Consumer Protection

Michele and Russell Poland's credit was shot, but they managed to buy their suburban dream home anyway. After a business bankruptcy and a home foreclosure, they turned to a rare option in this era of tightfisted banking - a subprime loan. The Polands paid nearly $10,000 in upfront fees for the privilege of securing a mortgage at 10.9% interest. And they had to raid their retirement account for a 35% down payment. Most borrowers would balk at such stiff terms. But with prices rising, the Polands wanted to snag a four-bedroom home in Temecula near top-rated schools for their 5-year-old son. By later this year, they figure, they'll be able to refinance into a standard loan.

A growing number of Indian tribes are getting into the payday loan business, saying they just want to raise revenue for their reservations while helping cash-strapped consumers nationwide. But federal officials suspect that, at least in some cases, tribes are being paid to offer their sovereign immunity to non-Indian payday lenders that are trying to dodge state regulations. So far, the tribes have prevailed over California and other states that have tried to assert authority over tribal lending operations.

Atty. Gen. Bill Lockyer warned Tuesday that the timing of new federal protections against identity theft threatens to expose California consumers to the very scams the laws were designed to prevent. Some of the new federal safeguards in a law signed earlier this month by President Bush will take effect in June, others on Dec. 1. However, the law prohibits states from enacting stricter protections in the field of consumer credit than those approved by Congress, a practice known as preemption.

Payday loans often trap consumers in a cycle of debt, a new report by the federal government finds. The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees - not including loan principal. A quarter of borrowers paid $781 or more in fees. "There is high sustained use - which we consider to be not only when a consumer rolls over the loan, but also when he pays it off and returns very quickly to take out another one," Richard Cordray, director of the bureau, said in a conference call with reporters Tuesday.

Bank of America Corp., which handles customer service on about 15% of U.S. home loans, has accounted for 30% of the mortgage complaints logged by the Consumer Financial Protection Bureau, according to a new database made public by the federal watchdog. The level of customer discontent - far greater than at home-lending rivals Wells Fargo & Co. and JPMorgan Chase & Co. - reflects BofA's struggles since its 2008 acquisition of Countrywide Financial Corp. in Calabasas. Countrywide had become the No. 1 mortgage firm by specializing in subprime and other high-risk loans.

Payday loans often trap consumers in a cycle of debt, a new report by the federal government finds. The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees - not including loan principal. A quarter of borrowers paid $781 or more in fees. "There is high sustained use - which we consider to be not only when a consumer rolls over the loan, but also when he pays it off and returns very quickly to take out another one," Richard Cordray, director of the bureau, said in a conference call with reporters Tuesday.

A new bill of rights for California car buyers provides grace periods for used-car purchases, caps dealer compensation on loans and features other provisions that are some of the strongest consumer protections in the country, according to state legislators and consumer advocates. The law, which went into effect July 1, applies to motor vehicles bought in California from a dealer for personal, family or household use.

WASHINGTON -- Credit card giant American Express Co. has agreed to refund $85 million to 250,000 customers and pay $27.5 million in civil penalties after federal and state regulators determined numerous violations of consumer protection laws. Among the alleged infractions were misleading some people who signed up for the company's Blue Sky credit card program into believing they would get a $300 payment they never received, charging improper late payments and deceiving customers about the benefits of paying off old debts, the regulators said.

In a nationwide crackdown on credit repair companies, the Federal Trade Commission said Thursday that 30 firms were being targeted, including a Woodland Hills company that had its assets frozen. Success Credit Services was accused in an FTC civil suit of violating the Credit Repair Organizations Act by contending that it could quickly clean up credit reports by removing legitimate negative items, such as late payments, bankruptcies and tax liens.

When you walk into your neighborhood fish market or grocery store, the display case is filled with "fresh" swordfish, "fresh" salmon, "fresh" shrimp, "fresh" petrale sole. But then you take your catch home and find that your "fresh" filet has a frozen center. Or your fork finds mush instead of firm flesh. How long has your dinner been away from the ocean? And what has happened to it since it left the waves behind?

WASHINGTON - Republicans have stepped up their pressure to limit the wide-ranging powers of the nation's watchdog over consumers' money matters. The head of a key House committee overseeing the Consumer Financial Protection Bureau said he would no longer accept the testimony of Richard Cordray, the bureau's director, before his panel because he doesn't believe Cordray was legally appointed to his post. Cordray, who delivered his semi-annual report to the Senate Banking Committee on Tuesday, was set to do the same in coming weeks in the House, as required by law. But Rep. Jeb Hensarling (R-Texas)

WASHINGTON — Got a beef with your mortgage company or loan servicer? Lots of people do, and thousands of them have been turning to a federal complaint hotline for action — or at least a quick response from the lender. The Consumer Financial Protection Bureau has opened up its bulging online complaint hotline files to public view, and the contents are startling: Although the CFPB's complaint window is open to various financial disputes — credit cards, student loans, credit reporting agencies, bank loans to consumers — by far the biggest source of complaints is home mortgages.

WASHINGTON - Federal regulators are conducting an extensive investigation into an alleged mortgage insurance kickback scheme that pushed up costs for home buyers dating from the mid-1990s. The Consumer Financial Protection Bureau, in disclosing its first action Thursday, said the investigation revolves around a scheme in which banks and other lenders required private mortgage insurers to seek backup insurance from lender-owned reinsurance companies. The backup insurance essentially was worthless and amounted to an improper payment to the lender by the mortgage insurer to acquire new customers, consumer bureau officials said.

Bank of America Corp., which handles customer service on about 15% of U.S. home loans, has accounted for 30% of the mortgage complaints logged by the Consumer Financial Protection Bureau, according to a new database made public by the federal watchdog. The level of customer discontent - far greater than at home-lending rivals Wells Fargo & Co. and JPMorgan Chase & Co. - reflects BofA's struggles since its 2008 acquisition of Countrywide Financial Corp. in Calabasas. Countrywide had become the No. 1 mortgage firm by specializing in subprime and other high-risk loans.

WASHINGTON - Senators questioned two of President Obama's nominees for key financial regulatory positions, and Democrats and Republicans appeared to like both of them. But only one of those candidates is expected to be confirmed. Mary Jo White, a former federal prosecutor, was on track to be confirmed as chairwoman of the Securities and Exchange Commission after Tuesday's hearing by the Senate Banking committee. However, the path for Richard Cordray, the director of the Consumer Financial Protection Bureau who has been renominated by Obama, was still blocked by Republicans who want changes to the agency.

WASHINGTON - Jeanette Ogle, a 92-year-old widow with a reverse mortgage on her house, got a huge birthday surprise recently: She did not lose her home at a scheduled foreclosure auction that had drawn scrutiny from federal and state agencies and consumer advocates. Because of obscure federal rules that critics say have snared unwitting elderly homeowners across the country, Ogle's home in Lake Havasu City, Ariz., had been set for foreclosure on Feb. 27, her birthday. But after interventions on her behalf by the federal Consumer Financial Protection Bureau, AARP and the Arizona attorney general's office, the auction was canceled.

Electronics retailer Sharper Image Corp. agreed Friday to stop selling personal breathalyzers and pay $1.2 million in restitution as part of a settlement regarding the devices. The company incorrectly claimed the digital breath alcohol testers were accurate to 0.001 of a percentage point of blood-alcohol content, according to tests by San Diego's Consumer Protection Unit. Sharper Image also agreed to pay $100,000 in penalties for inaccurately advertising the effectiveness of the testers.

Congress gave the Federal Reserve the power to enact rules to protect consumers from unscrupulous mortgage lending in 1994. But as the years passed and risky subprime loans inflated the housing bubble, restrictions on lenders never came. It wasn't until last summer, long after the bursting bubble triggered the deep recession, that the central bank adopted rules prohibiting unfair, abusive or deceptive lending practices. The 14 years it took the Fed to act are now cited by Obama administration officials, consumer advocates and lawmakers as a key reason for scrapping a fragmented regulatory structure spread across multiple agencies and replacing it with a new Consumer Financial Protection Agency.

WASHINGTON -- Senate Democrats said Thursday they were united in opposing Republican efforts to weaken the Consumer Financial Protection Bureau, and told President Obama they supported the renomination of Richard Cordray to head the agency. "It is time to confirm Richard Cordray as CFPB director to give the American people the protections they deserve and the marketplace the certainty it needs to help strengthen our economic recovery," Senate Banking Committee Chairman Tim Johnson (D-S.D.)

WASHINGTON - Nearly 4 out of 5 states have not enacted laws essential to enforcing new consumer protections in President Obama's healthcare law, less than a year before it is supposed to be fully implemented, a new survey indicates. Millions of Americans still stand to benefit in 2014 from protections in the Affordable Care Act, such as a new guarantee that consumers with preexisting medical conditions cannot be denied coverage. The law also limits how much more insurers can charge older consumers and requires health plans to cover a basic set of minimum benefits.