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Middle Class Families vs. Big Banks

posted on 2011-09-09 by Elizabeth Warren

Do we need more proof Washington's not working for middle class families? We got it once again this week.

The big banks and their army of lobbyists couldn't stop the creation of a new Consumer Financial Protection Bureau, so now they are trying to undermine its work, enlisting their Republican friends on the Senate Banking Committee to stop the nomination of Richard Cordray to lead the agency -- just to try to slow up the agency from doing its work.

It's outrageous -- and we've got to hold them accountable.

I'm starting a petition: Sign on now to call on the Republicans on the Senate Banking Committee to protect the interests of middle class families, to confirm a director for the Consumer Financial Protection Bureau, and to let the agency do its work.

The goal of this new agency is to protect consumers by ending the tricks and traps and fine print banks have used to make it hard to understand and compare the costs of mortgages and credit cards. We need to hold Wall Street accountable for issuing the kinds of deceptive loans that nearly brought our economy to its knees in 2008.

I fought hard for these new protections and faced an army of lobbyists to hold the banks accountable. I am proud to have been part of the David vs. Goliath effort that led to the passage of this new agency. I was also proud to help set up the new agency over the past year as an assistant to the President.

We've made a lot of progress toward fixing the broken credit markets and preventing the next crisis, but the enemies of reform are at it again.

It's time for Republicans in the Senate to put the interests of hard working middle class families over the special interests of large financial institutions. We've got to speak out and make sure our fellow Americans know the truth.

Sign my petition to Senate Republicans now: Urge them to put the interests of families first and to allow this consumer protection agency to do its work!

We need clear rules to fix broken credit markets, protect consumers, and get our economy growing and creating jobs.

I've made my life's work fighting for middle class families and pushing back against special interests. I know what it means to live one pink slip or one health crisis away from economic disaster, because I did. That's why I'm working so hard to change things.

But I can't do it alone. I need you to stand with me, today. I need you to make this an issue that the Republicans can't duck.

Sign my petition to Senate Republicans now: Urge them to put the interests of families first and to allow this consumer protection agency to do its work!

And I'll make sure the petition and our signatures get delivered to the Republicans on the Senate Banking Committee.

Thanks so much for your help.




The Return of the Debtor's Prison

posted on 2011-04-04 by Bryce Covert

Judges have signed off on more than 5,000 warrants allowing borrowers who don't pay to be jailed since the start of 2010. Portfolio Recovery Associates, a debt buyer, made $44 million last year on $281 million in revenue, a 16% net margin.

You wouldn't be crazy to think that debtor's prisons are a thing of the past. Debtors have historically been treated pretty poorly: under Roman law, a debtor's body could be chopped up and the pieces given to his creditors (although they were more likely to be turned into slaves). So debtor's prisons, in comparison, might seem less harsh. But they were squalid and debtors weren't given any provisions. No sentences were set; you were there until you paid up. Borrowers owing as little as 60 cents could be jailed indefinitely. They were officially abolished in the United States in 1883.

But they're now making a comeback in a modern form. As the debt-collection industry buys up bad debt and then seeks payment, it's started relying on arrest warrants to get its way, throwing those who miss court appearances or don't pay in jail. The Minneapolis StarTribune was one of the first to report on the resurgence: after analyzing court data it found "the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009." The practice is inconsistent, varying state-by-state, and the actual punishment varies. But there have been some cases that stand out:

In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

It's impossible to say how widespread this is across the country as no national statistics are kept. But the Wall Street Journal recently reported on the same phenomenon:

More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed. Judges have signed off on more than 5,000 such warrants since the start of 2010 in nine counties with a total population of 13.6 million people, according to a tally by The Wall Street Journal of filings in those counties.

In Minnesota, arrest warrants have been issued for debts totaling as little as $85. It's not free to put people in jail, either, and taxpayer dollars cover the cost. Not to mention the distraction from pursuing violent offenders. Law enforcement "can't quickly access arrest orders for dangerous criminals because their computer system is clogged with debt cases," reports the WSJ.

And there's something else we're being distracted from. In Joe Nocera's weekend NYTimes column, he told the story of Charlie Engle, a marathoner who has been serving a 21-month sentence for mortgage fraud. Was he a lender who suckered borrowers into loans they couldn't afford? A banker who sliced and diced mortgages into securities with AAA ratings? No. He's a borrower who supposedly lied on two liar's loans (although as Nocera reports, the evidence for that is pretty fuzzy). So while Angelo Mozilo walks free, making a nice profit for his company and himself, Engle goes to jail.

Banks and debt collectors are making a tidy profit, while the customers they prey upon are being thrown in the slammer. "We have now imprisoned one generation of debtors after another," Samuel Johnson observed in 1758, "but we do not find that their numbers lessen." His words ring true today.




The long arm of Dodd-Frank

posted on 2010-10-12 by Jim Jordan

 In my last blog, I explored the ramifications to a bank’s borrowers and depositors when the FDIC takes over the bank. I now want to bring to your attention a recent and further expansion of the powers of the FDIC contained in the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” commonly referred to as “Dodd-Frank.”

Title II of Dodd-Frank has expanded the power and reach of the FDIC by granting the FDIC the right to take over certain non-bank financial institutions whose failure would jeopardize the U.S. financial system. The intent underlying this provision of the new law is to address the risk to our entire financial system by the failure of companies, such as Bear Stearns, which are not banks and thus not subject to the jurisdiction of the FDIC during the financial crisis that began in 2008.

Section 201 of Dodd-Frank defines such a non-bank financial institution as a company “predominately engaged in activities . . . that are financial in nature” (which requires that 85% or more of the company’s revenue be derived from such activities). Under section 203 of Dodd-Frank, before the FDIC can take over the company, the entity in question must be “in default or in danger of default” and the federal government must determine that collapse of such entity would have serious adverse effects on the U.S. economy. Federal regulators, including the Secretary of the Treasury, make these determinations, subject to an expedited limited right of appeal to the federal courts.

Unlike bankruptcy, which generally has the goal of successfully reorganizing and continuing the business of the debtor entity, the intent of the FDIC’s new power is to liquidate the assets of the seized institution to avoid a government bailout. Accordingly, many practitioners are concerned by the minimal judicial oversight and the absence of creditors’ rights protections of the type that are applicable in the bankruptcy context. Indeed, the conference committee report on Dodd-Frank states that the costs of liquidation “are borne first by shareholders and unsecured creditors, and, if necessary, by risk-based assessments on [other] large financial companies.”

Like much of Dodd-Frank, these provisions delegate substantial rulemaking authority to the regulators, and until the regulations are published, parties dealing with these large non-bank financial institutions will be faced with considerable uncertainty as to this issue.


Jim Jordan, a partner at Sutherland Asbill & Brennan LLP and chair of the firm's real estate practice group, would like to thank his colleague Justin Lischak Earley for his editorial assistance. The views above are those of the author and not of his law firm or any of its clients.



Read more: The long arm of Dodd-Frank - Atlanta Business Chronicle



DBA International Responds to Wall Street Journal

posted on 2009-10-20 by Roger Knauf

 

A Consumer Financial Protection Agency Would Offer Many Benefits

Your editorial "Another Scary Czar" (Oct. 8) appropriately airs many concerns that the financial services industry has about the creation of a Consumer Financial Protection Agency (CFPA). Our organization recognizes the problems and potential excesses CFPA poses. However, one regulator for both originating creditors and debt buyers could eliminate confusion for the financial services industry and consumers alike. CFPA must be given pre-emptive rule-making authority over states, or this super agency will be an ineffective paper tiger with little authority to create protection for consumers nationwide. Debt buyers today operate under state-by-state regulation, with different rules and attitudes about enforcement. Several states have sought short statutes of limitations—as little as three years—along with extinguishing the creditors' rights to collect overdue bills, hoping to protect consumers from the excesses of a small minority of debt collectors. Shortening the time period in which creditors can collect on past due debts further tightens credit standards in order to limit a lender's risk. It leaves many creditors with no choice but to rush to the courtrooms seeking judgments, with the cost of that unnecessary litigation passed on to the consumer. Credit is a simple idea that has become a part of our national fabric, from the loans that make purchasing a home possible, to the revolving credit that makes smaller purchases convenient. It's incredibly hard to protect simple ideas in a single piece of complex legislation. CFPA could be a viable solution to consumer protection, but with federal pre-emption, this one agency could have the ability to protect all consumers and businesses equally. Roger Knauf Executive Director DBA International McLean, Va.




Debt Collector Reacts To Forbes Story

posted on 2009-09-23 by Joel Lackey

  Dear Forbes and Mr. Hawkins, I am a very busy person and have never responded to a published article, but I feel compelled to comment on "How To Outsmart Your Debt Collector." The attitude of, "What can I get away with, or out of because of a meaningless technicality?" is exactly what our society does not need. As the owner of an 18-year-old collection agency, we are swamped with hyper-technical lawsuits from "ambulance chasing" attorneys and debtors who are searching for a way to get out of paying a legitimately owed debt. The number of these suits has increased dramatically over the past few years, and the merit of these suits are typically laughable with absolutely no damage suffered by the debtor. The primary reason for this is that attorneys have become aware of the fact that a third-party debt collector cannot win when sued. It is simply a matter of how bad you are going to lose. Even if you win in court, you have lost big-time in that it will likely cost you tens of thousands of dollars to prove your case. Let's see, settle for $4,000 even though you did nothing wrong and the charges against you were completely unreasonable or fabricated, or roll the dice to prove your innocence and spend $30,000 in the process. That is, $30,000 if you win, and by the way, you will have no meaningful chance of recovering any of your costs. The Fair Debt Collection Practices Act (FDCPA) is over 30 years old and largely regulates communication pertaining to debt collecting. Keep in mind, when FDCPA was crafted over 30 years ago, answering machines were not even used, let alone faxing, e-mailing, texting, etc. ... The FDCPA is in desperate need of being updated, and many attorneys take advantage of this fact. It is filled with vague language and gray areas that are ripe for misinterpretation, which is just wonderful for low-level plaintiff's attorneys who are looking to make a quick buck at the expense of those performing an honest and needed service. Most third-party collectors go to great lengths and expense in an effort to comply with the FDCPA. Third-party collectors, at least the vast, vast majority of us, are simply attempting to get someone, the debtor, to make good on his/her legitimate obligation. What's not good and noble about that? It seems that your article actually encourages bad behavior and "making out" on a trivial technicality. Just because you can get away with something does not make it right. And I doubt you would be so keen on technicalities if someone in your family was the victim of a violent crime and it was found that an arresting officer of the accused perpetrator mishandled two trivial words in reading Miranda rights to the accused. Maybe that headline could read, "How to Outsmart Your Arresting Officer After Committing a Violent Crime." I give you the benefit of the doubt in that most people do not see things from our perspective; however, your article is disturbing, and it is never "smart" to devoid yourself of your rightful responsibilities. It is simply immoral! Thank you, Joel Lackey
President
www.nationalcreditsystems.com





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