Economic News

Federal consumer watch dog needs vice-grip bite

by Broderick Perkins

(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.

 

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