predatory loans Archives - FREE CONSULTATION

Consumers Being Lured Into Predatory Car Repair Loans

Posted on June 17, 2022by Admin

Predatory lending practices are becoming more common when it comes to companies attempting to “help” consumer fund car repairs. Many of the major car repair shops, including AAMCO, Jiffy Lube, Midas, Precision Tune Auto Care, Grease Monkey, and Meineke, are offering financial assistance to consumers who are not able to pay for their car repair expenses. The problem is, these car repair loans can end up charging up to 189 percent interest, according to a recent study by Consumer Reports.

Many states have laws issuing caps on interest rates to avoid predatory lending practices. However, companies have become wise to these laws and evade them by teaming up with a bank in a state that does not have an interest rate cap. This practice is also known as “rent-a-bank,” and it falls into a legal gray area.

Trump Administration Delays Consumer Protections for Abusive Payday and Car-Title Lenders

Posted on August 22, 2019by Admin

New consumer protections against abusive lending practices have been placed on hold by the Trump Administration for another 15 months. The protections that were enacted in 2017 were set to take effect this week are now being delayed, perhaps indefinitely. The reasoning behind the delay of this consumer safeguard: ‘It’s too troublesome for lenders.’

The delay is being viewed as just another example of the current administration stripping away consumer-friendly policies enacted under the Obama administration.

Bankruptcy Law, Credit, Timothy Kingcade Posts

Protecting Military Service Members from Predatory Loans Issue of National Security

Posted on February 20, 2015by Admin

Laws such as the Military Lending Act are intended to reduce service members’ likelihood of ending up in debt to predatory creditors by capping interest rates on loans at 36%; prohibiting “roll over” loans where the borrower pays off an existing debt with another loan (usually with less favorable terms); eliminating forced arbitration with creditors; banning creditors from requiring that they carve out an automatic amount of money from their paycheck to pay back your loan; and forbidding prepayment penalties for borrowers who pay back some or all of the loan early.

These rules, which protect our military are not just about doing something nice for our soldiers, it is an issue of national security. While it is unfortunate for any consumer to end up with revolving debt, there are particular concerns when the borrower is a service member. Someone looking for unauthorized access to military information or assets may be able to leverage that debt in their favor. This is why service members with significant debt on their credit reports may end up having their security clearance lowered or taken away. Some debt collectors are using this as leverage when trying to get service members to pay up, threatening to reveal their financial situation in a way that will negatively impact their position in the military.

According to the Consumer Financial Protection Bureau, some debt collectors have even threatened to tell the soldier’s superiors about the debt and when their status comes up for review. Such contact is illegal as outlined in the Fair Debt Collection Practices Act. Even if a soldier’s security clearance is damaged by debt, they can appeal their case to an Administrative Judge of the Defense Office of Hearings and Appeals, where they will be given a chance to explain how they ended up in debt and what they are doing to address the problem. This can include the soldier showing that they are currently living within their means; that they are making a good faith effort to resolve the unpaid debts; disputing debts that are not theirs, etc.

Click here to read more on this story.
http://consumerist.com/2015/01/09/protecting-military-servicemembers-from-predatory-loans-is-a-national-security-issue/

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Many States have cracked down on Predatory Payday Loans- But how are Lenders Still Evading the Law?

Posted on February 19, 2015by Admin

Several states have passed legislation, which regulate or completely outlaw payday loans. These types of predatory loans often charge triple-digit interest rates and tend to be a last resort for the poor and extremely desperate consumer. The business of lending to the low-income is a lucrative one and lenders continue to find loopholes.

Below are just five ways lenders have dodged current legislation:

1.) Disguising themselves as “other kinds” of lenders. Many payday lenders have become licensed as mortgage lenders, which operate under different rules and allow them to continue what they are doing.

2.) Altering the definition of “payday lending.” In 2006, Congress passed the Military Lending Act, which in part forbids lenders from charging active military households more than 36 percent interest on short-term loans. That provision has been something of a failure, according to the Consumer Financial Protection Bureau. The problem lies in the definition of a short-term loan. For example, the law regulates payday loans of 91 days or shorter; to evade this law, many lenders are offering loans just slightly longer than 91 days.

3.) Issuing simultaneous loans. Payday lenders are splitting up big loans into small, concurrent loan. For example, in Mississippi, two-week loans cannot exceed $250. Instead, lenders are giving four $100 loans at the same time. Whereas it is illegal to make a $400 loan due in only two weeks, the four $100 loans is perfectly legal.

4.) Referring to themselves as loan middlemen. Many payday lenders have registered themselves as “credit repair organizations.” These groups operate as middlemen, connecting customers to law-abiding loans from third-party lenders. So how do they make their money? By tacking their own fees on top of each transaction.

5.) Using Indian tribes to evade the law. Some payday lenders are partnering with Indian tribes to exempt themselves from local lending laws. These lenders tend to operate online, which allow them to offer their services nationwide- including states where payday lending has been banned.

Click here to read more on this story.

Bankruptcy Law, Credit, Timothy Kingcade Posts

Texas Borrowers Jailed for failing to pay back Predatory Loans

Posted on January 13, 2015by Admin

At least six people have been jailed in Texas for defaulting on their payday loans, according to public court records. Texas Appleseed, an economic advocacy group, found that more than 1,500 debtors face criminal charges in the state- even though Texas enacted a law in 2012 prohibiting lenders from using criminal charges to collect debts.

According to documents, 1,576 criminal complaints were issued against debtors in eight Texas counties between 2012 and 2014. These complaints were often filed by courts with minimal review and based solely on the payday lender’s word and inconclusive evidence. As a result, borrowers have been forced to repay at least $166,000, to the group found.

In 2012 the Texas legislature passed a law explicitly describing the circumstances under which lenders are prohibited from pursuing criminal charges against borrowers. In Texas, failure to repay a loan is a civil, not a criminal, matter. Payday lenders cannot pursue criminal charges against borrowers unless fraud or another crime is clearly established.

However, according to Texas Appleseed’s new analysis, payday lenders continue to routinely press questionable criminal charges against borrowers. In response to these findings, Consumer Financial Protection Bureau spokesman Sam Gilford said, “Consumers should not be subjected to illegal threats when they are struggling to pay their bills, and lenders should not expect to break the law without consequences.”

Despite being against state law, the data show that criminal complaints are an effective way for payday lenders to get borrowers to pay. Of the 1,576 criminal complaints Appleseed analyzed, 385 resulted in the borrower making a repayment on their loan. This deceitful strategy in using criminal charges to coerce money from borrowers means that payday lenders have a financial incentive to file criminal charges against debtors with alarming regularity — even if those charges are eventually and rightfully dismissed.

Texas is not alone in taking this approach. In 2011, The Wall Street Journal discovered that more than a third of states allow borrowers to be jailed, even though federal law mandates that loan repayment be treated as a civil issue rather than a criminal one.