citizens. So how might these types of deals affect you and your family?

• Background information: Once a drug company patents a certain drug, generic producers of drugs of similar chemical composition may file a challenge to the patent, with the goal of being able to produce a chemically similar (or identical) version to sell more cheaply.
• How the deals work: If these challenges went to court, it’s possible that they would result in judges ruling in favor of the generic producers. In order to avoid that outcome (and thus secure the market for themselves for a longer period of time), some brand-name drug manufacturers settle out of court with generic drug producers.
• Who makes money: Most settlements include an agreement that the generic manufacturer will not produce the generic version of the drug until a certain date; some settlements include a financial incentive from the brand-name manufacturer to lengthen the delay period (i.e. the brand-name manufacturer pays the generic manufacturer to delay its release of its cheaper product). The FTC found that in cases involving a payment, generic drug release waiting periods increased by an average of 17 months.
• Who loses money: The FTC notes that in 2010, 22 name-brand drugs were targeted in pay-to-delay deals. The total number of such deals reportedly jumped from 19 in 2009 to 31 in 2010 (an increase of more than 60 percent).
• What it costs us: The total dollar toll these deals have taken on Americans comes to $3.5 billion per year, according to FTC estimates. The difference comes from the fact that generic drugs can cost anywhere from 20 to 90 percent less than their name-brand counterparts. That’s a lot of money people could be putting toward paying down mortgages or credit card debt.

Are Generic Drug-Delay Deals Legal?

Anyone familiar with antitrust laws may wonder whether deals to delay competitive drugs are even legal in the U.S. The answer is a little murky. It seems that the FTC has filed a number of lawsuits against pay-to-delay agreements and has demonstrated its support of bills in Congress designed to eliminate such activity among drug manufacturers.

How can you take action? While there may not be much you can do about the problem of pay-for-delay agreements, if you’re worried about paying your medical bills, you can (and should) ask your physician whether generic versions are available any time you need medicine.

Posted in Consumer Protection, FTC, Financial Literacy, Legal Info, Medical Bills, medical bankruptcy, medical debt | Comments Off

Debt Collectors & New Media: What Rules Apply?

Debt collectors using new media to contact debtors, raising an issue that Consumer Financial Protection Bureau head Elizabeth Warren has indicated should be a top priority for lawmakers and attorneys general in every state.

A recent post from WalletPop.com highlights the issue, which has become more prominent and consumers - and marketers - embrace the latest technology.

Here’s a look at why this issue needs attention and how it might affect you.

Debt Collection Rules

Thanks to the Fair Debt Collection Practices Act, originally passed in 1978, debt collectors have to follow certain rules when contacting consumers about debts they owe. Generally, these rules are designed to make sure debtors are treated respectfully.

But new communication devices and debt collection practices have raised questions about what should be legal. For example:

• Pre-recorded messages: Many debt collectors have apparently begun leaving pre-recorded messages on voicemail accounts or home answering machines. While these messages have “disclaimers” that indicate a listener should hang up if the name in question is not their own, it’s easy to ignore that instruction and learn about another person’s debt (information that should be private, according to the FDCPA).
• Facebook messages: Some debt collectors have reportedly contacted debtors and their friends and families over social networking sites, which is not explicitly prohibited by the FDCPA (because Facebook wasn’t around when it was made law), but which many insiders argue should be considered “embarrassing media.”
• Text messages and cell phone calls: Other debt collectors are apparently using cell phone contact to reach debtors, a method that has raised the question of usage fees. Regulators are asking whether there should be restrictions on contact that debtors must pay for by the unit.

Proposed Regulations in Some States

As of now, a few states have begun to take action to regulate the new media debt collectors have been using. The Attorney General of New Mexico has reportedly announced that debt collectors must disclose to debtors the expiration dates for debts (that is, when collectors are legally prohibited from attempting to collect them).

In Massachusetts, Attorney General Martha Coakley has released a statement introducing proposed changes to that state’s debt collection rules, which would include:

• Extension of collection rules to apply to new media, including online, text and recorded messages;
• Amendment of the definition of a “household” to take into account use of cell phones and email addresses;
• Extension of rules for primary debt collectors to apply to so-called passive debt collectors (who often buy expired debts cheaply and aggressively attempt to collect on them); and
• Requirement for debt collectors to make a good faith attempt to determine whether a debt is too old to be legally collected.

Even if you don’t live in New Mexico or Massachusetts, you could see changes to debt collection laws and practices where you live in the near future. And, if you suspect that a debt collector has broken existing rules in attempting to contact you, don’t hesitate to contact a lawyer to learn more about your rights.

Posted in Consumer Protection, Legal Info, debt, debt collector | Comments Off

The Latest on Debt Collection Laws & Rules

As you may already know, consumers in the United States are protected by a number of consumer protection laws designed to make sure merchants and service providers do not take more than a reasonable amount of consumers’ money.

One consumer protection law, the Fair Debt Collection Practices Act, outlines how debt collectors are permitted to do their job and puts certain restrictions on them. Each year, the Federal Trade Commission issues a report on the state of various consumer protection laws and its recommendations for modifications and changes in rules and enforcement.

Here’s a look at what the FTC had to say about 2010.

Debt Collection Complaints in 2010

Last year, consumer debt collection complaints topped the list, at 140,036 individual filings (an increase from 119,609 in 2009). Specifically, people identified these debt collection issues:

• Repeated or continuous phone calls: Debt collectors are explicitly restricted from calling debtors repeatedly or with the intent to harass or annoy. Further, the FDCPA mandates that debt collectors can call only between the hours of 8 am and 9 pm local time.
• Misrepresentation of a debt: Consumer complaints cited debt collectors who misrepresented the character, amount or status of debts owed, and in some cases demanded payments in amounts greater than those permitted by law. All such actions are prohibited by the FDCPA: debt collectors cannot lie about any aspect of a debt or about their legal authority to collect it.
• Failure to provide adequate written documentation: The FDCPA requires that debt collectors send debtors written documents outlining the specifics of a debt and detailing the consumer’s rights regarding the debt and its collection. According to consumer complaints, though, many debt collectors are not adhering to these requirements.

Changes to Enforcement and Consumer Protection

Thanks to the implementation of the Consumer Protection Act in 2010, a new consumer rights bureau (the Consumer Financial Protection Bureau) will have authority to create and enforce (with help from the FTC) rules governing how debt collectors must operate. In future years, reports about the status of the FDCPA will be developed and issued by the new consumer protection bureau.

How to Take Action against Dishonest Debt Collectors

So what can you do if you’re plagued by debt collectors who don’t play by the rules? Take the following steps.

• Learn your rights: Check out a summary of the rules debt collectors must follow so you know when your rights have been violated.
• File a complaint: Visit the FTC’s complaint page to file a complaint electronically.
• Get legal help: If a debt collector is harassing you during or after a bankruptcy filing (especially for a debt that was discharged in bankruptcy), you may want to enlist a lawyer to help.

Posted in Bankruptcy and Predatory Lending, Consumer Protection, FTC, Legal Info, debt collection | Comments Off

New Consumer Protection at the Bank?

A recent press release from the National Consumer Law Center highlights a new federal rule that, if not modified in the next two months, will take effect May 1st and should better protect the bank accounts of people receiving government benefits. Here’s what you need to know.

When Creditors Can’t Garnish Your Money

If you’ve ever filed for bankruptcy or been in serious debt, you may be familiar with the practice of garnishment, which occurs when a creditor collects money directly from your wages or bank account to cover a debt you owe.

• Current law protects certain funds: As federal laws now stand, creditors are prohibited from garnishing certain payments from the accounts of debtors (that is, people who owe them money). These funds include Social Security payments, disability payments, veterans’ benefits and other benefits for low-income and disabled people.
• Current practice permits the garnishment: Despite the prohibition against garnishing such funds from bank accounts, it seems that many banks regularly freeze the accounts of customers whose creditors request a garnishment from the bank. While customers can have these funds unfrozen, doing so generally requires hiring a lawyer and can take time. During that time, these customers may not have access to the funds in their account that they need to make basic purchases.
• High monthly toll on the poor: Reports note that every month, as many as 100,000 Americans are victimized by this improper garnishment.
• Immediate action is essential: A recent New York Times Op-Ed piece notes that if customers do not act quickly enough to unfreeze their accounts, creditors may end up garnishing the funds regardless of the federal laws prohibiting such action.
• “Uncertainty of origins of funds”: Apparently, banks have justified their freezing of accounts legally protected from garnishment by claiming that they have no way of tracking the origins of funds in any given account, and that if they were to ignore orders of garnishment, they could face legal repercussions.

The New Rule: Electronic Tags for Special Funds

The new rule, then (if it is not modified or struck down before May 1), will allow the government to electronically mark the money it deposits into beneficiaries’ bank accounts. With such tags in place, banks should be able to easily identify which funds are eligible for garnishment and which funds are protected.

The National Consumer Law Center noted in a press release that the new rule is especially good news for retirees, veterans and Americans with disabilities, as their accounts tend to most often be the ones with the types of money in question.

Stay posted to the Total Bankruptcy blog to find out the latest updates and changes to this rule as the public comment period comes to a close.

Posted in Bankruptcy Laws, Bankruptcy and Predatory Lending, Consumer Protection, Legal Info, garnishment | Comments Off

Top Consumer Complaints of 2010

The Federal Trade Commission has released a report on the consumer complaints it received from Americans in 2010, and the list illuminates many of the financial and privacy concerns important to the American people.

Here’s a look at the top ten issues that sparked the most consumer outrage, as well as some tips for dealing with a problem new this year.

• Identity theft: For the 11th year in a row, identity theft earned the top spot for number of consumer complaints, with 19 percent of all complaints filed (a whopping 250,854).
• Debt collection: If you’ve ever dealt with abusive debt collectors, it may not surprise you to learn that issues with this group caused the second greatest number of complaints among consumers (144,159, or 11 percent of all complaints).
• Internet services: Whether for fraudulent offers or subpar service, Internet providers landed third for most consumer complaints, five percent of all complaints (65,565).
• Prizes, sweepstakes and lotteries: In fourth place came this type of scam, which often offers phony rewards after the victim pays a bogus entry fee. A total of 64,085 complaints were filed about this type of issue, or about five percent of all complaints.
• Shop-at-home and catalog sales: Whether for defective goods, unwieldy return policies or some other act of non-consumer-friendliness, this type of transaction accounted for about four percent of consumer complaints last year (60,205).
• Imposter scams: A new category this year, this type of scam jumped to sixth place, prompting the FTC to issue warnings about how to spot imposter scams to avoid sending money to strangers (details below).
• Internet auctions: Perhaps because of the Internet’s vast scope and inability to fit neatly into regulatory areas, online auctions prompted 56,107 people to file complaints with the FTC.
• Foreign money/counterfeit check scams: Getting blasted when you intended to invest or travel can be especially traumatizing, so it’s no wonder 43,866complaints concerning this category were filed last year.
• Telephone and mobile services: Varying definitions of service options and quality of service provided prompted 37,388 people to file complaints about their communication tools.
• Credit cards: This old classic is still causing us plenty of trouble. Despite the new protections instituted by the Credit CARD Act, 33,258 complaints were still filed about credit cards.

Avoiding Imposter Scams

The FTC’s consumer complaints about imposter scams (that is, scams in which someone pretends to be a government agency or loved one in order to convince a victim to part with money or sensitive information) prompted the release of a report on how to spot and avoid such scams.

In general, avoid wiring money to anyone you don’t know, be wary if someone pushes you to act quickly to make a transaction, don’t transmit sensitive information by text message and always confirm a person’s identity before making a major financial move.

Posted in Consumer Protection, FTC, Financial Literacy, Identity Theft, consumer rights | Comments Off

The Latest Consumer Protection from the FTC

The Federal Trade Commission’s annual National Consumer Protection Week is upon us (March 6 – 12, 2011) and that means it’s a great time to brush up on information about money, credit and the consumer protections available to you – just because you happen to live in the United States.

You can get handy tips for personal finance and money management at the NCPW blog, which is updated regularly with tips for topics including these (and more!):

• Avoiding foreclosure rescue and other mortgage-related scams;
• Knowing how to spot employment opportunity scams;
• Making the most of your money in the early stages of your career;
• Building and maintaining a budget to improve financial stability;
• Avoiding time-share and credit-card scams offered via text messages; and
• Learning what steps to take to save your home from foreclosure.

In short, whether you’re rebuilding from a bankruptcy filing or just starting to establish yourself in the world of credit and wealth, there are excellent, free resources available for your enjoyment and education.

FTC Targets Scammers Preying on the Cash-Strapped

In other FTC news, the commission announced this week new efforts to halt scams that target people in need of work – in other words, those who can least afford to lose money to dishonest schemes.

According to the FTC’s web site, Operation Empty Promises has taken legal action against the following scammers:

• Ivy Capital Inc., a company that allegedly bilked consumers out of more than $40 million with promises of helping them to establish lucrative, Internet-based businesses from their homes. The scam reportedly worked by first asking victims about their available credit and then pushing them to use that credit to buy worthless products and services.
• National Sales Group, Executive Sales Network and Certified Sales Jobs, three names of the same company that allegedly posted fake sales jobs on job-search web sties including CareerBuilder.com. The group, it seems, falsely promised sales positions with Fortune 1000 companies and charged victims money for what they claimed were costs related to background checks – often, this company reportedly overcharged and charged unapproved recurring fees to victims’ credit cards.
• Business Recovery Services LLC, a company that the FTC claims misrepresented the potential effectiveness of its work-at-home wealth recovery “kits,” which sold for $499 each. All told, the FTC reports that this group managed to snag $1.5 million from victims.

Take Advantage of FTC Protections!

The FTC is constantly patrolling for scammers and those violating existing consumer protection rules. If you’ve caught wind of a scam or have been victimized by a scammer, you may want to file a complaint with the FTC as well as consult with an attorney to see whether you might be entitled to any compensation.

Posted in Bankruptcy News and Events, Consumer Credit, Consumer Protection, Financial Literacy, Life After Bankruptcy, Mortgage Foreclosure | Comments Off

The Latest on Foreclosures & Home Sales in the U.S.

Because the current recession was caused in large part by questionable practices in the mortgage market, home sales and foreclosure rates have been particularly interesting to monitor as an overall indicator of the economy’s rate of recovery.

Here’s a look at some of the latest findings and reports about the industry.

Home Sales Up Slightly, Thanks to Foreclosure Sales

The Associated Press reported this week that home sales in the U.S. rose from December 2010 to January of this year:

• Rate of increase: Reports show that existing home sales (i.e. sales of not-new, previously occupied homes) rose at a rate of 2.7 percent between December and January.
• Annual rate: The rate of sales in January put the market on pace to sell 5.36 million homes for the year. December’s sales were at a 5.22 million annual rate. A “healthy” economy, sources note, generally includes about six million home sales per year.
• First time buyers: The latest numbers show that first-time home buyers accounted for 29 percent of all sales, well below the 40 percent that apparently is the hallmark of stronger economic times.
• Hearty areas: Particularly strong types of home sales reportedly included foreclosure sales, at 37 percent of all transactions, and cash-only sales, which accounted for another 32 percent. Sources indicate that these numbers mark a doubling in such types of sales from two years ago.
• Median home price: The glut of foreclosures now on the market continues to drive down home prices, and the median price in January was apparently $158,000, down 3.7 percent from this time last year and the lowest median in nearly a decade (since April 2002).
• Unsold homes: Sources report that 3.38 million unsold homes still clog the nation and hold back the housing market’s recovery. At January’s rate of sales, it would take more than seven months to sell these homes.

New Changes on the Horizon for Mortgage Servicers?

A recent report at Credit.com notes that the federal government may be nearing an announcement of new regulations for the mortgage servicing industry. Here’s why:

• During the subprime housing boom, mortgage servicers were often rewarded for signing customers up for more expensive loans than they could have qualified for.
• This led to abusive practices by many mortgage servicers and caused many customers to pay more than they could have for their loans in interest rates and related services.
• Since the collapse of the housing market, federal investigators have apparently been attempting to determine which practices were most detrimental to borrowers.
• As the research period draws to a close, insiders are reportedly expecting the announcement of new regulations for the mortgage servicing industry in the coming weeks.

Posted in Bankruptcy and the Economy, Consumer Protection, Foreclosure, Mortgage Foreclosure | Comments Off