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Want to keep those credit lines?

Saturday, March 14th, 2009

You may well not be able to!  No matter how well you handle credit.

The stories are coming out all over the Internet:  A debtor has a bunch of credit lines they have handled well.

Their reward?  Credit line decreases (CLD).  Or an “offer” of cash as an “incentive” to close and pay off the account (AMEX is doing this).  Or…the creditor simply says “Bye!” one day.

The reason?  Cold feet…or too much red ink.  Creditors these days have a lot of one or the other.  Or both.  The tight financial markets, subprime mortgage “meltdown”–the economy in general– are making creditors reassess their exposure and risk to their shareholders (where applicable).

The standards used?  Nothing the consumer has much control over in a lot of cases.  These posts from Debtorboards , for instance, reveal a lot about the situation and the seemingly illogical way that OCs are trying to save themselves.

Posts like this one by Flyingifr:

http://www.debtorboards.com/index.php/topic,7867.msg55987.html#msg55987

American Express CLD’d me in November, giving the “times are tough” reason. The new, improved CL I had was about $200 more than my current balance at the time. Over the next 4 months I paid it down another $1000 without adding any new charged. They cut me again this month, again to about $200 more than I owed at the moment. At that time I figured out that Amex no longer wanted my business and I closed the account. Here are the reasons given (and the truth behind the “reason”

1. Your total debt is too high with American Express or other creditors.

My total debt is $50,000 lower than it was when you gave me the card, and $1000 less with Amex than it was 4 months ago. Now, all of a sudden, it’s too high? …

2. The balance on your American Express card is too high relative to your credit limit.

No kidding, after you reduced it twice in 4 months by almost 50%!!!!

3. The average amount of payments in relation to your overall balance on your American Express account(s) has been too low.

I have always paid more than the minimum payment you requested. …

4. Too many creditors have recently reviewed your credit.

No kidding… including you every month. …

5. Your credit score as provided by TransUnion. According to TransUnion, your score is based on the following factors in your credit report:

5A. Proportion of balances to credit limits on bank/national or other revolving accounts is too high.

According to my TU credit report, my utilization is 19%

5B. Length of time revolving accounts have been established.

My oldest, Wells Fargo, is 6 years old, and has a $50,000 line.

5C. Length of time accounts have been established.

I don’t know if this applies to the Wells Fargo account being my oldest at 6 years or their account at 1 year.

5D. Time since most recent account opening is too short.

Yeah – 1 year – it was YOUR account. …

My other Amex account was closed for this reason:

6. Your spending patterns.

Like they would know my spending patterns. I never used that other account – not once. …

Or this one by Kitten:

http://www.debtorboards.com/index.php/topic,7867.msg56011.html#msg56011

[That is the same "no-usage"] spending pattern that just cost me an Advanta card. I did a BT with it in 2006, paid it off in 2007, and never spent anything. The card was due to expire in a few months, so I WAS going to put it in my wallet to show some usage, but got the letter last week telling me it was closed.

“Steve” wrote:

http://www.debtorboards.com/index.php/topic,7413.msg53031.html#msg53031

These GEMB a-holes are really messing up nowadays! One of my sister’s cards for a Jewelry Store keeps saying she didn’t make her payment, when she paid it off completely. Then, they paid her a refund of $500 while reporting 30-days late to her credit file, and now is saying she owes them about $1000! Her CareCredit card (both GEMB) was CLOSED, and she is pissed!!!

For me, they sent me a BS letter lowering my Paypal credit limit to $100! True, I’ve never used the stinking thing, but, regardless, that bank is clearly going through some stuff!

Another from Flyingifr-Citibank this time:

http://www.debtorboards.com/index.php/topic,7413.msg53636.html#msg53636

[T]hey CLD’d me to an available credit of $125 from a line of $15000. Rather than give them the pleasure of continuing to CLD me as the balance came down I closed the account. Absolutely no attempt was made to keep the business.

It seems Doctor Evil thinks it’s a situation of “debtor is lying about their credit status and therefore the creditors are being sensible:

http://www.debtorboards.com/index.php/topic,7850.msg55858.html#msg55858

I gotta say, have various cards, amex included with various balances and have not had one credit limit decrease or one rate increase. In fact, although solicitations have decreased, amex is the most common one I get.

Not trying to say my creidit is better than yours, but why do you think this is?

Actually, the reason so many are getting the “35-story shaft” from creditors such as AMEX may not really be the fault of the consumer, but…

http://www.debtorboards.com/index.php/topic,7850.msg55861.html#msg55861

As Flyingifr replied in that thread:

Doc – My FICOS are in the mid 700′s and my utilization is 20%.

I think it’s more a case of I live in Arizona (#3 in the nation in foreclosures) and you live somewhere else with a much lower rate.

As in real estate, whether one gets a CLD or not may well depend on only one thing: Location, location, location.

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Posted in Commentary., Creditors, Flyingifr, bank rip-offs, economic "meltdown" | Comments Off

Unemployed? Getting U.C. on a prepaid debit card? Watch out!

Thursday, February 19th, 2009

You may also be getting something else:  Assessed bank fees simply trying to access YOUR money.

This Associated Press report (via. the  ‘Clarion-Ledger’ [Mississippi]), “Jobless hit with bank fees on benefits” (“Fair Use” claimed) tells of the unpleasant “surprise” some unemployed people have discovered when they try to use the “convenient” cards, or even ask the bank via. phone how to use them!

One unemployed engineer–Arthur Santa-Maria from New Mexico–found out the hard way just why banks such as Bank of America (B0A) have found these contracts with several states to administer the unemployment benefits via. prepaid debit card attractive:

[H]e was issued a Bank of America debit card …was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That’s when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge… [H]e decided to take out the rest of his money — $250 — and deposit it in his bank account.

Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.

Nice:  He gets charged to call them to ask how to use the thing.

Then he gets charged to get his balance on-line.

Then, to add insult to injury?  Mr. Santa-Maria gets dinged an additional penalty fee for making two withdrawals in one day!  And was his bank BoA?  If so, that was adding insult to injury.

Avoid this expense by “using the card in the right way”?  Not so easy:  Since many an expense cannot be paid with a debit card–such as the rent and utilities–and a single benefit payment (benefits are generally paid by the week) is likely less than the amount of the biggest bills over the course of a month which necessitates multiple withdrawals and re-deposits into an existing account, either at that bank or another one?   One can easily see the income potential for a bank like BoA.

But why would the states agree to a program that could be a political millstone around their necks?  After all, their unemployed constituents would not exactly be fond of being treated like little children–or welfare cheats–simply to get the unemployment benefits they are qualified for.

Unless…

A typical contract looks like the agreement between Citigroup and the state of Kansas… The state expects to save $300,000 a year by wiring payments to Citigroup …

Citigroup’s bill to the state: zero. The bank collects its revenue from fees paid by merchants and the unemployed.

It’s cheaper to wire money in bulk and let the private sector take on the expense…and the opportunity to make a big profit…of distributing the funds to beneficiaries.   After all, issuing individual checks is expensive and states are not adverse to saving beaucoup bucks where they can.  New Mexico certainly does:

The state saves up to $1.5 million annually by not printing checks.

Are these fees necessary?  Not really; the banks are open to administering the distribution of the benefits if the states would just pony up those administration fees.

You can guess what the states will NOT do.  Nor will they necessarily think the current fee schedule is “unfair”:

Bank of America spokeswoman Britney Sheehan pointed out that the fees charged in New Mexico are similar to those charged in the 29 other states with unemployment debit cards.

How prevalent is the issuance of pre-paid debit cards as the medium for paying unemployment benefits?  Thirty states now use these debit cards for paying benefits; eleven are considering switching to debit cards from paper checks. (The rest use checks or direct deposit.)

[See the original graphic here .]

Are there benefits?  Maybe, if one is among the “unbanked”:

[T]he cards can save money for jobless workers who have no bank accounts. In the past, these people had to use corner check-cashing shops that charged fees as high as 2 percent, or $6 for a $300 check. Now, they can swipe their cards at McDonald’s, Wal-Mart or elsewhere for free

A bargain for these people?  Hardly:  It’s very unlikely that businesses will give “cash back” without a purchase or even with one.

This also overlooks the fact that many of these banks may not be located where the unemployed worker is or can get to and the ATMs they can access may not be in the “network”.  That means more fees, potentially to at least two different entities (the ATM owner and the issuing bank).  Since the average fee for a withdrawal at a non-network ATM is already substantial (it averages around $2.00 a withdrawal where I am located (CT)), the fess for using a check cashing service may well be cheaper than the fees tied to the use of the debit card over time.

Also remember that “pre-paid” debit cards do not allow for any sort of “overdraft” privilege so there are no additional costs to the bank for such transactions.  Or, do they prohibit overdrafts?  Perhaps not: Seems that such a logical conclusion–don’t allow overdrafts–may not be in the best interests of the bottom line of some banks:

Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what’s on the card.

How nice:  Overdraft fees, too.

The only way to avoid all of this is to handle the debit card as if it were a paper check:

They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller.

And they claim this service is really for the “convenience” of the beneficiary? Since when is having to wait in line at a bank and then dealing with a teller (especially if the bank is not the one one has their account(s) at) “convenient”?

No…the reason for all of this bulldung is here:

Some banks…also make money on the interest they earn after the state deposits the money and before it’s spent. The banks and credit card companies also get roughly 1 percent to 3 percent off the top of each transaction made with the cards.

As an example, in Missouri, analysts figure the average recipient uses the card six to ten times a month:

…94,883 people claimed unemployment benefits through debit cards from Central Bank….If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000. If half of the cardholders also dial customer service three times in any given week…the bank’s revenue would jump to more than $521,000. That would yield $6.3 million a year.

As Rachael Davis from St. Louis, MO, recently unemployed said to the AP [after she had to pony up $6.00 for two $40 transactions against such a debit card]:

“It’s a racket. It’s a scam.”

Need I say more?

——————————–

Leonard, Christopher, “AP IMPACT: Jobless hit with bank fees on benefits”, The Clarion-Register, Mississippi, February 19, 2009.  Originally via the Associated Press; downloaded February 19, 2009 from http://hosted.ap.org/dynamic/stories/B/BANK_FEES_JOBLESS_BENEFITS?SITE=MSJAD&SECTION=HOME&TEMPLATE=DEFAULT

(“Fair Use” claimed for all quoted materials.)

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Posted in Budgeting, Commentary., Creditors, Government, bank rip-offs, scams and frauds, unemployment compensation | Comments Off

What exactly makes assigning AU status legal? Or not?

Wednesday, March 26th, 2008

I may need to explain a bit more about the legality of assigning AU status:

1.) If permitted by the contract terms(note those words), an account holder can assign AU status to anyone. One is not limited to immediate family members or those who are employed by the account holder, as the case may be unless the credit contract agreed to by the parties specifically states otherwise.

While I personally see an account holder’s assigning AU status to anyone as being “risky” and its extension to family members/acquaintances as being an outmoded way to build credit (it’s still useful in business for staff access to the business’ credit lines), that does not mean such move is illegal. It isn’t…if it stops here…but…

2.) The illegal action (if NOT permitted by the contract terms) is SELLING and/or LEASING/SUBLEASING that access to a third party.

3.) The remarks I made, and have made in the past, pertain to Situation #2:

Leasing/subleasing/selling that AU status, either directly or through a broker, is the “no-no” if not expressly permitted under, and according to, the terms of the contract with the credit issuer . If such an action is not permitted outright or such original contract with the credit grantor is silent as to whether “selling” AU status is permitted? Then any such action is in breach of contract and can easily rise to charges of theft, fraud, and other crimes if the credit grantor would wish to pursue them.

At the very least, this situation would leave the account holder liable for the breach. That, in turn, could result in rate jacking, “calling” the loan (demanding immediate payment in full), and lawsuits. The third-party broker and the AU “for pay” would likely also end up in court and made to account for their actions by the original credit issuer (and possibly any other creditors who relied on the “tainted” credit reports to make credit decisions in the “AU for a fee”‘s favor).

Not a pretty picture, is it?

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, credit scoring, law and the courts, scams and frauds, seasoned tradelines scam | Comments Off

Someone is a bit defensive about "seasoned trade line" sales…and should be.

Tuesday, March 25th, 2008

But not for the reasons she thinks apply…

It seems that a certain barking beagle from WV is howling about “other sites” once again at a certain “friendly”, “professional” credit repair board. Her remarks in this post are rather, shall we say, “revealing” of a lot more than she might wish:

….I felt it was worth mentioning that the AU status and the selling of trade lines is what the main concern seems to be with other forums pro-FICO 08 crowd. Those people are making it out to be a shady dirty unethical way of improving your credit scores …

No, indeed it does not matter how anyone got into a mess…although it seems that someone is rather on the defensive here. Why?

Whether helping your scores by disputing a tradeline, by filing suit , or by buying a seasoned tradeline, no one here makes a judgment about the character of any guest or member here for doing what they feel they need to do.

Uh, look at what I bolded : Yes, it’s legal to dispute a trade line, to file suit (if a CoA exists)…but…

That “buy a seasoned tradeline” bit? I would say there are both ethical and legal questions to this one:

1.) Creditors did not consider such actions (a form of underground reselling of access rights to a credit line without owning such account, which is what an AU (authorized user) is) when drawing up the contracts offered.

2.) Therefore, the creditor is suddenly facing exposure to unplanned-for losses and definently do not get a “cut” of the proceeds. A risk they may not even know they have been exposed to until it’s too late.

3.) The owner of the “seasoned trade line”? All they “own” is access rights and concurrent liability for any monies borrowed under the terms of the contract as agreed to. Since the “selling” of the AU status (access without liability) was NOT part of the contract agreed to between themselves and the creditor, the debtor (account holder) has NO legal right to resell this access to anyone.

4.) By reselling the access without the consent of the creditor to do so, they then are not only in breach of contract but they are fraudulently collecting monies that they are not entitled to under contract.

That’s called “theft” and “fraud” around these parts.

5.) The reseller (the “seasoned trade lines” broker) is re-selling something that the seller did not have the right to sell to begin with. In other words, they are, for all intents and purposes, selling stolen property. In the vernacular, they are “fencing” the stolen goods. They are also receiving stolen property. (Yes, a debt is property.)

All of that is against the law, too.

6.) The buyer of the “seasoned trade line” is therefore an accessory to theft and a purchaser of stolen goods. And, no, one cannot argue lack of knowledge that the item is stolen…the buyer of the trade line goes into the deal knowing full well what they are buying and therefore has no defense in court AND is risking not only losing their money to “buy” the trade line, but fines, legal defense fees…and their not-so-hard-earned “repaired” credit!

Never mind finding themselves ending up on the wrong side of “breach of contract” and possible criminal fraud charges from every single creditor that the “repaired by purchase” trade line defrauded by presenting the debtor in a better light than they really deserved to be.

For a pittance. You don’t really think that a reseller such as our howling beagle’s CRO friend hands over the entire fee (or even the bulk of it) to the one who sold the AU access to the good trade line(s) they worked so hard to earn…do you? :wink:

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, credit scoring, idiotic "experts", law and the courts, scams and frauds, seasoned tradelines scam | Comments Off

FICO08 seems to be stymied…

Monday, March 24th, 2008

It seems that someone at “Infinite Credit” is not-so-secretly gloating over the apparent decision of some CRAs to tell “Fair Isaac” to “Take ‘Fico ’08″ and Shove It!”. Or, rather is it really their decision because they are being so “considerate” toward consumers? Or, is it something else:

…[R]ead the Equal Credit Opportunity Act. Not saying that the CRA’s won’t allow the model to be applied to their data (EX may) rather, only that the model is invalid as presented. Creditors may use it and if they do, I can foresee some litigation…

The truth: The model may or may not be “flawed”–we don’t have enough information to know that and we won’t get it.

No matter, though: Fear of litigation is what’s stopping the CRAs from accepting “FICO08″. This has NOTHING to do with the validity–or lack of it–of authorized user status and really has nothing to do with the Equal Credit Opportunity Act, either. The reason I say this is simple:

AUs are NOT parties to the credit contract, but are simply given permission to access the credit line as proxy for the account holder(s) by the account holder (owner) AND the creditor is willing to accept this proxy access as part of the contractural terms.

There is NO law that requires any creditor to allow for such proxy access. All the ECOA does is require that everyone have the same opportunity to access credit in their own name.

“Equal Credit OPPORTUNITY” does NOT equal the opportunity to go “piggybacking” on the account of an actual party to the contract…no matter how the ‘piggybacking’ is justified. The fact that some family members who might benefit from this process would lose out if the AU status is “deep-sixed” by creditors is of no importance here.

The ECOA also does NOT require that this status and its benefits continue to be made available forever to those who already have it. In other words, AU status can be revoked, as long as it’s taken away from everyone!

So where’s the ‘beef’? Everyone suffers equally…Oh…someone’s “seasoned tradelines business” might suffer just a bit if FICO08 did manage to take hold? :grin:

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, scams and frauds, seasoned tradelines scam | Comments Off

The ultimate truth about how the civil law game is played, by "Oracle"

Friday, January 11th, 2008

A [now former] user at another board posted this gem in a thread on January 5, 2008 at 12:09. The OP’s question/post dealt with CAs and why collections is the way it is under the civil law especially once it get to litigation; the answering post by “Oracle” applies to collections, civil law and the courts in general and is great wisdom we all need to remember:

Civil law is not necessarily fair, but it is the way life is. Preponderance of the evidence is the standard. You are not required to stand up for the creditors rights, and it is no requirement that they stand up for yours.

The FDCPA provides a certain degree of protection of for the alleged debtor, but it is the alleged debtor’s responsibility to see that his rights are, in fact, both exercised and protected. The same is true for the state implementations of the UCC.

I would expect that the universal recommendations of the guru class, everywhere, would be never knowingly to take a default judgment, and to arm yourself with the knowledge necessary to make sure that if the other side does prevail in court that the preponderance of the evidence that they muster is complete and accurate and dispositive.

It’s called ensuring due process.

Would that it be different, but it isn’t.

Or, to put it briefly:  Stand up for your rights.  They wont.  Make them PROVE IT!

Posted in Collection law, Commentary., Creditors, Debt Collection., Legislation, Litigation, Uncategorized, law and the courts | Comments Off

Credit report "freeze"=No new TLs/Inquiries without your say-so?

Thursday, December 27th, 2007

Sometimes, yes…but not this time .

This user–J.A.M.– seems to not understand the FCRA and that there a nicety in contract law which insures the “credit report freeze” will NOT work the way they think it will. Their post in answer to the OP who found an Inquiry on their CRs for a CA (NCO). (The OP had investigated when they got a collection letter from NCO stating that a demand amount was “past due”.) :

If this account is not on your report, it might not be yours and also if they aren’t reporting it may be because it’s beyond the 7 year statue of Limitations for the credit bureaus to report. …

Uh, credit reporting–as I have said ad nauseum–is NOT a requirement for anyone. The lack of a TL means…the client (the creditor/client) simply did not place one. It does NOT show that an account is “not yours” nor that the account is necessarily past the SOLR (although both are possible).

Now, for more misinformation:

Also, if your govenor for your state has allowed consumers to put a freeze on all 3 of their reports do so immediately. If the freeze is put on, if a collection agency is not currently on your reports, then they can’t put an entry on without your authorization.

One word for this advice? Bullshit! Dangerously inaccurate crap at that:

1.) What in the heck does the Governor or any state have to do with this (other than sign the bill when it went into law)? Some, if not most, states do have an analogue for the FCRA, but the most important is the Federal law; 15 USC 1641 Sec. 605A(h)(1)(A)(i) states:

(A) Limitation on Users

(i) In general. No prospective user of a consumer report that includes an initial fraud alert or an active duty alert in accordance with this section may establish a new credit plan or extension of credit, other than under an open-end credit plan (as defined in section 103(i)), in the name of the consumer, or issue an additional card on an existing credit account requested by a consumer, or grant any increase in credit limit on an existing credit account requested by a consumer, unless the user utilizes reasonable policies and procedures to form a reasonable belief that the user knows the identity of the person making the request.

2.) A collection account is NOT a “new” account, even if the client had the account transferred or sold to them by the OC.

3.) It can also be presumed that the user–if they are a CA–has such reasonable policies and procedures in place to form a reasonable belief that they are known to the consumer. The dunning letter would likely be proof of this knowledge.

4.) A ‘freeze’ on one’s credit reports applies ONLY to new creditors, NOT to successors and assigns.

Like a JDB. Like NCO.

5.) Every credit contract I know of has a clause which gives assigns/successors full rights under such original contract. This makes the assigned debt effectively a “pre-freeze” existing business relationship for which permission need not be sought to change/continue/enforce the terms of such contract and for which the CA is, for all intents and purposes, “known” to the consumer.

6.) The credit report “freeze” is designed to help stop the opening of NEW credit accounts by preventing potential creditors from accessing the reports unless you give them permission to do so. It does nothing else.

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Posted in Collections, Credit repair., Credit report "freeze", Credit reporting and CRAs, Creditors, Debt Collection., FCRA, Identity Theft, Legislation | Comments Off

Payday lenders and military personnel: A case of "The Law of Unintended Consequences"?

Sunday, October 21st, 2007

Or, is the new payday lender interest limitations in Federal law actually a good thing by making these loans essentially impossible to get for military personnel, at least in UT. The “Deseret Morning News” article (via. “Overlawyered” ) gives a clue as to what is going on:

 

Payday lenders tells military ‘no’

Companies refusing loans at mandated lower rate

By Lee Davidson
Deseret Morning News

Published: October 2, 2007

© 2007 Deseret News Publishing Company | All rights reserved© 2007 Deseret News Publishing Company | All rights reserved

 

Utah payday lenders began refusing Monday to make loans to members of the military rather than give them much lower rates mandated by a new federal law. That new law, which took effect Monday, caps the annual interest on payday, car title or tax refund anticipation loans at 36 percent annually for members of the military and their families. A 2005 Deseret Morning News series found payday loans here averaged a whopping 521 percent interest, and car title loans averaged 300 percent.

Cort Walker, spokesman for the payday loan industry’s Utah Consumer Lending Association, said Utah payday lenders simply cannot make a profit if they charge only 36 percent — so they will decline to do business with members of the military.

“At 36 percent annual percent rate, the total fees we could charge are $1.38 per $100 for a two-week loan. That is less than 10 cents a day,” Walker said.

“Payroll advance lenders could not even meet employee payroll at that rate, let alone cover other fixed expenses and make a profit,” he said. Walker added that for such lenders to reach the break-even point they must charge about $13.70 per $100 loaned for two weeks.

Walker said Utah payday lenders will now ask potential customers if they are active members of the military. If they are, “we cannot offer them a loan,” he said.

The payday loan sharks…eh…lenders …can’t make money at 300% per annum plus?? Something is wrong here…and it starts with picking on our servicemen and women!

Walker said, “This law will force the members of the military to choose between more expensive alternatives like bounced checks or overdraft protections and even unregulated and more risky alternatives, like offshore Internet lending.”

And the military will then stop that, too. The military HATES it when servicemen and women get into financial trouble. Payday loan places, which have clustered around military bases like flies around shit, have been the source of more grief–and loss of manpower. The reason? Military personnel who end up with bad credit ratings/in financial trouble may are not able to get security clearances nor can be deployed overseas. The concern is that military personnel in financial trouble are likely to take bribes or sell out to the enemy…and this has happened!

All the Pentagon is doing is trying to “protect their investment” in personnel and training by helping military personnel (and their families) keep out of debt and available to deploy. Besides, at a 36% rate of interest, the banks can make money…lots of it! Even (the apparently late) “Aspire” card did not ask for a much higher interest rate than that…and we know the type of thieves…eh, businesspeople that own CompuCredit!!

“The protection the regulation offers is not a wall preventing a service member from getting assistance, rather it is more like a flashing sign pointing out danger and directing the borrower to a safer way of satisfying immediate financial need,” said Leslye A. Arsht, deputy undersecretary of defense for military community and family policy.

Subtitle F–Other Matters

SEC. 670. LIMITATIONS ON TERMS OF CONSUMER CREDIT EXTENDED TO
SERVICEMEMBERS AND DEPENDENTS.
(a) Terms of Consumer Credit.–Chapter 49 of title 10, United States
Code, is amended by adding at the end the following new section:

“Sec. 987. Terms of consumer credit extended to members and dependents: limitations

“(a) Interest.–A creditor who extends consumer credit to a covered
member of the armed forces or a dependent of such a member shall not require the member or dependent to pay interest with respect to the  extension of such credit, except as–
“(1) agreed to under the terms of the credit agreement or
promissory note;
“(2) authorized by applicable State or Federal law; and
“(3) not specifically prohibited by this section.

“(b) Annual Percentage Rate.–A creditor described in subsection
(a) may not impose an annual percentage rate of interest greater than 36 percent with respect to the consumer credit extended to a covered member or a dependent of a covered member.”…
“(e) Limitations.–It shall be unlawful for any creditor to extend
consumer credit to a covered member or a dependent of such a member with respect to which–
“(1) the creditor rolls over, renews, repays, refinances,
or consolidates any consumer credit extended to the borrower by
the same creditor with the proceeds of other credit extended to
the same covered member or a dependent;
“(2) the borrower is required to waive the borrower’s right
to legal recourse under any otherwise applicable provision of
State or Federal law, including any provision of the
Servicemembers Civil Relief Act;
“(3) the creditor requires the borrower to submit to
arbitration or imposes onerous legal notice provisions in the
case of a dispute;
“(4) the creditor demands unreasonable notice from the
borrower as a condition for legal action;
``(5) the creditor uses a check or other method of access to
a deposit, savings, or other financial account maintained by the
borrower, or the title of a vehicle as security for the loan obligation;

See especially U.S. C. Chapter 49, Title 10, Subtitle F, §670.987e(5). That is the applicable subsection covering payday and title loans and making them subject to the interest rate restriction.

Posted in Commentary., Credit Issuance., Creditors, Legislation, contracts, miliary personnel, payday loans | Comments Off

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