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CONSUMER FINANCIAL PROTECTION BUREAU RELEASES NEW TOOLS AS PART OF “KNOW BEFORE YOU OWE” MORTGAGE INITIATIVE – NO MORE MORTGAGE PAYMENT SURPRISE.
Want to know what you mortgage payment will be before looking for a house or signing all the loan documents? Consumer Financial Protection Bureau (CFPB) has online tools as part of its Know Before You Owe initiative aimed at helping consumers navigate the mortgage process and avoid a mortgage payment surprise. The tools provide an interactive, step-by-step overview of the mortgage process, help home buyers decide how much they can afford to spend, and help consumers explore and use the new Know Before You Owe mortgage forms. Creditors will have to begin providing the new forms on Oct. 3, 2015, making it easier for consumers to understand mortgage options and comparison shop between multiple loan offers.
“Our new mortgage forms reduce the information gap between lenders and consumers, shedding light on a process that often feels like a mystery,” said CFPB Director Richard Cordray. “It is time consumers have more power in the mortgage process, and our new forms and online tools will help make that a reality.”
“Owning a Home” Tools
The CFPB launched “Owning a Home” as part of its Know Before You Owe mortgage initiative. These tools are designed to help everyone (experienced and new buyers) navigate the mortgage process and make decisions. Mortgages are very difficult to understand: there are different loan term, loan type and interest rate. Consumers also need to consider how much they can afford to spend on a home.
These tools include:
- Guide to the mortgage milestones.
- Monthly mortgage payment worksheet.
- Interactive sample of the new Know Before You Owe mortgage forms.
- Resources such as the closing checklist, a loan options guide and a tool to help consumers explore interest rates.
Additional tools or resources:
- Owning a Home
- Your Home Loan Toolkit
- Housing counselor locator: CFPB’s search tool.
- A Know Before You Owe mortgage initiative visual presentation with video, photos and others.
The post Ever Surprised by the Amount of Your New Mortgage Payment? appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Santander Bank fined $10 million for illegal overdraft service practices.
The Consumer Financial Protection Bureau (CFPB) ordered Santander Bank, N.A. to pay a $10 million fine for illegal marketing of overdraft services and using a telemarketing firm that signed some bank customers for the overdraft service without their consent.
According to CFPB Director Richard Cordray “Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees. Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers.”
Why are these actions illegal?
Since 2010, federal rules have prohibited banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers specifically agreed. If consumers don’t agree, the banks may decline the transactions because of insufficient or unavailable funds, and cannot charge an overdraft fee.
The Bureau found Santander Bank’s illegal and improper practices included:
- Signing consumers up for overdraft service without their consent.
- Deceiving consumers that overdraft service was free.
- Deceiving consumers about the fees they would face if they did not opt in.
- Falsely claiming the call was not a sales pitch.
- Failing to stop its telemarketer’s deceptive tactics.
Enforcement Action – So what has CFPB ordered Santander Bank to do?
- Validate all opt-ins associated with the telemarketer.
- Not use a vendor to telemarket overdraft service.
- Increase oversight of all third-party telemarketers.
- Pay a $10 million penalty.
The full text of the CFPB’s consent order: http://files.consumerfinance.gov/f/documents/20160714_cfpb_Consent_Order.pdf
The purpose of the Consumer Financial Protection Bureau. The CFPB is “a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” For more information, visit consumerfinance.gov.
Youtube from CFPB: https://www.youtube.com/watch?v=BHMUVfjffhA&feature=youtu.be
The post Santander Bank Fined $10 Million for Illegal Overdraft Practices appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Toxic Transactions: How Land Installment Contracts Once Again Threaten Communities of Color
The National Consumer Law Center “NCLC” issued a report about what is called “installment loan contracts” or “agreements for sale”, calling them “toxic transactions”. The parties to these contracts are (1) the owner of the home/property and (2) a buyer. The owner agrees to sell the home/property to the buyer, but carries back a loan usually a long term loan, with a high-interest rate. Many times the reason for the “carry back” is because the buyer cannot qualify for a traditional loan. The report discloses that most of these contracts are focused on lower-income and minority buyers. This report goes on to point out that these contracts are “built to fail” and are “predatory in nature”, benefiting only the sellers, at the expense of the borrowers. Hence the term “toxic transactions”.
Buyers are lured by the dream of home ownership; many are first time home buyers. The buyers are misled or do not understand the financial burden caused by the high rate mortgage terms. In addition, most first time home buyers are not aware of the financial demand all home owners face – costs of repairs and maintenance. Many of these homes are already in extremely poor condition and quickly require thousands of dollars just to put them into livable condition. The sellers of these “toxic loans” count on the buyer defaulting so they can repossess the home, evict the owner and flip the house to another unsuspecting buyer. Article by the New York Times describing this nightmare.
The NCLC report focuses on a Dallas based company, Harbour Portfolio Advisors, one of the larger national firms to emerge in the contract for deed market. “The Dallas company has bought nearly 7,000 homes — most of them from the government-backed mortgage company Fannie Mae — and has been reselling them “as is,” often in need of major repairs, through contracts that critics contend lack basic consumer protections.” A great majority of these homes were located in predominantly African-American neighborhoods.
CURRENT OR POTENTIAL ACTIONS:
- The report urges the Consumer Financial Protection Bureau to take the lead in pushing for “comprehensive regulation” or pursuing enforcement actions against sellers who use predatory contracts.
- Requires that all land contracts be recorded, that they use the same standard contract and that sellers be required to pay for an independent appraisal and inspection of the home before a sale.
- The authorities in New York sent subpoenas to several companies this spring to determine how prevalent such contracts were in the state.
- The Missouri attorney general in late May issued an alert warning residents to be wary of abuses with contract for deed sales.
- New Mexico officials are also investigating reports that contract for deed home sales are targeting immigrant and Spanish-speaking populations, according to Hector Balderas, the state’s attorney general.
The post What are Toxic Transactions? Seller-Financed Home Sales appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Tax returns filed late – can the debt be discharged in bankruptcy?
Confusion reigns among the various courts responsible to interpret and apply the bankruptcy laws. The question is whether a debtor can use bankruptcy to discharge a tax debt when a tax return was filed late. Some court decisions have little to do with the law, but instead focus on the actions of the taxpayer. even the IRS does not support the conclusion of some courts (filing a tax return even one day late = non-dischargeable).
At this time the Courts of Appeals fall generally into two camps of thought:
1) The First, Fifth and Tenth Circuits have convoluted the Bankruptcy Code, federal statutes and case law in order to determine that a tax debt is not discharged if the tax return is filed even one day late.
2) The Fourth, Sixth, Seventh, Eighth and Eleventh Circuits follow a 1984 Tax Court decision known as Beard v. Commissioner, 82 T.C. 766 (1984). Of the four factors in Beard the above Courts generally focus on whether there was an honest and reasonable attempt to satisfy the requirements of tax law. Or in the case of the Eighth Circuit – determine honesty solely from the face of the tax return.
In Smith v. I.R.S. (In re Smith), 14-15857 (July 13, 2016) the Ninth Circuit joined the second camp, distinguishing itself from the 8th Circuit carve out. The court held that the return, filed eight years late and three years after the IRS’s deficiency notice, was not dischargable because it “was not an honest and reasonable attempt to comply with the tax code.”
The post Not Filing Tax Return on Time Can be Serious in Bankruptcy appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Nebraska is the 16th biggest state in the USA, but we rank 43rd in population density. In fact, Nebraska has more cows than people by a ratio of 3 to 1.
Bankruptcy is a specialized area of laws these days, especially after enactment of the Bankruptcy Reform Act of 2005. Attorneys in sparsely populated areas of the state generally do not handle bankruptcy cases, so our firm is routinely hired by clients throughout our big state. (This is actually a wonderful aspect of practicing bankruptcy law since we get to know folks in every square inch of the state and learn about their communities.)
One challenge we face in a state that stretches 430 miles across is getting documents signed and returned in a timely fashion. This is especially critical in bankruptcy cases since we must provide the court with a precise “snapshot” of a debtor’s financial situation on the day the case is filed. Bank account balances change daily, average income calculations change monthly, and the list of debts owed changes constantly.
Like an astronomer looking at a distant galaxy through a telescope, we report of a scene that no longer exists.
Preparing bankruptcy petitions is like laying a foundation on moving soil or taking a vivid 35 mm snapshot of a speeding race car when the nearest camera is 3 days away. It is hard to provide an accurate snapshot when the information is constantly in motion. Like an astronomer looking at a distant galaxy through a telescope, we report of a scene that no longer exists.
The challenge is to get a list of debts, income and property signed and filed with the court before the information becomes outdated. Bank account balances can vary by thousands of dollars in a matter of days and debtors may be penalized for providing the court with inaccurate information. Receiving documents mailed to clients for signature may take up to two weeks.
Many clients do not have ready access to fax machines as that technology seems to be fading away. To compound the problem, debtors demand their cases to be filed immediately to stop ongoing garnishments and foreclosure. “Move fast!”, says the client. “Be accurate!”, says the court. It’s a tricky balance.
Once solution to this time/distance problem is to obtain electronic signatures. Companies that offer digital signature services, such as DocuSign, allow attorneys to obtain virtually instantaneous signatures of any document.
Digital signatures are electronic signatures that are encrypted by computer technology, and encryption process protects the document from alteration. A document that is signed digitally provides an assurance that it was signed by the sender and receiver without alteration. Parties to a digitally signed document typically receive an executed copy of the document instantly. A digital signature is similar to a notarized document or a document embossed with a seal to ensure authenticity.
Digital signatures have been authorized in the United States by the Electronic Signature in Global and International Commerce Act of 2000, (ESGICA). 11 U.S.C. 7001. The Nebraska Digital Signatures Act was enacted in 1998. In short, these laws give digital signatures the same legal effect as a penned ink signature on paper (sometimes called “wet” signatures).
MAY A DEBTOR DIGIGALLY SIGN A BANKRUPTCY PLEADING?
Federal Rule of Bankruptcy Procedure 9011 governs signatures on bankruptcy documents. The Nebraska bankruptcy court has a local rule 9011-1 regarding signatures as well:
- Petitions, lists, schedules and statements, amendments, pleadings, affidavits, and other documents which must contain original signatures or which require verification under Fed. R. Bankr. P. 1008 or an unsworn declaration as provided in 28 U.S.C. § 1746, shall be filed electronically and may include, in lieu of the actual signature, the signature form described in subsection C.
- The attorney of record or the party originating the document shall maintain the original signed document for all bankruptcy cases at least one year after the case is closed. In adversary proceedings, the parties shall maintain the original document until after the case ends and all time periods for appeals have expired. Upon request, the original document must be provided to other parties or the Court for review (Fed. R. Bankr. P. 9011 applies).
May a digital signature qualify as an “original signature” under Nebraska Local Rule 9011-1? May a bankruptcy petition be digitally signed in Nebraska?
Some bankruptcy courts appear to require “wet-ink” signatures on bankruptcy pleadings, including the Southern District of Indiana, the Northern District of Oklahoma, and the District of Maine. However, even in in these districts it is not perfectly clear that the courts require “wet-ink” signatures on paper or if the courts are merely speaking to the requirement that bankruptcy attorneys retain originally signed documents, whether in ink or digital format, for a period of years. Courts seem to use the term “wet” signatures to mean “original signatures” while overlooking the fact that digital signatures may also be used original signatures as well, thus causing confusion.
The Nebraska local rule 9011-1 does not use the term “wet” or “wet-ink” in reference to signatures, nor does Federal Rule 9011. So, in the absence of local rule explicitly requiring wet ink signatures on paper, it would appear that digital signatures do qualify as original signatures in Nebraska bankruptcy cases since both federal and state law validate digital signatures. However, a prudent attorney will seek out clarification on this topic from the court before utilizing digital signatures in bankruptcy pleadings.
Image Credit
BANKRUPCY COURTS SHOULD ALLOW AND PREFER DIGITAL SIGNATURES TO WET INK SIGNATURES ON PAPER
There are several reasons why bankruptcy courts should encourage the use of digital signatures:
- Documents signed digitally cannot be altered. Each page of the digital document is encrypted and stamped electronically. If altered, such a document will display an error code to warn that unauthorized changes were made to the document.
- Every page of the document is verified. Unlike wet ink signatures on paper, it is not possible to attach altered pages to the signature page. A wet ink signature on paper may be attached to 60 or more pages of bankruptcy pleadings, and there is no guarantee that the attached paperwork has not been changed.
- Digitally signed documents are instantly sent to all parties who signed. If the document is altered each party has evidence of the alteration.
- Allowing digital signatures encourages attorneys to improve the accuracy of bankruptcy documents since signatures may be obtained instantaneously if errors are discovered.
- Debtors get immediate full copies of what they signed. This makes it difficult for them to claim ignorance of what they signed.
In short, allowing digital signatures improves the integrity of court documents. It supplies debtors with full copies of what they signed immediately. It encourages attorneys to make last minute corrections and improvements to the documents. Digital signatures essentially provide something similar to a document where every page has been signed and notarized.
Selfishly I confess that digital signatures would be more convenient to use in our practice, but it is clear that they offer a superior level of transparency as well. The notion that wet ink signatures are more trustworthy is simply not supported by the facts. Hopefully Nebraska can adopt a local rule confirming the propriety of using digital signatures on bankruptcy pleadings.
Image courtesy of Flickr and Leszek Leszczynski
There are five major areas of concern when considering filing for Chapter 13 bankruptcy. 1) The first concern is the type of debt. There are certain debts that can be eliminated in a Chapter 13 at less than 100% payback. There are other debts that cannot be eliminated and must be paid back+ Read More
The post Chapter 13 Bankruptcy Considerations From A Legal Perspective appeared first on David M. Siegel.
N.J. forces mom to pay son’s student loans: Murder ‘does not meet threshold for loan forgiveness’ for guaranteed student loans.
Marcia DeOliveira-Longinetti’s son was murdered last year. After working through the aftermath of this horrific event – arranging a funeral, dealing with the police and closing out her son’s life she turned to the co-signed student loans. The federal student loans were written off. But not the New Jersey student loans Marcia co-signed, thus making them guaranteed student loans.
“Please accept our condolences on your loss,” a letter from that agency, the Higher Education Student Assistance Authority, said. “After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.”
Her experience with New Jersey, which runs by far the largest state-based student loan program in the country, is hardly an isolated one. New Jersey currently has $1.9 billion in student loans. What differentiates them is their extraordinarily stringent rules: repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.
Read the full article
Additional articles and links:
Need help paying your federal student loans?
Disability Discharge for Federal Student Loans
Student Loans, the Latest Nightmare and How CFPB is Helping
Sometimes Paying Zero is Still Too Expensive for Students
You have heard me say this before – student loans are the next financial balloon waiting to pop. the student loan debt now exceeds 1.4 trillion dollars. There is little done to hold the schools responsible to handing out loans to anyone who asks. Why would the school stop? This is guaranteed cash flow. The school is not held accountable to educate the students BEFORE handing out thousands of dollars.
Students also share the blame. Some students see this as “free money”. They have not been educated, either at home or school, how to set and stay within a budget. As with many of us, myself included, students use the student loans to buy luxury items or to live in a more expensive dwelling. Doesn’t everyone need a gold watch?
Lastly, the government and private lending institutions should shoulder a large portion of the blame. No one is watching these folks, except the Consumer Financial Protection Bureau.
Now I realize this is a generalization and does not reflect all schools, all students or all lenders. My point is that all of us need to be responsible for our actions, government included.
The post Guaranteed Student Loans Result in Nightmare for Parents appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Payday loan industry has successfully avoided regulation by shifting from type of loan service to another.
What is a payday loan? The payday lender industry includes payday loans, title loans, short-term loans or quick money loans. Each of these services have had the same result – lending to very low income, charging outrageous fees and interest with the goal to keep the poor borrower on the financial hook as long as possible or until bankruptcy is filed.
An example: in 2010 Arizona voters banned traditional payday lending. Before the ink was try on the new law payday loan stores converted into auto title loan stores. The end result was the same – extremely high interest rates (some as high as 500 to 700%). Some of the payday loan stores moved to Indian reservations, to the Internet or to other countries, all with the intent of avoiding regulation.
The heyday of these bottom feeders will be over early next year. The Consumer Financial Protection Bureau “CFPB” is doing its job in establishing regulations to protect the consumer. The new regulations will require that payday loan companies first determine a customer’s ability to repay the loan within the term of the loan before entering into the loan. The regulations will also limit the amount of times a customer could renew the loan (some people are perpetually paying on the same loan taken out several years earlier). According to a 2014 study by the CFPB approximately 60 percent of all loans are renewed at least once, with almost a quarter of the loan renewed at least seven times. According to industry officials they expect payday loans to drop between 59 percent to 80 percent.
Read more from CFPB about payday debt traps
Given the history of the payday loan companies I can only assume they will find another way to continue gouging the most vulnerable of consumers – low income, single parents and minorities. I try to avoid political statements, but cannot help myself. In our wonderful country why do some find it acceptable to prey on those who cannot help themselves? Should we stand by while the greedy put shackles on those who are just trying to feed their family? Perhaps Jesus (oops now I am bringing in the church) had the right idea – destroy the benches of all money changers in the Temple.
Now, I am not implying that all lending should be stopped. I am suggesting that the CFPB is correct that over-reaching lenders need to be regulated so as to protect consumers (perhaps from themselves). It is sad that the only time we see regulations or laws enacted is when bad people do bad things. Personally, after thirty years in the field of consumer related laws, I am pleased that a regulatory agency like the Consumer Financial Protection Bureau is committed to its name – consumer protection.
The post Payday Loan Industry Finally Being Forced To Clean Up Its Act appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
The federal Fair Credit Reporting Act (FCRA) provides a consumer with certain rights regarding his file in the credit bureau. The FCRA was enacted to promote the accuracy, fairness, and privacy of information in the files of a credit bureau.
Credit bureaus may generally report accurate negative information on your credit report for up to seven years and bankruptcy information for up to ten years. Under the law, credit bureaus are also called "credit reporting agencies.". You may obtain a free copy of your credit report once every 12 months from each of the three major credit bureaus at www.annualcreditreport.com.
A consumer has the right to dispute inaccurate or outdated information on his credit report under the FCRA. The credit bureau and the provider of the information (such as the credit card company or other lender) have the duty to correct inaccurate or outdated information. You may dispute the information on the credit report with both the credit bureau and the provider of the information. The credit bureau must generally investigate the disputed item within 30 days. When the investigation is complete, the credit bureau must give a person the written results.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
The federal Fair Credit Reporting Act (FCRA) provides a consumer with certain rights regarding his file in the credit bureau. The FCRA was enacted to promote the accuracy, fairness, and privacy of information in the files of a credit bureau.
Credit bureaus may generally report accurate negative information on your credit report for up to seven years and bankruptcy information for up to ten years. Under the law, credit bureaus are also called "credit reporting agencies.". You may obtain a free copy of your credit report once every 12 months from each of the three major credit bureaus at www.annualcreditreport.com.
A consumer has the right to dispute inaccurate or outdated information on his credit report under the FCRA. The credit bureau and the provider of the information (such as the credit card company or other lender) have the duty to correct inaccurate or outdated information. You may dispute the information on the credit report with both the credit bureau and the provider of the information. The credit bureau must generally investigate the disputed item within 30 days. When the investigation is complete, the credit bureau must give a person the written results.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com