(1/21/2011) Erate Exclusive - "Wall Street Reform's" far reaching and Consumer Financial Protection Bureau is due to launch in six months, unfortunately giving the financial industry still more time to keep one step ahead of regulators and plant more landmines for unsuspecting consumers.
After years of predatory lending, mortgage fraud at organized crime levels, time-bomb
mortgages, gouging, and abusive conditions that helped bring housing and the
economy to their knees, consumers still can't walk through the economy's
financial district without fear.
Six months after passage of Wall Street Reform, officially the "Dodd-Frank Wall Street Reform and
Consumer Protection Act" the consumer financial market remains shrouded
in dirty-tricks, according to repeated scrutiny by the Consumer Federation
of America (CFA) and other consumer advocates.
The Dodd-Frank act created the bureau to ensure consumers get clear, accurate
information necessary to shop for mortgages, credit cards and other
financial products. It will also protect consumers from hidden fees,
predatory terms and deception -- when it's got teeth.
But since its inception, it's been bogged down in creating bureaucracy
and spewing reams upon reams of rules to governs banks and credit unions
with assets of over $10 billion and all mortgage-related businesses
(lenders, servicers, mortgage brokers, and foreclosure scam operators),
payday lenders, and student lenders as well as other non-bank financial
companies, including debt collectors and consumer reporting agencies.
Knowing the landmark legislation would take a year or more to evolve, the
financial industry, conducting business as usual, has been slipping through
loopholes and braving complaints and fines as the cost of doing
business.
"The scan shows that lenders continue to offer products and services
riddled with abusive terms and conditions, and some that are outright
illegal," said Susan Weinstock, CFA's Financial Reform Campaign Director.
"The CFPB will be up and running on July 21 and that day cannot come soon
enough," she added pointing to a host of "egregious practices and products"
reported since the act was passed.
• Inducements to sign
consumers up for overdraft coverage. New federal rules already
require consumers' consent before they are enrolled in overdraft loan
coverage. To skirt the law, many banks sent letters laced with fear
describing "dire" circumstances consumers would face without overdraft
protection.
• Pre-paid cards with high fees, but no protection. CFA
reports the Kardashian Kard came with a $9.95 ownership fee; $7.95 monthly
payment; $1.50 fee to add funds, and fees for services like customer service
phone calls, ATM withdrawals, and card cancellation, but has since been
pulled for bad publicity.
• Robo-signing foreclosure scandal. To speed up
foreclosures, mortgage servicing companies hired "robo-signers" to sign off
on thousands of foreclosure documents daily without checking the legitimacy
of the foreclosures as required by law. After state and federal officials
stepped in to stop the practice, some economists say the incident may
contribute to a double-dip in falling home prices as many of the temporarily
blocked foreclosures return as a bulge in the pipeline.
• Subprime credit cards with high fees and interest rates.
According to the credit-card comparison site, CardHub.com, the number of
credit card solicitations sent to subprime borrowers (those with FICO credit
scores between 620 and 660) has increased by up to 300 percent since June,
2010. The average interest rate on these cards is about 20 percent and they
often carry an average annual fee of $39.
• Internet payday lending. Payday lenders are marketing
loans online at rates and terms that mire cash-strapped consumers in repeat
borrowing cycles and debt at extremely high rates. Finance charges are in
the $25 (650 percent annual percentage rate-APR) to $30 (780 percent APR)
per $100 borrowed range, with built-in loan flipping in many contracts that
automatically roll over the loans. The loans exploit a loophole in federal
consumer protections.
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