5 Ways consumers benefited from the crash

2:30 PM benefited, consumers, crash No Comments

| By Mitch Lipka, MSN Money

Regulatory amendments adopted after the financial crisis yet the average American with a few extra protection from predatory lenders.

There was a good thing after the devastating stock market crash in 2008 was built, it was the increased consumer protection, which came as a result.

The massive taxpayer-funded bailout, which was necessary, to avert the collapse of the global financial system changed the political climate in Washington. Under pressure from angry consumers, Congress adopted two important legal texts: the credit card Act of 2009 and the law establishing the consumer financial protection Bureau or CFPB.

"The crash led perhaps the most important consumer protection since deposit insurance: the establishment of the CFPB" Ed Mierzwinski, federal consumer program director for the consumer advocacy group U.S. PIRG said. "We win no game changer consumer protection, when we have provided impact as the collapse."

Needless to say, millions of consumers suffered a severe blow in the 2008 meltdown that destroyed millions of jobs and bring down prices. The economy is struggling still with anemic growth and a weak job market while the housing market only now recovering.

For the consumer, the playing field is a little more level than five years ago. While some of the resulting changes remain to be seen, here are five most important ways the consumer have benefited are:

No. 1: credit card companies can no longer change, interest rates and terms at any time without notice.

For years, winning more and more drove the credit card industry from its customers. Use some large banks had to crash the collective anger pushed legislators some checks and balances to take create from consumers.

"The CARD Act's greatest achievement to House gotcha, beat down", said Daniel Ray, editor-in-Chief of CreditCards.com. "Banks had rates more honestly since the CARD Act set." She not himself was able to lure customers at artificially low rate, then leave, she met with a gotcha and trotting prices then. The industry has become more transparent, and consumers know what the deal is pure."

No. 2: Card companies are now required to disclose how long it would take to pay off credit card debt, by only the minimum payment.

Nothing was taken over by banks with this change. But now that the banks are required, set out how long it would take to pay off a credit balances, consumers get an honest picture of what they are facing.

"Map one of the provisions of the law says there must be a table that calculates the amount of interest you pay and how many months-really years-it takes you pay off your balances when you only the minimum payment figures", said Bill Hahn, CEO of LowCards.com. "In black and white on each statement see and be personalized is an incentive for the people paying more than the minimum payment and debt-free faster."

No. 3: Consumers have a place to turn with their complaints about financial institutions.

Consumer had problems with credit card companies in the past, it was difficult to complain, to find a place. No single government agency was tasked with testing the consumer problems with card issuers have or help to fix them. By establishing the CFPB, consumers have not only one place to turn with their credit card issues, but also an agency that looks at financial products of all kinds, including student loans.

"The CFPB is still under construction, but its greatest impact was in transparency," Ray said. "The Agency has put a spotlight on some of the worst practices in the lending industry, and it is on his way to a one-stop-shop for consumers. Previously, consumers had to play 'Find the regulator.' "

No. 4: Young adults no longer bombarded with credit offers.

Would for years whenever you go on a college campus, you'd see that promotional gifts such as pizza and frisbees hung as bait to get registering students for credit cards. But the CARD Act reined this kind of marketing.

"Issuers no longer in a position to set up a table in a University campus and give away free stuff", Hardekopf said. "That led to all sorts of young adults getting a card and ring, a significant amount of debt that hurt their credit scores for years."

No. 5: card issuers and credit across the economy is subject to regulatory oversight are responsible.

Not only consumers have a place to turn when they complain, financial firms also provide, if they did something wrong to have.

In the last year ordered the CFPB, American Express, capital one and discover a combined $425 million consumers pay after an investigation revealed that the unused products such as credit insurance companies marketing were. The CFPB examines credit report errors and makes public thousands of consumer complaints about mortgages, student loans and credit cards.

"Without a doubt, if we can hold the CFPB we continue to have a marketplace and financial system that better addresses the interests of the industry with the interests of their clients," said honoured.

He said that financial institutions, this view of parts not. "they absolutely don't like the idea of an Invigilator with just a job: protecting consumers."

Read More

Consumers, after brief rest, start saying 'charge it' again

4:00 AM after, again, brief, charge, consumers, saying, start No Comments

WASHINGTON -- U.S. consumer credit rebounded strongly in August after posting its first decline in nearly a year in July, Federal Reserve data showed on Friday.

The rebound would likely be interpreted as a short-term boon to growth, though it could bode ill for household balance sheets if it is not accompanied by a rise in real wages, which have been stagnant.

U.S. consumer credit rose $18.12 billion, the biggest gain since May, following July's revised $2.45 billion decline. Revolving credit, which mostly measures credit-card use, climbed $4.2 billion. Nonrevolving credit, which includes student and auto loans, rose $13.92 billion.

Credit has been expanding almost continuously since mid-2010 as the country recovered from the 2007-2009 recession. The decline in July was the first drop since August of last year.

A sharp drop in the U.S. jobless rate to 7.8 percent in September, reported on Friday by the Labor Department, suggested the economic recovery, while weak, continues to muddle along. (Reporting By Pedro Nicolaci da Costa; Editing by Neil Stempleman)

Copyright 2011 Thomson Reuters.

Read More

Consumers confident but wary about the economy

10:04 PM consumers, economy No Comments

Spencer Platt / Getty Images

Shoppers walk down a street in the Soho neighborhood of New York City. Consumers are moderately confident about the economy, but remain wary, a new survey shows.

American consumers were just as leery about the economy in April as they were in March, but at least their confidence didn't drop, according to a widely-watched survey released Tuesday.

The Conference Board reported that its Consumer Confidence Index remained virtually steady this month, coming in at 69.2 versus 69.5 in March. That's well below the 90 that's needed to indicate a healthy economy. It's also below the 70 that economists were expecting, The Associated Press reported, but well above the low of 40 it hit last October.

"Overall, consumers are more upbeat about the state of the economy, but they remain cautiously optimistic,” said Lynn Franco, director of The Conference Board Consumer Research Center.

Jon Huntsman, (R) former Utah Governor discusses the state of the U.S. economy, political policies and leadership, and the challenges facing China.

Read More

Consumers fret about paychecks, upbeat about jobs

11:41 AM about, consumers, paychecks, Upbeat No Comments

Americans turned less optimistic about the economy in early February on worries about falling income even as their outlook on the jobs market rose to a record high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 72.5 in early February from January's 75.0, which was the highest level since February 2011.

The latest figure fell short of the median forecast of 74.5 among economists polled by Reuters.

"The personal financial situation of consumers remained dreary," survey director Richard Curtin said in a statement.

An improving financial situation was reported by just 23 percent of all consumers surveyed in early February, down from 29 percent in January and last year's 30 percent.

One in four families reported declines in income in the early February survey.

While more households were worried about shrinking paychecks, they reported a record level of optimism about job prospects. Last week, the U.S. Labor Department said the monthly jobless rate fell to 8.3 percent in January, a near three-year low.

"More consumers spontaneously mentioned hearing about increases in employment and job opportunities than ever before recorded in the long history of the surveys," Curtin said, adding that positive reports of job growth set a record in early February as they have doubled over the past three months.

The survey's barometer of current economic conditions fell to 79.6 in early February from 84.2 in January. Analysts had expected a figure of 84.5.

The gauge of consumer expectations dipped to 68.0 from 69.1. January's figure was the highest level since May 2011 and for February, analysts had predicted an even higher reading of 69.5.

In an uncertain economic climate, consumers shaved their short-term inflation outlook, but raised their expectations on long-term inflation.

The survey's expectations for one-year inflation slipped to 3.2 percent from 3.3 percent in January, while the survey's five-to-10-year inflation outlook rose to 2.9 percent, matching the level set a year ago, from 2.7 percent in the previous four months.

Copyright 2011 Thomson Reuters.

Read More

Giant Eurobank accused of gouging US consumers

3:06 PM accused, consumers, Eurobank, giant, gouging No Comments

The accusations are as outrageous as they are plentiful:  Hundreds of “robocalls” --  in one case, 800 to a single person -- to collect auto loan debts;  illegal repossession of cars from active duty military deployed overseas;  late fees assessed three years after the fact and then compounded into $2,000 or $3,000 bills; harassing calls to friends, neighbors, co-workers -- even children -- on cell phones. And now, a flurry of lawsuits filed around the country, and lawyers fighting over potential clients.

The defendant in the lawsuits is Europe’s largest bank, Banco Santander S.A., which is preparing to make a big push into U.S. retail banking. But many Americans already have been introduced to the Spanish financial powerhouse, a first encounter that many liken to a nightmare.

Santander’s most visible presence in the U.S. market is the result of a buying spree begun in 2009, when the bank began purchasing billions of dollars in auto loans -- many of them subprime loans for used cars -- from Citibank, HSBC and a host of other banks. 

But if the cascade of complaints and lawsuits are accurate, Santander Consumer USA has tried to immediately turn those receivables into lucrative assets by assessing massive penalty fees and repossessing cars under dubious circumstances.

"They have a good business model if you are a crook," said lawyer Johnny Norris, who filed one of the first class-action cases against Santander Consumer USA, the Spanish bank's U.S. arm.  "It's a very lucrative but unlawful business plan. ... It's really terrible and we're trying to put a stop to it."

Laurie W. Kight, vice president of communications for Santander Consumer USA, said the company would not consent to an interview for this story.

"(Santander) declines to comment at this time," she said in an email.

While the Internet has been awash in complaints about Santander’s debt-collection practices for months, legal proceedings are just now reaching a fever pitch.  Norris said he's filed more than 100 individual cases against Santander and he's considering hundreds more.  One of his clients was called more than 800 times by an automatic dialer, he said, alleging that the calls represent a violation of the Telephone Consumer Protection Act. If so, each call could net a penalty of $1,500 for plaintiffs.

"Our cutoff is 100 calls" when the firm screens potential new clients for Santander lawsuits, he said.

The class-action case, with seven lead plaintiffs, was filed in federal court in Alabama.

One plaintiff, Leslie Haynes, purchased a used BWM in 2007 from a dealer in Birmingham, Ala., according to court documents. A year later, Santander collectors began peppering her with demanding calls. The lawsuit claims agents misled her about the balance of her loan, tried to trick her into making additional payments, then refused to stop calling her at work. Agents also repeatedly frequently called relatives, even harassing her sick stepfather and his live-caregiver in the months before he died, it alleges.  The court filing does not indicate whether Haynes had made all payments on time.

Another plaintiff in that case, Victor Shortt, alleged that Santander agents repeatedly called his minor daughter's cell phone, ignoring pleas to stop. A third, Jacob Glassmoyer, said Santander officials called his parents' cell phones repeatedly, at a time when one of them was undergoing chemotherapy, according to the lawsuit.

Norris said Santander routinely uses another tactic after acquiring a loan from another lender: It searches records for past slip-ups -- such as a payment that was late by a few days -- then assesses fees retroactively, sometimes years after the fact. By calculating the loan forward from that point, and "cascading" the fees, the firm sometimes claims clients owe thousands of dollars in late fees, and demands immediate payment or threatens repossession.

Another class-action case, filed in a federal court in California, accuses Santander of ignoring the Servicemembers Civil Relief Act, claiming the firm repossesses cars while active duty military are deployed overseas and refuses to lower interest rates to 6 percent, as required by law. The plaintiff in that case, Sgt. Charles Beard of Lemoore, Calif., serves in the U.S. Army National Guard, and was deployed abroad on Aug. 16, 2008. On Feb. 3, 2009, Santander repossessed his Kia Sportage, even after the bank was informed that a court order is necessary to repossess a deployed soldier’s car. 

"One of defendants’ representatives told Mrs. Beard that she would go to jail for a stolen car if she did not turn in the vehicle," the lawsuit alleges. Santander also ignored complaints from Army legal assistance, and sold the repossessed auto at auction in March of that year, according to the lawsuit.

The lawsuit claims such violations by Satandar of the Servicemembers Civil Relief Act are routine.

"Defendants have a policy of failing to verify, prior to undertaking voluntary repossession, whether the person whose vehicle is subject to repossession is serving on active duty," it claims. "Defendants routinely ignore service members’ rights under the SCRA and wrongfully repossess their cars without obtaining the requisite court orders."

Used car loans might seem like a hard way for an international bank to make money, but they've actually proven to be more resilient and recession proof that other forms of lending -- particularly mortgage lending. Cars, at the moment, appear to be better collateral than homes and are much easier to turn into cash after a borrower defaults. That's part of the reason that Santander was the most profitable bank in the world outside of China last year, and has been on the acquisition trail since the financial meltdown.

The Spanish bank is Germany's largest auto lender, and has enormous auto loan portfolios across Central and Eastern Europe, said Mauro Guillen, a Wharton Business School professor who wrote a book about Santander called "Building a Global Bank."

"Auto loans are low margin, but high volume gives you a good return," he said. "It's a typical way for Santander to enter a market."

It's also lucrative. Santander Consumer USA earned a tidy $455 million in 2010.

"It's a cash cow for them," Guillen said. 

Santander has big designs for U.S. retail banking. It completed the acquisition of Sovereign Bank, largely a regional lender based in the Northeast, in 2009.  It recently received approval to convert from a savings bank to a national bank, and plans to begin rebranding 747 Sovereign branches as Santander early next year.

But as the bank brings its impressive balance sheet to the wider U.S. market, it apparently has also exported its reputation for mistreating consumers.  Last year, a flurry of news stories in the British press labeled Santander "Britain's worst bank,” after it registered more than 160,000 complaints from account holders in a recent 6-month period, by far the most of any bank. The complaints typically involved frustrations with fees and customer service.

Santander usually receives the most consumer complaints in Spain, too, Guillen said.

Santander's move into U.S. auto loans has been aggressive.  In November 2009, it acquired $1 billion in loan receivables from HSBC for $900 million. It raised the stakes much higher in June 2010, when it announced it purchased $3.2 billion in loans from CitiFinancial, and also agreed to service another $7.2 billion in auto loans still held by CitiFinancial.

Combined with a series of acquisitions from smaller lenders, and the loans it inherited from Sovereign, and analysts estimate Santander's U.S. auto loan holdings at $17 billion.  

The banks' preference is for high-interest, subprime auto loans, which were reliably lucrative before the financial collapse, Guillen said. 

They still are, argued lawyer Norris, because of what he says are the bank’s illegal practices.

"They are taking these subprime loans while the loan is still active.  They are piling that loan as high as they can with fees, making as much money from the borrower as they can," he said. "Then they repossess the car, and sell the car.  Maybe there's a difference between the outstanding loan amount and the price they get at auction, but guess what:  Santander didn't pay 100 cents on dollar for the loan. They bought the car at a discount to start with."

The Internet is awash with complaints of unfairly repossessed cars and sudden demands for lump payments by Santander. Many focus on confusion around the transfer of the loan to the Spanish bank from the original lender.  Thomas Tupper of Irvine, Calif., purchased his car through Citibank, but when the loan was transferred to Santander in September 2010, he says he ended up with nothing but trouble. Automated direct payments were received by Santander, and credited to his account, but he was still reported late to the nation's credit bureaus and assessed late fees by the bank.  Then, when he sold his car, Santander cashed the payoff check but still reported him as late. That forced him to make extra payments on the loan, even after the loan was paid off. He's only received partial refunds of the overpayments. (For more on his trouble, click here)

Donovan Rogers, 34, of Abeline, Kansas, said Santander repossessed his 2005 Dodge Durango this year after purchasing his loan from the original lender. Rogers said he wasn’t alerted to the bank change. He claims he continued to send payments on time via money order to his initial lender, but Santander would later tell him it never received the payments. He says was unaware of the problem until weeks before the car was repossessed in May. He says he received nearly 500 phone calls from the firm during that time, and was threatened with criminal charges. Even though the pickup was sold at auction in June, he said he still receives calls from Santander demanding payment.

“They've made my life a mess.  When I tell people my story, they are in awe,” Rogers said. “I thought I was alone until I found all these other stories online. I’m living a nightmare, but now I’ve seen stories of people with much worst nightmares than mine.”

Accusations of unfair fees and repossessions don't figure into the lawsuits Santander is facing, however.  Lawyers are flocking to the cases because of potentially lucrative violations of the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act. Santander agents routinely fail to identify themselves, use obscenities, call people other than the actual debt holder and reveal to those people details about the debt, the lawsuits allege -- all direct violations of the latter law. The bank has also used automated dialing systems and prerecorded messages directed to cell phones without permission, the lawsuits allege, a violation of the Telephone Consumer Protection Act. Willful violations of that law offer a $1,500-per-phone-call bounty to the plaintiff.

Missouri lawyer Gary Green, who is also readying a series of lawsuits against Santander, thinks that the bank many have just overlooked consumer law when it raced to expand its U.S. presence.

"I think that they've stumbled in without doing research," he said. "And they figured the claimants would act like most claimants and not realize they had any rights.  They figured they could take advantage of these people thinking individually they would have no voice. And maybe they just didn't read the federal law."

Even outside of consumer issues, Santander's reputation is not pristine. Alfredo Saenz, the bank's No. 2 executive, received a pardon last month from lame duck Socialist Party officials in Spain, sparing him from a previously imposed lifetime ban from working in banking. In 2009, he was convicted of making false criminal accusations in an attempt to recover a $5 million loan dating back to 1994. 

The bank's CEO, Emilio Botin, and other relatives are the focus of a tax evasion inquiry by the Spanish government involving a secret Swiss bank account that dates to the days of the Spanish Civil War in the 1930s.

Santander also operated a so-called "feeder" fund that essentially acted as a front to entice investors for disgraced Ponzi scheme operator Bernie Madoff; clients lost a staggering $3 billion.  The bank says it, too, was duped by Madoff, and has already paid $235 million to the fund set up by Madoff trustee Irving Picard. It has also offered nearly $2 billion worth of stock to victims to settle pending lawsuits.

But Guillen, who wrote the book on Santander, thinks it might be unfair to single out Santander for alleged aggressive debt collection tactics.

"What bank doesn't have a lot of complaints right now? I can't imagine (alleged illegal tactics) are a part of an explicit business plan," he said. "Are they doing this more than other banks? Banks are desperate for cash right now. I don't know if Santander stands out as being more aggressive than other banks."

And despite the complaints and lawsuits, he predicted the bank will successfully expand into U.S. retail markets.

"And I would predict other acquisitions for them," he said.

Read More