The Corporate Observer : Washington D.C. Class Action Lawyer & Attorney : Steven Berk Law Firm : Consumer Protection, Corporate Abuse : The Corporate Observer Blog

Here is a Federal Agency willing to walk the walk.  The FTC recently announced that Countrywide, one of the nation’s largest mortgage lenders and now a member of the Bank of America family was fined $108 million for improperly pursuing foreclosures and charging excessive and unfair fees to lenders being thrown out on the street.  Where is the pity?  How bout showing a little humanity. Nope.  Instead, Countrywide took advantage of folks that who had no resources to fight back.  As just an example or two, Countrywide’s egregious action included fees for  a $300 lawn mowing and the approval of a trustee’s fee that exceeded the going rate by more than 400%.   Shocking ... Not.

But no need to dwell on Countrywide’s disgraceful, dishonest, shameful (insert your own sentiment here) behavior.  There is a bright side.  The fighting and fit FTC; going to bat for the American public. As Gretchen Morgenson rightly pointed out in her column on Monday, the wheels of justice have been turning painfully slowly but we at Berk Law are delighted to see justice any time – even when it shows up late to the party.

So, three cheers for the FTC for reaching this settlement.   No doubt thousands of aggrieved homeowners will be made whole. The United States Trustee, the investigative arm of the Department of Justice that assisted the FTC in this matter plans to look into similar predatory practices committed by other now-defunct mortgage-lending banks.

There are undoubtedly scores of lenders whose predatory actions, despite harming thousands of citizens, have gone undetected and unpunished. We hope that investigations and results such as this recent settlement with Countrywide scare some sense into banks and other financial institutions who are in a position to make mischief for homeowners while lining their own pockets.

 

Assisted by Zachary Kady

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The dangers of indoor tanning have been undeniably proven.

 A recent study at the University of Minnesota adds to the ever growing wealth of research connecting indoor tanning to skin cancer. According to a CNN article published today, the Minnesota study found that using a tanning bed just once increases the risk of contracting melanoma by 75%. One time, just one time.  Those who regularly use tanning beds run the risk of doubling, or even tripling their risk of developing melanoma.

·          1 time = 75% greater risk of skin cancer

·          Regular use = 200%-300% greater risk of skin cancer

The CNN article claims these new studies recently presented to the FDA are likely to bolster efforts to regulate indoor tanning. We have written on this subject numerous times in the past. We sure sure hope they are right. 

Click here for a link to our post on the status of indoor tanning with the FDA. Click here for a link to all of our past posts on indoor tanning.

This growing body of evidence linking tanning to cancer cannot be ignored. The dangers of indoor tanning have been undeniably proven.  It is no longer debatable whether or not indoor tanning causes cancer – it does. Important issues like this do not come around every day. If you would like to help us pursue this matter please contact us at info@berklawdc.com.

Assisted by Zachary Kady

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The New York Times reported yesterday that the Federal Reserve will move to restrict banks’ abilities to charge overdraft fees.

The Fed’s new rules will have multiple impacts on consumers’ relationships with banks:

1.      Most importantly, all consumers will be notified of debit card policies and fees in clear, easily comprehendible language.

2.      Starting July 1, 2010, banks will no longer have the ability to charge exorbitant overdraft fees on most common purchases.

3.      Customers will have to opt-in to overdraft protection policies in order to be subject to them.

4.      If a consumer does not opt-in to overdraft protection, he or she will simply be denied at the register for purchases over their available balance.

Overdraft fees will still be charged for purchases made by check and on recurring debit card payments (i.e. auto-pay monthly bills). However, purchases at retail stores will not be subject to overdraft and withdrawals at ATMs will trigger a warning that a customer is about to overdraft. Only if the customer chooses to continue with their withdrawal will they be charged an overdraft fee at an ATM. According to the NY Times, the distinction between types of payments was made in response to consumer satisfaction surveys. These surveys concluded that consumers are less aggravated by fees on checks and recurring payments than by fees on retail purchases and ATM withdrawals.

Currently, consumers can be charged overdraft fees upwards of $30 for purchases far less than the fee. Under these current conditions, a $3 cup of coffee that pushes an account below zero could cost a customer 10 times that amount in fees. As we described in earlier blogs, overdraft fees are essentially high interest loans made without the consent of the consumer. The Fed’s realization of this injustice and action to remedy it, however dilatory, is highly praised.

This recent move is a step in the right direction, and one The Corporate Observer has advocated for in the past (see: “Big Banks Strike Again: High Interest Loans Disguised as Protection”). Consumers’ rights to full disclosure in the banking world are of paramount importance and the Fed deserves congratulations for its responsible action.

Assisted by Zach Kady

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Generally, you are NOT responsible for the debts of the deceased

Jed Sorokin-Altmann is an Associate at Berklaw who specializes in consumer protection. He provides insightful and helpful tips to vulnerable consumers who are too often preyed upon by professional con artists and even reputable corporations. Jed's message is thoughtful and concrete. We welcome his new voice.

Assisted by: Jed Sorokin-Altmann

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All consumers, not just those who bank at the largest banks, deserve protection from irresponsible practices of banks. Yesterday, the House Financial Services Committee took a giant step away from that critical goal when it passed an amendment excluding over 97% of banks from the statutory reporting requirements to be performed by the soon-to-be-created Consumer Financial Protection Agency (“CFPA”).

The excluded banks are small banks and most credit unions. Small banks are classified as those with assets less than $10 billion or credit unions with assets less than $1.5 billion. To be sure, there are some valid arguments for imposing additional regulation on only the larger banks and financial institutions. Notably, they control about 80% of the assets.

But every financial institution must take some portion of the blame for the runaway greed, exotic financial instruments, and poor practices rampant in the financial sector over the past decade. Congress must not allow high-priced lobbyists to cabin this issue on the doorsteps of a few money centered banks. While the near collapse of the financial world’s banking industry may have been the result of the extreme conduct of a few large banks, excusing smaller banks and labeling their investment practices “less risky”, runs a foul of Congress’ duty to protect all consumers.

The Miller-Moore amendment and those who support it cite small banks’ inabilities to cope with costs related to annual examinations as reason for exemption. Isn’t this the same argument that big banks have been making for decades? The banking industry has always claimed that oversight will hurt business and decrease profits. Look where that argument got us!

Forgoing examination of 97% of our banks is not the answer, but rather the seeds of a new problem. Instead of giving these smaller institutions a free pass, the new regulator should tailor exams to each specific type of bank. For example, Citigroup and Bank of America should be subject to a very rigorous exam. Local community banks or credit unions should not get a pass, but simply be subject to a less onerous testing. Has Congress forgotten that all banks need tougher regulations in order for all consumers to be protected?

Assisted by: Zach Kady

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What happens when a consumer needs to pay bills, but doesn’t have a credit or debit card? A new and increasingly popular answer is prepaid debit cards. This new business is booming. The New York Times reported on October 5^th that over $8.7 billion was loaded onto prepaid cards in 2008 alone. These cards offer the convenience of a debit/credit card without the credit check or bank account fees. Unfortunately, this is not the whole story. There is, quite often, a long list of fees including:

·      Activation fees

·      Convenience fees

·      ATM withdrawal fees

·      Balance Inquiry Fees

·      Purchasing Fees

Keep in mind; this is by no means an exhaustive list of fees connected with most prepaid cards.  I am not the first to raise the issue that some large companies may be taking advantage of their target markets: college students, and the uncreditworthy.

Of course the companies issuing the cards (small upstarts like Green Dot, Net Spend, and Account Now) have the right to a reasonable profit. We should also remember that without charging interest, fees will certainly be included in any of their schemes. My problem with the current system is that consumers are generally unaware of these fees which often end up considerably devaluing the money put on a card. This is a growing problem in the financial world and I think it’s time we found a solution.

Let’s look at an example:

This is a short sample of the fees that a consumer would incur with normal use of the MiCash prepaid MasterCard.

A deposit of $500

- $9.95 activation fee

- $17.50 (10 ATM withdrawals)

- $5 (5 ATM balance inquiries)

- $10 (20 purchases)

-$8 ($4 per month for “monthly maintenance”)

_________________________________________

Net Value: $449.50

A consumer using this card would have lost 10% of his or her initial payment just in fees by using this card normally for a two month period. Is this fair? Well, there certainly is precedent in the check cashing and pay-day loan industries for charging outrageous fees just for people to access their own money. However, even these questionable industries seem more willing to disclose fees than prepaid credit card companies.

Though prepaid cards may still be a better option than high interest credit cards or certain bank fees, many consumers rightfully feel that they are being charged fees without being made explicitly aware of them. The MiCash program in particular discloses the fees in the “terms and conditions” which are not directly posted on the application page – rather a user would have to follow a small link at the bottom of the application. This method of disclosing fees is perfectly legal, but is still deceiving. Nowhere on the application page does MasterCard mention any fees. In fact the only mention of fees is in reference to a lack of outrageous overdraft fees. However, it is clear in the fine print of the “terms and conditions” that overdraft or “negative balance” fees do indeed exist with the MiCash program.

We are not seeking an end to prepaid debit cards, nor are we seeking an end to all fees. All the common person is seeking is a fair representation of products, a clear warning that fees will be deducted from a prepaid card. Federal oversight should be the next step towards ensuring full and fair disclosure of fees. The industry is relatively new and has not been subject to a substantial amount of governmental review. Perhaps legislation will be the best way to guarantee disclosure. The card should warn customers that any initial deposit will actually have a lower net value. Hopefully, this clear warning will help assure that consumers are not tricked into allowing big banks and credit card companies to take their hard-earned money.  

Assisted by: Zach Kady 

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Securitization of life settlements is yet another dangerous development for Main Street. Is this really what we need right now?

It just doesn't stop. Despite repeated lessons and tales from the brink (the collapse and near collapse of Lehman Brothers and Bear Stearns to name just a few), Wall Street is at it again. What now, you ask? Wall Street is securitizing life insurance policies. What the heck is that?

A recent New York Times article details "life settlements"--which have Wall Street executives' mouths watering. The premise is this--elderly people sell their life insurance policies for fractions of what they are worth to banks. Wall Street then repackages these policies into bonds, grabs fees and sells them, netting dealers even more fees--and creating another speculative industry. This time betting on when grandma will die. And what's next derivatives on these bonds.

Securitization of life settlements is yet another dangerous development for Main Street. Industry sources explain that insurance companies are able to maintain premium rates based on the profit they make from policy lapses. If life settlements are securitized and traded, Wall Street will pay the premiums and the insurance companies will be out the easy profits from the millions of policies a year that lapse. Ultimately they will be forced to raise premiums to continue earning profits. Who, then, will suffer the true consequences? Main Street, once again.

Is this really what we need right now? In a time when the economy is inching towards a recovery from a crisis caused by precisely what is presented here: the opportunity for a new overaggressive and under-regulated speculative market? And who is going to be able to regulate these new instruments of greed so that Main Street does not become the victim?

We have a better idea for Wall Street.

Go back to basics. Finance renewable energy products, figure out an innovative way to finance new infrastructure--so sorely needed. Maybe even come up with a new micro-loan product that works for hard working Americans who want to start small businesses.

Let's let the securitization of life insurance policies die a peaceful death.

Assisted by David Martin and Jessica Begen.

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