Payday loan clerk shot in robbery. / Image: swanksalot/Flickr/CC BY-SA

Jamie Brock, a clerk for USA Payday Loans in Hanover park, Ill., was shot in the forehead at point blank range during an October robbery. The shooter, Admise Wilson, apologized to her in court Monday. He was sentenced to 25 years in prison.

Shooter had been in twice before

The robbery occurred on Oct. 5, 2010. Wilson, 34, was a regular customer who had been in twice before that day to check on his account. On the second visit, seeing that she was alone in the store, Wilson told Brock, 35, that he needed to check something at his bank and would be back in five minutes. He returned with a .22-calibre handgun, put the muzzle to her forehead, and fired.

”Everything went black,” Brock said. “I fell. I couldn’t see.”

Victim played dead

Wilson took $1,000 in cash and threw a paper shredder at Brock. He then put the gun to the back of her head, but Brock played dead.

“I’m holding my breath and thinking, ‘Please don’t shoot me,’” Brock recounted Monday in the Cook County Circuit Court.

Victim identified the gunman

Wilson fled without firing another shot. Brock then called 911 and identified the gunman. Next she knocked on the wall, trying to get help from the Jimmy Johns sandwich shop next door. Finally, she called her family and told them what had happened.

Wilson was arrested an hour later. Police found the gun still in his possession, as well as $242 in cash. He was taken into custody and later confessed to the shooting. He was charged with several crimes, including attempted first-degree murder.

A remarkable recovery

Brock has made a remarkable recovery, though she regularly sees a neurosurgeon, and has still not returned to work. The incident left a 3-inch scar in her forehead.

Victim confronts her shooter

Brock addressed Wilson in court Monday as she held her husband’s hand. “I don’t know the reason why you did what you did. I have a daughter who just had her eighth-grade graduation,” she said. “I have a son with cerebral palsy. I was the breadwinner in my family. You don’t know at all what you could have caused me that day if I had died.”

Wilson made a tearful apology to Brock in court. “I didn’t mean for it to happen that way. I’m sorry for the pain I caused to you and your family. I’m glad you’re up and moving around.”

Robber sentenced to prison

Wilson was sentenced to 25 years in prison by Judge Thomas Fecarotta Jr. To avoid prosecution for attempted murder, Wilson pleaded guilty to armed robbery and aggravated battery with a firearm. Under the terms of the plea bargain he must serve at least 85 percent of the sentence and three years supervised probation.

Sources

Chicago Tribune: http://triblocal.com/hoffman-estates/2011/06/20/please-dont-shoot-me-woman-recalls-shooting-as-man-pleas-guilty-apologizes/
Daily Herald: http://www.dailyherald.com/article/20110621/news/706219985/

People should watch for payday loan collection scams, which are usually conducted over the phone. Image from Wikimedia Commons.

Though any form of credit, from mortgages to payday loans, carries some risks and responsibilities, those risks do not include putting up with illegal activity. Unscrupulous people are trying all sorts of methods, including payday loan collection scams, to try to bilk people out of money.

Arkansas Attorney General sues Kansas firm for illegal collections

A Kansas-based debt collection firm is being sued by Arkansas Attorney General Dustin McDaniel for attempting to illegally collect debts the company claims are owed to payday loan lenders by citizens in the state of Arkansas, according to ArkansasNews. McDaniel has sent National Credit Adjusters two requests for information concerning its attempts to collect payday loan debts in Arkansas, but the Hutchinson, Kan., firm has not responded to either. According to a post on the Attorney General of Arkansas website, payday loan lending is illegal in Arkansas, and the debts are therefore not collectable, according to the Attorney General’s office.

Beware collectors posing as cops

A popular trick among some unscrupulous debt collectors and scam artists is to call people and pose as either state officials or police officers. People in North Carolina, according to WFMY, a CBS affiliate in the Raleigh, N.C. area, have been receiving phone calls from telemarketers posing as agents of the Federal State Bureau of North Carolina saying that people owe a debt and have to pay up right away or be arrested. An Ohio man, according to Credit.com, was contacted by lawyers for the Brooklyn County Court and told he owed a payday loan company almost $800 for a loan and collection fees, though he had only applied for an online loan but did not take it. Similar phone calls, involving a “thick accent” and posing as an official through the non-existent Brooklyn County Court, have been observed across the country, and many people who received such calls had recently applied for a payday loan online.

Forewarned and forearmed

Debt collections fall under the Fair Debt Collection Practices Act, and people who feel a debt collector is not abiding by these laws should complain to their state attorney general’s office and the Federal Trade Commission. Ask for a statement in writing, as a debt collector is required to provide one. Do not stand for tactics of intimidation; it is illegal for debt collectors to be abusive when trying to collect a debt. Also, if a debt collector claims to be an attorney, ask for the person’s name and proof of membership in the state bar association. Impersonating an attorney is a crime, and consumers should never hesitate to ask for credentials.

Sources

Arkansas News

Arkansas Attorney General’s Office

Credit.com

WFMY

Fair Debt Collection Practices Act

If your online bank account is hacked, the bank may not be liable for all the money. (Photo Credit: CC BY/Don Hankins/Flickr)

Maine Magistrate Judge John Rich has ruled that despite the fact that a bank allowed online hackers to steal more than $300,000 from a customer’s account, the bank is not responsible for the lost money. According to BankInfoSecurity, the judge said the plaintiff, a construction company, should have done a better job of protecting its bank account details.

Judge recommends charges against Ocean Bank be dismissed

Judge Rich recommended that the U.S. District Court in Maine dismiss a complaint filed by Patco Construction Company against Ocean Bank after Patco’s account was hacked and more than $300,000 was stolen. How much security banks should reasonably be required to provide commercial customers was called into question. If U.S. District Court follows Rich’s recommendation, legal experts see a precedent being set for liability claims in which online bank theft occurs via password interception. Each year, small- and mid-sized U.S. companies lose hundreds of millions of dollars via fraudulent ACH (Automated Clearing House) transfers, and the District Court ruling on the Ocean Bank case will no doubt be of interest.

Patco v. People’s United Bank: The inside story

Patco Construction Company’s case against People’s United Bank (the owner of Ocean Bank) states that in May 2009, it was discovered that hackers were stealing $100,000 per day from the company’s online Ocean Bank account. Apparently, the company’s password had been stolen via a malicious email that placed trojan malware onto a Patco employee’s computer.

Nearly $600,000 was gone before Patco noticed and informed Ocean Bank. The bank was able to block $240,000 in transfers, but told Patco the rest was irretrievable. Patco’s lawsuit accused the bank of “failing to implement best security practices,” i.e. requiring customers to use multi-level authentication. Ocean’s initial defense was that because the online user identification and password matched, it had done its share of maintaining security.

While Judge Rich agreed that Ocean Bank could have done more to maintain security, he concluded that the law does not require banks to use the best security methods available. As Ocean’s security was similar to other online banks, Rich deemed that Patco was responsible for not securing its log-ins.

Not the best, just multi-factor

Patco Construction Company President Mark Patterson argued that Ocean Bank was not in compliance with the Federal Financial Institutions Examination Council’s authentication processes by only asking for username and password. IT security attorney David Navetta seconded Patterson’s concern, yet the court was satisfied by Ocean Bank’s two-step, “multi-factor” process of requiring username and password.

How to avoid identity theft

Sources

BankInfoSecurity

Federal Financial Institutions Examination Council

Wired

Bank of America recently settled a massive class action lawsuit concerning overdraft fees. Photo Credit: MoneyBlogNewz/Flickr/CC-BY

Bank of America has reached a settlement in a huge lawsuit that involves most large retail banks in the United States. B of A has agreed to pay $410 million to settle a class action lawsuit over aggressive overdraft fee practices. Similar suits are being filed against other banks.

Dozens of banks sued for account fees

Overdraft fees and account fees are not popular among consumers, and outrage over fee practices has led to major class action lawsuits against some of the largest financial institutions in the United States and Canada. Nearly 1 million people are part of  a massive class action suit, according to Bloomberg, against Bank of America, and similar suits have been filed against JPMorgan Chase, Citigroup and Wells Fargo. Bank of America has won approval to settle for about $410 million. More than two dozen banks from the U.S., Canada and Europe are being sued for overdraft fees, according to Reuters, and the cases were all consolidated into one massive class action. The case is titled In Re: Checking Account Overdraft Litigation.

Undue burden placed on vulnerable consumers

Bank of America is alleged to have processed transactions from largest to smallest instead of by when the transactions were made, thus making it more probable that accounts would fall into overdraft and the sum recovered by the banks would be greater. Overdrafts can function like short term credit; the bank will fund the transaction but add a fee to the amount owed by the account holder. Fees vary by institution, though fees between $25 and $35 are common. Many consumer advocates consider overdraft protections and fees to be abusive to less fortunate consumers. Banks can no longer enroll customers into an overdraft protection program automatically; customers have to elect to enroll.

B of A going mobile

Bank of America is unveiling a pilot program involving mobile banking, according to the Los Angeles Times. If a transaction is declined for insufficient funds, the customer will receive a text message giving the customer the option to have the bank cover the overdraft. If the customer elects to do so, the customer can deposit the required funds by 8 p.m. that evening to avoid the overdraft charge of $35. The option would only apply to that transaction. Overdraft fees will become the province of the Consumer Financial Protection Bureau, according to the New York Times, when the agency begins operation. The CFPB is involved in an ongoing Congressional tug-of-war over the director position and what powers the bureau should have.

Sources

Bloomberg

Reuters

Los Angeles Times

New York Times

American Precious Metals LLC offered fraudulent gold and silver investments to customers. Image: Flickr / sirqitous / CC-BY

For the third time in the last few weeks, the Commodity Futures Trading Commission has taken action against precious metal investors. American Precious Metals LLC has been shut down, pending further investigation. Companies have been offering fraudulent investments in gold, silver and other precious metals.

Case against American Precious Metals LLC

American Precious Metals LLC was a company based in Lake Worth, Fla. The company used telemarketers to call and pressure customers into purchasing gold, silver, platinum and palladium investments. The salespeople claimed that the company would store the physical metals for the customer and even finance part of the purchase after a significant down payment was made. In exchange, the company promised several hundred percent returns on the customer’s investment. In essence, the company was offering short-term loans for investments in precious metals — but the company never really had the precious metals. The company also never registered with the FTC or CFTC as an investment business. The charges against the company include violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, as well as regulations controlling precious metals. All the assets of the company have also been frozen.

Rising precious metal prices

The increasing number of fraudulent precious metals investment scams has been boosted by the quickly rising price of most precious metals. In the last year, the per-ounce price of gold has gone from less than $1,200 to more than $1,500. Silver and other precious metals have experienced a similar price jump. This is partially because precious metals are often viewed as a “safe haven” when worldwide currencies are weakening. Some industry watchers have warned that gold and precious metals are getting close to bubble status, with prices that have expanded beyond their “real” value.

Protecting yourself when investing

Investing can be an activity fraught with dangers. There are do-it-yourself investing tools, and you can purchase precious metals and store them yourself. No matter how you choose to invest, always work with companies that have been vetted by the Better Business Bureau. You should also never invest in any precious metals company that you cannot independently verify with the FTC or CFTC.

Sources

FTC.gov (PDF)
Futures Mag

The Department of the Treasury would get additional powers over the Consumer Financial Protection Bureau, if new bills become law. Image: Flickr / wwworks / CC-BY-SA

The Consumer Financial Protection Bureau is set to launch in the next few months. Despite strong consumer support, three new House bills are attempting to weaken the CFPB. The House Financial Services Committee has approved these bills, but they have not yet become law.

Current status of the CFPB

The Consumer Financial Protection Bureau was initially created by the Dodd-Frank Act in order to “promote fairness and transparency for mortgages, credit cards and other consumer financial products and services.” The bureau is set to open for the first time in July of 2011. Despite this close deadline, no director has yet been nominated for the CFPB. Until a director is nominated and confirmed, the Secretary of the Treasury is responsible for running the CFPB.

Bills to weaken CFPB introduced

In the United States House of Representatives, three separate bills to weaken the Consumer Financial Protection Bureau have been introduced. HR 1121, called the Responsible Consumer Financial Protection Regulations Act of 2011, would replace the director of the CFPB with a five-member commission. HR 1315, called the Consumer Financial Protection Safety and Soundness Act, would give the Financial Stability Oversight Council of the Department of Treasury the right to overturn any rules made by the CFPB. Finally, HR 1667, the Bureau of Consumer Financial Protection Transfer Clarification Act, would block the agency from operation until a director has been confirmed. These three bills have been approved by the Financial Services Committee and will be debated in the House.

What the CFPB will do

Though the duties and responsibilities of the CFPB may change, there are several things the Bureau will likely remain responsible for. First, the CFPB will review and monitor financial products with an eye toward consumer protection. Second, existing federal financial laws would be enforced with the assistance of the CFPB. The Bureau is also supposed to become a clearinghouse for information and resources for consumers.

Sources

Treasury.gov
WalletPop
House.gov

Car title lending is the target of a re-opened discussion in the Wisconsin legislature. Image: Flickr / teegardin / CC-BY-SA

Last year, Wisconsin became the final state in the union to regulate payday and title lending. The original bill would have prohibited banning car title lending, but the governor vetoed that item to entirely ban title lending. Now, a joint committee is taking action to end the ban on title lending, which would de-regulate the industry.

Current regulations on Wisconsin’s payday lending industry

Currently in Wisconsin, short-term loans secured by an auto title are not legal. The selective vetoing of the 2010 legislation banned loans of this type. Payday loans in Wisconsin are also limited to 35 percent of a borrower’s monthly income. Once a loan comes due, additional interest cannot be charged, even if payment is late. In 2009, Wisconsin’s 527 short-term lender locations lent out $600.5 million.

Wisconsin GOP tries to rescind changes

Senate President Mike Ellis, a Republican, has been pushing this year for tighter regulations on payday loans. Despite his surprise at the recommendation of the Joint Finance Committee, Ellis agrees that the recommendations should be debated on the merits, rather than as a knee-jerk reaction. The committee’s co-chairman, Rep. Robin Vos, responded by saying “You can make a case that it was done wrongly the first time. We’re correcting his error and actually adding some better provisions in,” referring to the fact that the original bill as passed by last year’s legislature was significantly re-shaped by the governor’s vetos.

The difference between payday lending and title lending

Title lending and payday lending are often lumped in with check cashing and other short-term financial solutions. These financial products all cater to the underbanked community, but they each do so differently. Payday loans are short-term loans intended to be paid back in two to four weeks. Title lending, on the other hand, offers higher loan amounts, but puts the collateral, a vehicle, at risk. Check-cashing services charge a fee for cashing checks for customers. Each of these services is different and should be regulated and discussed differently.

Sources

WTAQ
JS Online

The Texas legislature is considering three bills to regulate payday lending in the state. Image: Flickr / criminalintent / CC-BY-SA

In the Texas legislature, three new bills intended to limit payday lending are under consideration. One, House Bill 2592, has passed easily. Another is expected to come up for vote today and pass, and a third may or may not make it to the House floor.

Agreed upon legislation

Two of the three pieces of proposed regulation in the Texas legislature are “agreed upon” pieces of legislation. This means that the industry, consumer advocates and some legislators agreed on the legislation. House Bill 2592 passed 123 to 23 in a voice vote. This bill mandates more conspicuous disclosures of the fees and interest rates of the loans that payday lenders offer. House Bill 2594, which requires additional licensing of all storefront locations, is held up in parliamentary debate. The expectation is that HB 2594 will pass when it reaches the house. These two bills are supported by much of the industry, though one payday lending store owner who is a member of the House argued against the bills, saying they were an attempt to push out small business owners.

Controversial legislation to limit payday loans

Unlike HB 2592 and HB 2594, HB 2593 is considered controversial. HB 2593 would place specific limits on the total amount of loans that could be offered to customers. The bill would also limit the number of times a loan can “roll over.” HB 2593 is buried relatively deep in the legislative list, and unless the Texas House addresses it by midnight tonight, it will have to be moved to the Senate or re-introduced next year. The legislative session ends on May 30. Any bills passed by the House today will have to go on to the Senate, be reconciled and then sent to the Governor for his signature, veto or tacit approval.

The question of fee disclosures

The one bill that has already been passed by the Texas legislature requires extensive disclosures. One Texas legislator went undercover in several payday loan stores and reported that only one of the eight stores he visited had conspicuous displays of fees. The legislator did not indicate whether he had been given fee disclosures when receiving the loans.

Source

Texas Statesman

The Colorado legislature is attempting to sort out payday loan legislation, with only days until the end of the session. Image: Flickr / swanksalot / CC-BY-SA

Just hours before the Colorado legislature is due to shut down for the season, an amendment is causing frustration. The annual rules bill that deals with much of the day-to-day operations of the state has a new, controversial amendment about payday loans. If the issue is not resolved today, the Colorado legislature will require a special session.

Colorado Senate Bill 78

Colorado Senate Bill 78 is an annual rules bill that was intended to create specific, enforceable rules for many of the bills passed over the last session. There are about 600 individual rules addressed in Senate Bill 78, including solid waste disposal fees, fire codes in schools, licensing of medical marijuana dispensaries and ski lift safety. After the bill had been passed by the House, Senate Republicans amended the bill to include a previously dead bill that changes payday lending laws in the state.

Proposed changes to Colorado payday lending law

Last year, the Colorado legislature made significant changes to payday lending laws in the state. The fees and interest rates that lenders could charge were severely limited. The bill also limited origination fees on any short-term loan to $75. Lenders argued that the way the rules on this particular law were written was improper, and the Colorado House earlier this year passed legislation that allows lenders to keep their regular origination fees. The bill died in the Colorado Senate, however. Senate Republicans tacked the bill back onto the Rules Bill as an amendment, re-igniting debate on the controversial issue.

Potential cost to taxpayers

If the House and Senate in Colorado cannot come to an agreement on Colorado Senate Bill 78, the legislature may well face a special session. A special session of the legislature could cost taxpayers several thousand dollars per day. In Washington, special sessions were estimated to cost $20,000 per day; New York special sessions are about $50,000 per day. In short, the cost of sorting out the payday loan bill in Colorado could cost taxpayers several hundred thousand dollars.

Sources

Komo News
Denver Post

If instituted, a home renters tax credit would help offset the burden of soaring rents. (Photo Credit: CC BY-ND/Hardy's Hill House)

The U.S. housing market has scared off many potential home buyers, sending them toward home rentals. The increased demand has made it significantly more difficult for low-income families and individuals to take advantage of lower rents, a problem the Obama administration recognizes. As a means of relief, legislators are currently exploring the idea of instituting a home renter’s tax credit as a part of a larger overhaul of the tax system, reports MarketWatch.

The rent is too damn high

A recent Harvard university study found that about 26 percent of renters – 10.1 million people – spent more than half of their pre-tax household income on rent and utilities in 2009. This can be attributed to stagnant or retarding wages brought on by the recession, which is a bad place to be when rents continue to rise. U.S. Housing and Urban Development Secretary Shaun Donovan believes there needs to be a way out for struggling tax payers searching for residency, and the home renter’s tax credit is an idea that is gaining traction.

Boosting government support for home renters is an idea “that is worth looking at,” according to Donovan. If such a rental housing tax break were to be instituted, it would require adjustments to other parts of any new U.S. tax code in order to avoid unnecessary addition to the federal deficit.

Homeowners receive tax credit love

Consumers who own their own homes currently are able to reap the benefits of government subsidies through tax deductions of mortgage interest payments and property taxes. In addition, mortgage buyers Fannie Mae and Freddie Mac have received ample federal support through taxpayer bailouts.

In 2009, the government granted $230 billion in subsidies for homeowners, reports the Congressional Budget Office. Over that same period, home renters received only $60 billion.

Sources

MarketWatch

U.S. Department of Housing and Urban Development

Washington Post

Renting a home vs. buying a home: Do the math

In times of economic downturn, people turn to stealing catalytic converters from cars, copper wire from houses and gas. Image from Wikimedia Commons.

Incidents of theft of precious metals and gasoline have started to increase nationwide. Gasoline theft has been observed during previous periods of high gas prices, and people are stealing precious metals such as platinum and copper at an increasing pace. Precious metals will always have a market.

Keep an eye on the catalytic converter

One trick opportunistic criminals resort to at times is stealing catalytic converters, and it is happening with greater frequency these days, according to USA Today. Thieves will remove catalytic converters from vehicles by any means necessary because catalytic converters contain the precious metal platinum. One converter can fetch between $100 and $150. The law enforcement liaison of the Institute of Scrap Recycling Industries, Inc., says  2,012 alerts were issued to law enforcement officials regarding scrap metal theft in 2010, which was up from 643 in 2009. The ISRI tracks how many incidents are reported to law enforcement officials regarding significant theft of scrap metal.

Make sure to call a copper

One of the other common materials for thieves to steal is copper, specifically copper wiring. A quick Google search can show just how widespread it is. Within the past month, in the Highland Park neighborhood of St. Paul, Minn., thieves made off with the copper wiring from a string of street lamps. About 10 street lights were left without power and the culprits made off with nearly a half mile of copper wire, according to the Star Tribune. During the same time period, Dougherty County, Ga., 30 mobile homes were stripped of copper in a single weekend including gutting air conditioning units, according to Fox Southwest Georgia. Also in the past month, a couple in Reyoldsburg, Ohio, was charged with stealing copper from more than 30 homes. The thieves allegedly looked at vacant home listings and took every ounce of copper they could, according to 10TV News in Columbus. They are accused of stealing copper from homes in several counties. Police credit copper having reached $3 per pound or more.

Large vehicles attract criminals

Gas prices hitting $4 per gallon is an unpleasant prospect for most and an inducement to crime for others. Gasoline thefts are being reported with greater frequency. One trick is for thieves to siphon gasoline from parked cars. Business vehicles such as delivery trucks and moving vans are fairly common targets, according to a recent article on ABC. A locking gas cap isn’t always a guarantee of keeping thieves out; some will drill through the lock or cut the gas line from the tank. Trucks and SUVs, according to Fox News, are the most frequent targets because they sit higher from the ground, and that aids siphoning. The Christian Broadcast News network reports that customers who drove off without paying stole of $89 million in gasoline from convenience stores in 2009.

Sources

USA Today

Institute of Scrap Recycling Industries

Star Tribune

Fox Southwest Georgia

10 TV News Ohio

ABC

Fox

Christian Broadcast News

Facebook has become a vehicle for debt collectors to harass people. Image: Flickr/benstein CC-BY-SA

Most businesses these days are creating social media positions to co-opt the reach of Facebook, debt collection agencies included. A Florida woman made headlines late last year when she hired an attorney to sue a debt collection agency for harassing her via Facebook. The federal government, which received more complaints about debt collection than any other industry in 2010, is considering how to update consumer protections for the social media era.

Debt collectors and social media

It’s no secret that debt collection agencies use the Internet to find people who owe money. The Orlando Sentinel first reported about Melanie Beacham of Tampa, Fla., last November when she fell $362 behind with her car payments. Beacham’s auto loan account was promptly sent to collection. Calls, text messages and emails started rolling in. After she worked out a payment plan with her creditor, a debt collection agency called MarkOne Financial sent a message to all Beacham’s friends on Facebook asking them to urge her to call the debt collector. Beacham hired an attorney to sue MarkOne, citing violations of federal and Florida law. The lawsuit claims the debt collection agency harasses consumers, their families and their friends using Facebook. The lawsuit is pending, but in March, a judge ordered MarkOne not to contact Beacham, her friends or family via Facebook or any other social networking site.

The Fair Debt Collection Practices Act

After the court scolded MarkOne, Beacham’s attorney, Billy Howard, head of the consumer protection department at the law firm of Morgan & Morgan, said it was the first ruling in the country that specifically banned a debt collector from using social media. But that hasn’t stopped MarkOne. Three weeks ago Howard filed a suit on behalf of another woman against MarkOne for Facebook debt collection harassment. But posting messages on Facebook telling the world someone is behind on a debt could be a violation of the Fair Debt Collection Practices Act of 1978. That was enacted decades before the advent of Facebook, but the Association of Credit and Collection Professionals said the rules apply to social media the same as phone calls or letters. Debt collectors can only contact third parties if the collection agency can’t locate the debtor. Debt collectors are also barred from disclosing to a third party why the debtor needs to be contacted. In both these instances, MarkOne appears to violate the law.

Debt collection 2.0

A Federal Trade Commission’s annual report required by the Fair Debt Collection Practices Act shows that the agency received more complaints about debt collection in 2010 than any other industry. The FTC recorded 140,036 complaints about debt collectors, 27 percent of all complaints received by the agency and an 18 percent increase from 2009. The FTC will host a public workshop in Washington, D.C., April 28 called Debt Collection 2.0 that will include a discussion about social media. In July, the new Consumer Financial Protection Bureau will begin working with the FTC to create debt collection rules, field complaints and educate both consumers and debt collectors.

Sources

MSNBC

Orlando Sentinel

Money Talks News

The Federal Trade Commission has frozen assets of six companies accused of payday loan fraud. Image: wsavespublicart / Flickr / CC BY

This morning, the Federal Trade Commission filed a fraud lawsuit against a group of several individuals and companies. The FTC says these companies and individuals defrauded customers seeking payday loans. These companies allegedly charged customers for products they did not want or choose.

Alleged violations of FTC Act

A group of companies headed by Michael Bruce Moneymaker, Mike Smith and Michael Bruce Millerd was named in the complaint by the Federal Trade Commission. Among others, these three ran Fortress Secured, Belfort Capital Ventures Inc., Dynamic Online Solutions LLC, HSC Labs Inc., Red Dust Studios Inc. and Seaside Ventures Trust. These companies are accused of obtaining customers’ bank account information through payday loan applications and then misusing it. Most often, the account information was used to charge customers “subscriptions” for services they did not knowingly agree to.

Alleged misuse of Terms of Service agreements

Customers coming to the websites run by the companies and individuals named in the complaint often were required to accept Terms of Service agreements to complete applications. Buried in the Terms of Service were agreements to monthly subscriptions for services like voicemail and airline tickets. These “continuity services” usually had a $40 to $50 subscription fee and another $19.95 per month. Many customers had no idea they were enrolled in the services and only discovered it if they checked their monthly statements. When the customer contacted the companies, they were rarely, if ever, given a refund. The customers were often also told that they were not entitled to refunds because they had agreed to the service.

Specifics of the FTC complaint

Michael Bruce Moneymaker and his associates were charged with five specific crimes:

• Obtaining consumers’ bank account information and debiting their accounts without their informed consent
• Falsely representing that consumers’ authorizations were part of their payday loan applications
• Failing to conspicuously disclose that consumers would be charged for third-party trial offers automatically
• Falsely telling consumers that they were not entitled to refunds because they agreed to enroll in the defendants’ programs and pay for them and had agreed that they could get a refund only if they asked during the initial trial period
• Falsely promising refunds to consumers and not providing them

Protecting yourself from payday loan fraud

Protecting yourself from payday loan and lender fraud takes just a few extra minutes. Be sure to read the full text of any agreement you digitally or physically sign. If you are applying for payday loans or any other financing, be sure that the company you are applying for provides a physical address, phone number and responsive customer service.

Source

FTC.gov

The new CARD act may have the unintended consequence of stripping stay-at-home spouses of their financial identity. Image: rubenerd / Flickr / CC BY-SA

The CARD Act, passed in 2009, is intended to help protect consumers. Credit-providing companies are disallowed from providing credit to individuals who cannot prove income. One unintended consequence of these new rules is that stay-at-home parents may lose some financial freedom.

Requirements of the CARD Act

The CARD Act contains several provisions intended to protect consumers from unfair or inappropriate practices of credit card issuers. The Act also created several new rules that change how card companies consider income. Community property and household income can no longer be considered as “income” on an application for credit. Instead, all income on an application for credit must be individual. This is intended to keep consumers from over-claiming income or qualifying for credit that they do not have the income to pay back.

Effects of new CARD Act rules

Though it may not be intentional, the CARD Act could have a disproportionate effect on stay-at-home partners or parents. In households where one partner works and one partner stays at home, the CARD act prevents the jobless partner from claiming any of the income of the working partner. While this prevents individuals with no independent income from getting credit they may not be able to pay back, it also prevents stay-at-home spouses from building an independent credit history. No credit history can mean fewer job opportunities, greater financial dependence and added problems if the relationship ends.

The CARD Act and community property

In 10 of the 50 United States, married couples share what is known as “community property.” This shared property law, which can be superseded by any pre- or post-nuptial agreement, means that partners in a marriage have equal share of anything earned during the marriage. For couples in community property states, the CARD act will require them to split their financial lives. For couples not in community property states, the CARD act simply means that one partner cannot obligate the other partner to bad credit loans
or other debt without their explicit agreement.

What the CARD Act means to you

If you are a stay-at-home partner, these new provisions of the CARD Act may have the biggest effect on you. If you stay at home and do not have paying employment, you may be required to get your partner’s signature on everything from credit card applications to personal loans. This means that establishing your own, independent credit history is important. Employment or some way of verifying monthly income from your partner is important, as is maintaining open lines of communication about finances.

Sources

National Consumer Law Center
The Library of Congress

Fuel prices are often a concern for consumers -- and the CFTC and FTC have agreed to cooperate in investigations. Image: Alesist / Flickr / CC BY-SA

For the second time in three years, gas prices are quickly heading toward the $4 per gallon mark. Now, two federal agencies have signed an agreement intended to help fight manipulation of the petroleum market. The effects of this increased enforcement, however, could be difficult to discern.

Federal Trade Commission tries to address gas prices

In late 2008, gas prices quickly rose up and above $4 per gallon. About one year later, the Federal Trade Commission signed a “Final Rule” that officially prohibited “fraud or deceit in wholesale petroleum markets, and omissions of material information that are likely to distort petroleum markets.” Since the issuance of this rule, the FTC has been investigating possible manipulations that could be increasing the cost of oil, and therefore fuel. Despite these investigations, the FTC has not officially charged or fined any company with manipulation.

FTC and CFTC agree to cooperate

The Commodity Futures Trading Commission (CFTC) is a smaller agency than the Federal Trade Commission, with a much narrower focus. Commodities and Futures are products that make financial investments in physical products, rather than companies. Today, the CFTC and FTC signed a “Memorandum of Understanding” that allows the two agencies to share non-public information about the fuel market. This sharing of information is intended to give both agencies a broader view of the petroleum market, and hopefully ferret out abuses and manipulations in the market.

What affects fuel prices

Gas and fuel prices, like all product prices, are affected by a variety of factors. A jump in oil prices takes a few months to reach market as fuel prices, and consumers often feel the pinch. Geopolitical conflicts, costs of refining, demand for fuel and even the cost of crops all effect the price of fuel. Consumer sentiment also has a strong effect, and nervousness about fuel prices can be a self-feeding loop that increases prices. There are often accusations of oil companies gouging on fuel prices, though the FTC and CFTC rarely find enough evidence to prosecute perceived offenders.

Sources

The Price Of Fuel
FTC
CFTC

Bank of America Corp. and other large banks may have colluded to manipulate interest rates in their favor, allege the U.S. Justice Department and SEC. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

The Wall Street Journal reports that the U.S. Justice Department and Securities and Exchange Commission are examining whether a group of the world’s largest banks – led by Bank of America Corp, Citigroup Inc. and UBS – colluded to manipulate the London Interbank Offered Rate of interest (LIBOR) on trillions of dollars in loans and derivatives before and during the global financial crisis. LIBOR represents the rate at which banks borrow funds from each other. It is the world’s most widely used benchmark interest rate and is applied to everything from adjustable rate mortgages (ARMs) to corporate bonds and car loans.

LIBOR collusion investigation ongoing for past year

Law enforcement officials have been investigating whether banks have intentionally been understating their own borrowing costs to benefit a secret global banking cartel. It is suspected that such LIBOR interest rate manipulation occurred in excess between 2006 and 2008. If banks that were secretly struggling with bad debt and liquidity had reported borrowing at higher interest rates then peers, the plight would have been revealed to the public.

Currently, the LIBOR collusion case is being handled by antitrust and anti-fraud prosecutors, according to insiders close to the situation. Investigators are searching for signs of collusion like price fixing and bid rigging. Legal experts note that corporate collusion cases are difficult to prove without email evidence or bank insider testimony.

James Rill, the former assistant attorney general of the Justice Department’s Antitrust Division, told the WSJ that the prosecution will ideally need the assistance of at least two witnesses or hard evidence to make collusion charges stick.

‘Remarkably similar costs’

In 2008, a study conducted by the WSJ found that bank borrowing costs remained “remarkably similar,” despite the fact that each bank faced different kinds of financial trouble. In the first quarter of that year, the three-month borrowing rates for 16 banks remained within a 0.06 percentage-point range, compared to the average LIBOR of 3.18 percent.

At the time, economists at the Bank for International Settlements questioned whether LIBOR was being manipulated. The economists noted that if enough banks colluded, the impact upon LIBOR would be significant.

Class action suits waiting in the wings

In the event that the Justice Department and SEC can prove LIBOR collusion in the antitrust case, the banking consortium would likely be exposed to numerous class-action lawsuits by private plaintiffs harmed by interest rate manipulation. If successful in their suits, plaintiffs would be awarded triple the normal amount of damages, said former Justice Department antitrust lawyer Michael Volkov.

Sources

Bankrate.com

Investopedia

Wall Street Journal

Wikipedia

A LIBOR primer

Experian is being sued for fraud; customers say the company doesn't provide relevant information in the credit reports it provides to customers. Photo Credit: Swampyank/Wikimedia Commons/CC-BY-SA

A lawsuit has been brought against credit bureau Experian in California. Experian is one of the three main credit bureaus, along with TransUnion and Equifax, and credit ratings from those bureaus are used in creating a persons’ credit score. The plaintiffs in the suit, which may become class action, are alleging fraud.

Plaintiffs say free credit report sites give false info to consumers

Plaintiffs in the California lawsuit against credit bureau Experian are saying the bureau has defrauded. They say Experian provides misleading information on the websites where the company sells copies of credit reports, according to MSNBC. The suit claims that Experian provides the wrong score, purposefully, through FreeCreditScore.com and FreeCreditReport.com. The sites, which charge a $14.95 per month fee to users so they can monitor their credit report activity, provide the Experian PLUS score. The reason why the plaintiffs are seeking a class action status is because that isn’t the score lenders would look at if a person applied for a personal loan.

Lenders look at FICO scores

When lenders or other parties check a person’s credit score, they aren’t looking at a score that one credit bureau comes up with. Lenders look at the FICO score, or the number from the credit scoring system developed by Fair Isaac and Company. Fair Isaac scores are calculated by looking at certain data about a person and coming up with a numerical rating of that persons’ credit worthiness. Experian, Equifax and TransUnion all produce credit scores with the FICO formula, and those scores are reported to lenders. The lawsuit accuses Experian of fraud because the PLUS score is not reported to anyone and would not be considered if someone applied for a job or installment loan. The suit says Experian misled consumers by advertising worthless information for sale. Experian had to be compelled by threat of a Federal Trade Commission suit to advertise the link to the government site where consumers can request the one free report from each bureau that people are allowed by law.

States trying to get employers to mind their own business

Labor rights advocates have never been enthralled with the idea of employers checking the credit scores of potential new hires. At least half of the United States isn’t either; 49 bills in 25 states are currently before state legislatures to legally bar employers from checking credit scores of a potential new hires. Though credit bureaus that sell the reports to businesses and some businesses contend that it can catch a potential problem employee, civil rights and labor advocates insist that it is prying into an area that no employer has a right to.

Sources

MSNBC

USA Today

Rhode Island legislators will soon debate the merits – or lack thereof – of 2011 H 5562, yet another payday loan rate cap bill. (Photo Credit: CC BY-ND/Patrick Haney/Flickr)

Just as He-Man had his infamous “By the power of Grayskull!” battle cry,  opponents of payday loans continue to cry for cartoon-like 36 percent APR interest – cartoonish because 36 percent has been proven numerous times to be well outside the bounds of practicable business reality. Yet legislators in Rhode Island, led by sponsor Rep. Frank Ferri, D-Warwick, are pursuing yet another bill that would attempt to cap payday loans at the same 36 percent APR. Lenders argue that this will drive them out of the state and drive consumers in need toward unscrupulous loan sharks.

2011 H 5562 would eliminate payday lending in Rhode Island

Volumes of published and unpublished independent research have shown that when companies that offer payday loans with no credit check are driven from a community, the overall financial condition of consumers degrades. Payday lenders don’t need that kind of blow to the bottom line, let alone the state of Rhode Island.

Advance America Vice President Jamie Fulmer told the Associated Press that a 36 percent cap would force Advance America to pull its 20 branches from Rhode Island. As it stands currently, the branches charge $10 for $100 payday loans. If Rep. Ferri’s 2011 H 5562 manages to become law, payday loan businesses could only charge $1.38 per $100 loaned.

“This is not a reform bill; it’s designed to eliminate our industry outright,” said Fulmer.

Anti-payday loans bill offers a single exemption

According to The Providence Journal, 2011 H 5562 offers but a single exemption to the 36 percent APR cap. Organizations that offer payday loans with no credit check can charge as much as 260 percent APR on short term loans. Because such loans come to maturity long before a year is up, the concept of an annual percentage rate on payday loans is not a useful yardstick, however.

Politician cries ‘financial rape,’ business trusts consumers

In a bout of cartoonish exposition, Rep. Lisa Baldelli-Hunt, D-Woonsocket, told local media that payday loans are “financial rape” and that a 36 percent APR is “predatory.” However, as Community Financial Services Association of America spokesman Steven Schlein told The Providence Journal,

“Consumers know what they’re doing. You walk in and you see our rates in big letters on a poster. We’re the most transparent financial service there is.”

Sources

Associated Press

The Providence Journal

Rhode Island General Assembly

The antiquated U.S. patent system, overwhelmed by advancing technology, has a backlog of more than 700,000 patent applications. Image: CC davidflanders/Flickr

The U.S. Patent and Trade Office is outdated, inefficient and overwhelmed by technological evolution. After being all talk and no action for years on patent reform, congress appears on the verge of overhauling a U.S. patent system that hasn’t changed since 1952. Authors of the patent reform bill aim to decrease the patent application backlog and increase the patent office budget, moves that patent experts say could create millions of jobs.

Patent reform: “millions of jobs lying in wait”

The patent reform bill was a slam dunk in the Senate earlier this month, passing with a 95 to 5 vote. This week the House is debating its own version of patent reform. The Senate version of patent reform will have a tougher time in the House because although most lawmakers agree that patent reform is necessary, they don’t agree on how to go about it. Six decades of stagnation in the U.S. Patent and Trade Office while technology has advanced by leaps and bounds has led to a backlog of more than 700,000 patent applications and an average three year wait for patent approval. David Kappos, director of the USPTO, who testified before the House Subcommittee on Intellectual Property on Wednesday, said that key provisions in the bill could halve the current backlog, shorten the wait to about a year and create “millions of jobs lying in wait.”

Key provisions of patent reform

Each year the USPTO accepts about 500,000 patent applications. Congress sets the USPTO budget, determines the fees it can charge and spends some of the revenue on programs unrelated to patent approval. The most significant change in patent reform would allow the patent office to create its own fee structure and keep all the money. Kappos said the USPTO would have an extra $300 million a year to hire more staff and invest in a state-of-the-art patent review and approval system. Patent reform would also help keep patent disputes out of the courts by allowing the USPTO to look at commercially viable patents a third party tries to invalidate, which is currently done through litigation. The most controversial aspect of patent reform may be changing the U.S. patent system from first-to-invent to first-to-file.

First-to-file provision a sticking point

The first-to-file provision in patent reform has generated the most opposition so far. Opponents of the Senate version of patent reform content that changing from first-to-invent to first to file could hurt small inventors because large companies have far greater resources for filing patent applications. Currently, a small inventor that proves it has beat a large competitor to an innovation gets the patent, regardless of whether the big company filed first. The bill’s opponents also believe that the third party review is just adversarial litigation by another name that will force smaller inventors to give up on their innovations because of the cost. Those familiar with the patent reform issue expect the House to focus on aspects of the bill that increase the USPTO budget and scratch most of everything else in the Senate version.

Sources

CNNMoney.com

bNET

Washington Post

Financial reform under the Dodd-Frank Act is necessary – and expensive. (Photo Credit: CC BY-ND/iChaz/blogmosaic)

The Dodd-Frank Wall Street Reform Act was intended to save U.S. consumers a significant amount of money – but at what cost? With any governmental undertaking, there’s a financial burden taxpayers shoulder. According to a Government Accountability Office (GAO) report, that burden will amount to as much as $2.9 billion over five years, the price of Wall Street reform.

Financial stability is not entirely dependent on taxpayers

While it may seem as if taxpayers are being asked to pay without end, the Dodd-Frank Act reportedly will not require full taxpayer subsidization to function, writes the Wall Street Journal. Of the 11 agencies that will be responsible for putting the Dodd-Frank laws into practice, six are either fully or partially funded by revenues and assessments from companies and/or entities that the Dodd-Frank agencies oversee. Three others are covered by congressional appropriations, while the watchdog Consumer Financial Protection Bureau will receive its money from the Federal Reserve, all of which was originally obtained from assessments and other revenues, rather than from taxpayer wallets.

Financial institutions will pay the government more

Banks, credit unions, investment houses and short term loan outlets are slated to pay the U.S. government more to operate under Dodd-Frank laws. This has raised concerns within the financial community that competitiveness will be hampered by over-regulation, and House Republicans have taken up that torch, using GAO report findings to support the idea that Dodd-Frank is too much for a slowly recovering economy to bear.

Breaking down the numbers, the GOP plans to highlight such things as the $975 million cost for the 11 agencies in the first year of the Dodd-Frank Wall Street Reform Act. That’s the baseline used to project the five-year, $2.9 billion price tag. Moreover, hiring 2,600 full-time workers (including 1,225 for the Consumer Financial Protection Bureau) will produce significant cost.

Other highlights from the GAO report

From the upcoming GOP presentation to the House Financial Services Subcommittee on Oversight and Investigations, the Journal points out the following:

• A Fed estimate from earlier this year projected a cost of $77.5 million to pay 290 full-time staff dedicate to Dodd-Frank implementation. Three new offices – the Office of Financial Stability Policy and Research, Financial Market Infrastructures Risk Analytics and Financial Market Infrastructures Oversight – were created to run Dodd-Frank laws smoothly.
• The first of the three Fed sub-offices, the Financial Stability Oversight Council, will pay seven full-time staff up to $7.9 million beginning in fiscal 2012.
• The Office of Financial Research has $74.5 million earmarked for use in fiscal 2012 and will hire 135 full-time staff to perform duties under Dodd-Frank.

Sources

Dodd-Frank Act Summary

Government Accountability Office

Wall Street Journal

GOP on what Dodd-Frank might cost small businesses