consumer finance

The difference in net worth between the typical white family and black family is $131,000, ProPublica's Paul Kiel reports. As a consequence of that racial wealth gap, black families have smaller financial reserves to fall back on and more likely to be sued over a debt or land in jail because of unpaid tickets and court fines.

Kiel and a reporting partner found that debt-collection lawsuits in three U.S. cities were twice as high in mostly black communities than they were in mostly white communities. 

He suggests reform to debt collection laws, such as reducing the amount of income subject to garnishment or setting a small sum in bank accounts as off limit to collectors.

Banks may be running out of time to get their money back in New York foreclosure cases because some cases could become time-barred by a six-year statute of limitations, The New York Law Journal's Andrew Keshner reports. One Long Island judge ruled that the statute of limitations starts when the entire mortgage balance was declared due in full but a bank failed to file its second mortgage complaint within six years.

Elizabeth Lynch, supervising attorney for MFY Legal Services' foreclosure project, told Keshner that it is rare that homeowners have not made some post-acceleration mortgage payments, which can start the statute of limitations clock again.

There are approximately 92,000 foreclosure cases pending in New York.

Homeowners who lost their properties to foreclosures are starting to bounce back and are qualifying for new mortgages, The Wall Street Journal's Annamaria Andriotis, Laura Kusisto and Joe Light report. More than 5 million families lost their homes to foreclosure between 2007 and 2014, but foreclosures and other negative credit events come off credit reports after about seven years. “'The dark shadow of the foreclosure crisis is finally beginning to fade,”' Mark Zandi, chief economist at Moody’s Analytics, a unit of Moody’s Corp, told the WSJ. '“That should be a positive for single-family housing and, by extension, for the broader economy.”'

New York Law Journal's Mark Hamblett reports that the New York Court of Appeals is going to answer a question posed to it by the Second Circuit: does New York City's law governing debt collection apply to law firms? A federal district court judge held "in 2013 the law does not apply to plaintiff law firms that attempt to collect debts, and violates a provision of the New York City Charter because it purports to grant New York City the authority to grant or withhold licenses to practice law," Hamblett reports.

The New York Times' Michael Corkery reports that legislators in at least eight states have "voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit." There has been a lobbying push by the consumer loan industry, which argues that caps on interest rates have not kept pace with the costs of doing business. Efforts in North Carolina initially failed because of opposition from military leaders, but the industry was able to get the law amended when the commanding officers changed at some of the state's military bases and did not feel as strongly about the issue. The law changed from allowing lenders to charge 30 percent interest on loans up to $1,000 and 18 percent on a remaining balance of $6,500 to charging up to 30 percent on loans up to $4,000 and 24 percent on a remaining balance of $4,000.

ProPublica and NPR published a joint report earlier this month on the problems with a 1968 federal law that allows debt collectors to take 25 percent of debtors' paychecks and every penny in their bank accounts to repay consumer debts, leaving "millions of workers" facing the struggle of how to live when a large part of their pay is diverted to pay a consumer debt. For example, "time has eroded what even then were modest protections [in the Credit Consumer Protection Act]. The law barred creditors from taking any wages from the very poorest of workers, but used a calculation based on the minimum wage to identify them. Since the federal minimum wage hasn't kept pace with inflation, today, only workers earning about $11,000 annually or less— a wage below the poverty line— are protected." The National Consumer Law Center argues that the cap should be reduced to 10 percent to ensure that low-income debtors still earn a living wage.

The Consumer Financial Protection  Bureau has filed a brief in a federal court siding with  "Benjamin Lawsky, New York’s top financial regulator, against a lawsuit from two western Native American tribes," The Daily Caller reported. The tribes sued over cease-and-desist letters sent by Lawsky over the online payday loan businesses. Lawsky contend that the interest rates charged by the businesses for their loans are too high, while the tribes argue that they are sovereign entities and they follow federal law, The Daily Caller further reported.

The New York Times commentator Floyd Norris reports on a study that found that a federal law called the 2009 Credit Card Accountability Responsibility and Disclosure Act--which requires more transparency on the fees credit card companies collect from their customers--actually worked. The researchers expected to find that, if credit card companies couldn't charge those fees anymore, they would start charging customers more interest  or  reduce consumers' access to credit. But what the study found: "It cut down the costs of credit cards, particularly for borrowers with poor credit."

A federal judge in New York has ruled the state's banking regulator can control the lending done to New York consumers by online lenders associated with sovereign American Indian tribes, the Washington Post reports. Loans are made by the lenders that violate state law, including on maximum interest rates. "Once states began introducing interest rate caps, some ... lenders began forging relationships with Native American groups to take advantage of their sovereign-nation status," the Post reports. The tribal plaintiffs argued the ruling undermines their sovereignty and their ability to be economically self-sufficient, the Post also reports.