Archive for the ‘predatory lending’ Category
Monday, August 30th, 2010
As consumers continue to struggle under the weight of a lagging economy, many Americans are trying to refinance their car loans.
Unfortunately, scammers have taken notice and are increasingly trying to bilk people of their hard earned cash. According to Rosemary Shahan, the president of Consumers for Auto Reliability and Safety, car loan scams are a “problem just about everywhere.”
Shahan recognizes that many people are able to refinance their car loans, but warns that “the way to do it isn’t to go to these companies who are out there advertising, ‘We can miraculously get you out of this excruciatingly bad deal.”
A recent article from MarketWatch provides some tips aimed at helping you avoid car loan scams:
- Choose wisely: If you want to refinance your loan, don’t opt for a group that heavily advertises its miraculous refinancing abilities. Instead, choose a safer organization, like a credit union or nonprofits like the Consumer Federation of America, or the National Foundation for Credit Counseling.
- Speak with your lender: Since no lender wants to go unpaid, they are often willing to work with you to adjust your payment plan. According to the Better Business Bureau, lenders will often assist you by stretching your payments over a longer period of time.
- Get it on paper: If a loan reduction company offers you any promises, make sure to get them in writing. Other things to get in writing include the services they will provide, the costs of those services, and promised money-back guarantees.
- Do your homework: Your local Better Business Bureau likely offers reports that reveal how many complaints have been filed against a particular lender and whether that company has been the subject of any lawsuits.
- Shy away from up-front fees: If a company demands that you pay large fees before they provide any services, they may be violating state law. Many states have outlawed this kind of behavior. Even if up-front fees are legal in your state, the practice could still be a scam.
An Alternative to Refinancing
If you cannot make your car payments, but are reluctant to adjust the terms of your loan, there are alternative steps you can take to ease your financial pain.
One helpful alternative may be to simply sell your car. Sources indicate that use-car prices are pretty high right now since last year’s cash-for-clunkers program removed a lot of used cars from the market.
So, you may be able to sell your current car and purchase a cheaper one with more reasonable payment terms.
If, however, your car loan is the least of your financial problems, and you need someone to talk to about your struggles, consider calling a personal bankruptcy lawyer.
Posted in Bankruptcy and Predatory Lending, Car Loans, cars in bankruptcy, loan scams, predatory lending | Comments Off
Tuesday, August 3rd, 2010
Despite sweeping financial reforms passed by Congress a few weeks ago, there remain loopholes in the new laws that spell continued danger for consumers. Specifically, the new laws still allow some predatory lenders to roam free.
While the reforms put lending restrictions on most major financial institutions, car dealers and community banks escaped the grasp of the new federal regulations. This oversight poses a serious threat to many consumers, as these two industries are annually involved in billions of dollars in loans to tens of millions of people.
Car Dealers
Most folks don’t pay for automobiles with cash. As a result, auto dealers are seasoned veterans of the loan industry. With high stakes in the financial reform package, sources indicate that the auto industry lobbied hard to escape the regulations. Some of their key gains include:
- We Didn’t Do it: One of the most criticized loopholes of the financial reform bill was the “carve out” won by auto dealers. Car dealers escaped further regulation because they convinced legislators that they were not responsible for the recent economic meltdown.
- Power in Numbers: How do car dealers have so much lobbying muscle? Mostly because there are more than 18,000 dealers nationwide. And the financial institutions who aid in most car loans were glad to assist their friends in the car industry, as well.
- More Escapees: In addition to the exemption for car dealers, companies who sell boats, motorcycles, and RVs are also not governed by the new legislation.
Finally, while 90 percent of car loans are financed through standard financial institutions, like banks, car dealers serve as brokers about 80 percent of the time. So, according to consumer groups, the car dealer’s role as a broker leaves room for them to push loans with unfairly high interest rates. According to some reports, car dealers are more likely to charge excessively high interest rates to minorities and lower-income borrowers.
Community Banks
In order to avoid further regulation, community banks successfully argued that they are much different entities than larger financial institutions. Typically, small community banks charge smaller fees than their larger counterparts and are more dependent on aid of small, local businesses.
As a result of lobbying efforts, community banks are now exempt from paying the same Federal Deposit Insurance premiums as large banks. In addition, all banks with assets under $10 billion are not required to follow new lending regulations.
Still, the Independent Community Banks of America recognize the potential for loan scams, and they warn that consumers should always be wary of loans that sound too good to be true. If you are unsure of whether or not you’re the victim of a financial scam, don’t hesitate to contact a bankruptcy attorney.
Posted in Bankruptcy and Predatory Lending, auto loans, financial reform, predatory lending | Comments Off
Thursday, June 10th, 2010
Student loans provide people chances for their education, dreams and future career opportunities. But what happens when it’s time face the hefty debt waiting after graduation?
Who is to blame if the recent grad gets overwhelmed with debt and can't afford to pay their loans back?
A recent New York Times article profiled one indebted grad and tried to address all the parties involved.
For students like Courtney Munna, blame is no longer her concern. Now she regrets taking out $100,000 in student loans to attend N.Y.U. and wishes she made better financial decisions regarding the loans.
Since graduation in 2005, Munna has deferred her loans as a short term solution to scrape by and pay the rest of her bills.
But the question still remains, who’s to blame for students like Munna getting in over their heads.
The article said that both the students and their families have personal responsibilities to know their finances and take out loans they can afford to pay back.
The article also placed some responsibility on the universities since they have access to student’s finances after they fill out the financial aid forms, and are in a familiar situation helping students find aid. Students, on the other hand, are often overly trusting of universities to look out for their best interest.
The Times suggests that these schools should advise prospective students they cannot afford their school, an idea that Vice President of Enrollment at N.Y.U. Randall Deike said “would be completely inappropriate.” Besides discrimination issues, it’s not the schools decision to make whether or not a student can afford their school.
Their business is to enlist students, not turn them away. Deike agreed that prospective students should not take on too much debt, but he said that’s their decision.
There are other reasons universities do not want to tell students to search for a cheaper education. They said it might reflect poorly on their school and suggest that their education might not provide opportunities after graduation.
The lenders themselves have continued to take the blame for loaning too much money with too lax of standards. In Munna’s case she was approved for $40,000 in loans by Citibank, even after she was already deep in debt.
As of now, Munna makes $22 an hour and barely makes the bills. She knows she’s responsible for taking out to much money in loans. But said she doesn’t “want to spend the rest of her life slaving away to pay for an education…[she] would happily give back.”
Student loans typically take decades to repay, even if the student is fortunate to find a well-paying job after graduating. Many students see a series of forbearance and deferrals while they wait to land the right job, as interest and fees pile onto their original loans.
And there is typically no way to eliminate student loans other than to pay them in full. Currently, student loans are one of the rare types of debt that cannot be discharged in bankruptcy.
Posted in Bankruptcy, Bankruptcy and Predatory Lending, Student Loans, predatory lending | Comments Off
