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Monday, August 29, 2011

ATT to consumers: Arbitration is great when it helps us, horrible when it does not!


In the fight to protect consumers and restoring access to justice one is rarely surprised by the level of corporate hypocrisy.  Yet, last week’s filing by AT&T managed to do just that. 
This spring, in AT&T vs Concepcion, the Supreme Court dealt a devastating blow to consumers’ ability to access justice.  In ruling that corporations can ban class actions where there is an arbitration clause in the contract, Post Concepcion, companies can potentially isolate themselves from court challenge with an arbitration clause in any contract. 
Follow closely the highly illogical logic.  To obtain this decision, AT&T, in Concepcion, argued that class actions in arbitrations shouldn’t be allowed because there was no meaningful judicial review of what arbitrators do; yet, they lauded individual arbitration as meaningful, efficient and economically beneficial to consumers.  Since consumers now can’t bring class actions in court or in arbitration, the only recourse for a consumer fighting against corporate wrongdoing is to file in arbitration. 
As it turns out though, AT&T only likes arbitration if only a few people actually use it.  Last week, in response to the initiation of multiple arbitrations filed by many individuals, AT&T sought an injunction against any attempts to arbitrate such claims because, purportedly, the relief sought is akin to class-wide injunctive relief which is outside the scope of what the arbitration agreements permit.  Translation: we only like arbitration if it works for us.  Because too many people recently tried to bring individual arbitration filings AT&T is now bringing its customers to court
Perhaps, consumer advocates were right all along.  Pre-dispute mandatory arbitration clauses are exculpatory; they are not meant to accommodate anyone but the corporation who wrote the clause.   

Written by Delicia Reynolds, Legislative Director, National Association of Consumer Advocates

Thursday, August 18, 2011

Foreclosure Reforms May Be Coming Soon


Now several years into the housing crisis more than 7.5 million homes have entered into foreclosure, with millions more still at risk.  Most federal government and private initiatives to stem the tide of foreclosure have fallen short in the face of continued poor economic conditions as well as reported abuse and misconduct of the largest financial institutions at each stage of the mortgage process from origination to foreclosure.  It is clear that the voluntary loan modification efforts, conducted under the Administration’s Home Affordable Modification Program or through the mortgage industry, have not been able to help enough affected borrowers.

Many homeowner advocates and consumer groups are looking to the settlement negotiations with the state attorneys general and the nation’s top mortgage servicers to begin to resolve many of the widespread problems in servicing and foreclosure practices.  However, recent news reports indicate that a 50-state attorneys general settlement is experiencing complications.  Attorneys General from New York, Delaware, Massachusetts and Nevada have voiced public concerns that a proposed settlement would protect banks from mortgage investigations that are not yet finished.

These states are conducting their own investigations into banks’ mortgage practices. For example, New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden are investigating mortgage securitization and recently filed a motion to intervene in the proposed $8.5 billion settlement between Bank of America and the Bank of New York acting as trustee of 530 Countrywide residential mortgage securitizations. Attorney General Martha Coakley of Massachusetts said in a letter last month that she will not sign on to an agreement if it includes “a comprehensive liability release’’ for mortgage securitization or conduct related to a mortgage database called MERS.

We continue to wait to see how the settlement negotiations play out.  We know that what little has been done to address the foreclosure crisis on a national level so far has not worked.  That is why a meaningful settlement is so important to help homeowners, investors and the economy as a whole.  

Ellen M. Taverna
Legislative Associate, National Association of Consumer Advocates (NACA)

Wednesday, August 10, 2011

S&P Selling Lemons; Are You Buying?

10 August 2011

If an auto dealer sold you a lemon, would you purchase another car from the same dealer?  Recent headlines have focused almost exclusively on the standoff between Congressional Democrats and Republicans over the national debt ceiling.  Tensions and debates started and stopped, rising to the final crescendo of the historic downgrade of the U.S. government’s credit rating by Standard and Poor’s (S&P), which occurred on Friday, August 5th, 2011.  Yet, this same company had a significant role in creating the financial crisis, rating subprime-backed toxics as AAA investments and that  joined with other players in the financial industry over the years to discourage more aggressive financial regulation.

 Interesting enough, the S&P was not the only one selling financial lemons last week.  In the rush to get a debt ceiling deal passed and get out of town, the Senate cancelled the first nomination hearing for Richard Cordray – recently nominated to head the Consumer Finance Protection Bureau.  Before Senators left town, however, Congressional Republicans didn’t miss an opportunity to block any chance of a recess appointment of a CFPB director by scheduling several "pro forma" sessions essentially to prevent the Senate from formally recessing.   Cordray’s nomination faces strong resistance from nearly all Senate Republicans who have promised to block any nominee to head the agency unless it is significantly weakened.   

Consumers are sick of lemonade.  This downgrade underscores the need for Congress to put partisanship aside and support a consumer cop on the beat to lead an independent and strong CFPB.


Delicia Reynolds
Legislative Director, National Association of Consumer Advocates (NACA)

Tuesday, August 9, 2011

And Why Should We Care What S & P Thinks!?!


09 August 2011

When I heard about S & P downgrading U.S. credit - only one thought came to my mind - you've got to be kidding me!! Isn't this the same company that threatened to downgrade or refuse to even rate mortgages in states that had the audacity to try and prevent the predatory lending crisis that we all saw coming. And isn't this the brilliant agency that gave AAA ratings to mortgages that weren't safe enough to use at the bottom of a bird cage.

Paul Krugman: http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?_r=1&hp

and Robert Reich: http://www.huffingtonpost.com/robert-reich/why-sp-has-no-business-do_b_920348.html

said it better than I ever could.

Ira Rheingold
Executive Director, National Association of Consumer Advocates (NACA)

Thursday, August 4, 2011

Will the FTC Finally Take Action Against Crooked Auto Dealers?

04 August 2011

As referenced in an earlier NACA blog post, we know that young military servicemembers often fall victim to predatory auto loans, many of whom are buying their first car and managing regular paychecks for the first time.  The Center for Public Integrity recently released an investigation that found senior military leaders worry that fallout from abusive loans can result in increased stress levels that affect “military readiness” and put security clearances at risk if credit scores are ruined.  A new study by the Center for Responsible Lending also shows that many of the same tactics that led to the mortgage crisis like creating incentives for brokers to mark-up the interest rate above what the consumer's credit would qualify for or charging consumers hidden fees continue to plague auto loans.

These problems are so pervasive that it was the focus this week at the Federal Trade Commission (FTC) roundtable in San Antonio, Texas.   This is the second auto lending roundtable that the FTC has held this year to gather information on consumers’ experiences with sales and financing at car dealerships.   The focus of the first day was specifically regarding military consumers’ financial experiences with auto dealers.  It also addressed the role of financial literacy in consumers’ understanding of the auto lending process as well as ending the second day with fair lending issues.  NACA members Dwain Alexander, Tom Domonoske, Rosemary Shahan, and Alberto Mesta Jr. were panelists at the FTC event.

The ball is now in FTC’s court to do something to protect consumers against abusive auto lending.  Unfortunately, auto dealers were successful in their lobbying efforts to exempt themselves from the authority of the Consumer Financial Protection Bureau (CFPB). While much of the FTC’s authority and power in the area of financial services has been turned over to the CFPB, the FTC is authorized to issue rules with regard to one significant group, auto dealers.  Furthermore, under the Dodd-Frank Act, the FTC’s unwieldy and cumbersome Magnuson Moss rulemaking proceedings were substituted with the more streamlined APA informal rulemaking procedures for auto dealers.

We hope that with the information learned about auto lenders’ predatory financing practices and unexpected add-ons at these auto roundtables, the FTC will finally act to issue new strong rules and take tough enforcement against dealers that engage in unfair lending practices against servicemembers and everyday consumers.

Ellen M. Taverna
Legislative Associate, National Association of Consumer Advocates (NACA)

A Comic Worth A Thousand Words

04 August 2011

Not Much Else Needs To Be Said:
















Wednesday, August 3, 2011

I Will Gladly Pay You Today For a Hamburger I Can Eat Tomorrow - Prepaid Service Contracts Can Be a Ripoff

03 August 2011

Most car dealers are honest, but some just plain aren't.

We just saw a consumer's sales paperwork from a Cincinnati dealership where the dealer packed into the deal an oil change package at a cost of $624. The oil change package promises free oil changes for as long as the buyer owns the car.

It reminds me of Wimpy's refrain, "I'll gladly pay you Tuesday for a hamburger today" but in reverse. The dealer has got the consumer paying up front a big chunk of money for oil changes that will probably never happen - and of course there's no refund either. It's like free money to the car dealer and a ripoff you need to watch out for.

First of all, the vehicle is a 2011 Chevrolet Cruze and according to the factory manual, it will only need an oil change when the car's computer says so. I've got the same kind of thing in our car and it usually says we need an oil change about every 7 to 9 thousand miles. Of course, many folks have grown up hearing the oil manufacturers and car dealers beating the drum that you have to "change your oil every 3,000 miles" but there's at least one long-time industry expert that says it ought to last at least 5,000 miles and even longer if you use the best oil out there. Let's assume the computer is broke and you just change the oil every 4,000 miles. That seems pretty reasonable (although you ought to get that computer fixed anyway).

Okay, what's the average miles driven per year in the U.S.? The federal government says 12,000 but a lot of (mostly car industry) others say it's 15,000. Let's take the middle and call it 13,500 miles.

So, how long does the average person keep their car? One mechanic expert said online that the answer was 4.7 years.

Okay, let's multiple 4.7 years by 13,500 miles ... hummm, let me get out my calculator. Okay, that means the average person drives their car 63,450 miles before they get rid of it, trade it in, or whatever.

If you wait for the computer to tell you when to change your oil, and you are like most of us and just use your car for normal city and highway driving, you'll probably have that computer tell you to change the oil just 9 or ten times. And if you just go ahead and change it every 4,000 miles, then you'll have a total of about 16 times. So the range is going to be 9 to 16 oil changes during your ownership of the car. So what's that cost you if you pay for it when you have it done, instead of up front?

Well, one Cincinnati car dealers says it's $20 to $25 (with a "free" car wash thrown in) - and it's not the Chevy dealer who ripped off the client whose paperwork we're looking at here - and there's lots of other places where the cost will run from $18 on up.

If you get your oil changed just 9 times, that's gonna cost you $225. If you get it changed 16 times, that'll cost you $400. And that "lifetime oil change" deal? Well, that car dealer charged $624.

So, you see, it's kind of like the car dealer saying "I'll gladly let you pay me today for a hamburger I'll give you next Tuesday" or - actually - in about 3 months. It's like free money to the car dealer.

When you go car shopping, just remember. Buying the car is the easy part. Getting out of the finance office financially alive, though, that's the hard part. Don't put up with getting ripped off. Read everything carefully before you sign anything. Scratch out or cross out anything you don't like. Don't buy stuff you don't need and stuff that is of no real value. And think real hard before you buy any of it.


Burdge Law Office
www.CarSalesFraud.com
Helping consumers protect themselves, everyday.