Sen. Bernie Sanders, I-Vt., has a plan to rescue consumers from interest-rate hikes on everything from mortgages to credit cards: He’s proposed a piece of legislation that would force all companies offering consumer loans to cap interest rates at 15 percent, according to The Bennington Banner (“Sanders Seeks Interest Rate Cap,” March 13, 2009).

Currently, credit card companies, based on a 1978 Supreme Court decision, are only required to abide by the interest-rate restrictions enforced in their home state. Many financial services companies have taken advantage of this state-by-state enforcement and established headquarters in South Dakota and Delaware, states that don’t have restrictions on how much interest banks can charge.

Sanders’ bill would overrule that court decision, imposing the 15-percent interest rate cap on credit cards and consumer loans issued in all states, and would limit the fees banks can charge. His plan is modeled after a similar interest rate cap implemented under the Federal Credit Union Act nearly 30 years ago, which was set at 15 percent and later increased to 18 percent in 1987 by the National Credit Union Administration.

“If a rate cap has worked for credit unions all these years, it could work for our friends in the financial industry as well,” Sanders said.

A New Era for Credit Card Rates

Sanders believes his legislation will be met with staunch resistance from banking industry lobbyists, but he says it’s time for financial service companies to end their “culture of greed.”

Credit card companies are taking billions of dollars in taxpayer bailout money, and, in some cases, receiving zero-interest loans from the Federal Reserve, all while ratcheting up fees and interest rates. Citigroup credit card holders, for example, have been told their rates could go as high as 30 percent if they miss a single payment, and JPMorgan Chase customers who have large balances may have to start paying $10 monthly fees.

Sanders says the free-wheeling rate hikes and fees currently implemented by banks is “loan sharking,” and these banking tactics are making it even more difficult for struggling consumers to pay down their debts.

“This is very significant because right now there are millions and millions of people who are paying outrageously high interest rates on their credit cards. We think enough is enough,” Sanders said. “At a time when things are so bad, they need relief in terms of these interest rates.”

Popularity: 5% [?]

Hammered by the housing crisis, rampant unemployment, and a declining economy, the city of Detroit has thousands of foreclosed homes for sale with “fire-sale” prices — less than $1 in some extreme cases — that are attracting buyers from as far away as Australia and the United Kingdom, reports the Associated Press (“Outside Buyers Drawn to Detroit’s Foreclosed Homes,” March 9, 2009).

At one time Detroit, the capital of the nation’s auto industry, had one of the highest owner-occupied housing rates in the country. Now, however, the city has the lowest ownership rate for single-family detached homes of 20 of the largest cities in the United States, according to Detroit demographer Kurt Metzger.

Currently, there are more than 1,800 homes for sale for less than $10,000 in Detroit — homes that used to be worth more than 10 times that amount before the national real estate bubble popped, erasing about $2.4 trillion in home values across the country.

Last year, the average sales price of homes that were foreclosed on by the U.S. Department of Housing and Urban Development averaged $8,692, and at the beginning of this year, that price dropped to $6,035, according to HUD statistics. These bargain prices have helped spur sales of foreclosed homes in Detroit.

“In the past few months, I’ve picked up 10 new clients from out of state that are buying in bulk,” said Detroit real estate agent Mike Shannon, whose office specializes in foreclosed properties. “They’re coming to us, saying ‘Look, I want to buy 50, 100, 1,000 [homes].’ They want to own every decent and cheap house they can find.”

Shannon recently sold 30 homes in a single day to one buyer. And a trio of U.K. investors, he says, has bought a half-dozen homes and plans to buy many more.

Popularity: 9% [?]

Credit card holders just barely bucked year-end credit card trends at the end of last year, charging less than expected and making slightly more of an effort to get caught up on their credit card balances compared to 2007, according to a recent anonymous survey of 27 million random TransUnion credit profiles. (more…)

Popularity: 5% [?]

As part of his crackdown on foreclosure rescue schemes, Arizona Attorney General Terry Goddard has filed a lawsuit against a foreclosure rescue operation that allegedly defrauded as many as 400 Arizona homeowners, according to a news release from the Office of the Attorney General (“Terry Goddard Files Lawsuit to Stop Foreclosure Rescue Operation,” March 5, 2009).

Goddard’s lawsuit alleges that Richard Winer and his associates purportedly identified homeowners facing imminent foreclosure through public records, approached these homeowners claiming to be experienced “distressed property consultants,” and fraudulently promised to stop foreclosure, in many cases, in as little as 24 hours.

“Instead of offering legitimate help to homeowners, this operation misled and exploited them to turn a handsome profit,” Goddard said. “The housing crisis has given rise to a number of rescue scams, and we are going after them aggressively.”

According to court documents, Winer was able to persuade troubled homeowners to sign over the deed to their house to one of his four limited liability companies: Taken Care of Investments, LLC; Homeowner Solutions, LLC; Bourbon Street Property Management, LLC; and Filibuster, LLC, without notifying the homeowner’s mortgage lender or servicer. He then promised homeowners that his company would pay off the full value of their delinquent mortgage payment and assume current payments on their home.

Homeowners were able to remain in their home as a renter and were promised that, within a year of the initial transaction, they could repurchase the property for a $15,000 fee under a sale-leaseback agreement. The lawsuit specifies that most homeowners weren’t able to repurchase their home because a clause in the sale-leaseback agreement nullified the offer after the homeowner-turned-renter made a single late rent payment.

Within two weeks of assuming responsibility of the homeowners’ properties, Winer was able to resell most of the homes to investors at wholesale prices and collect a commission from the sales. Investors were then able to flip the properties of homeowners who were unable to repurchase their properties, reselling them at full-market value.

If convicted, the court may require Winer to perform several actions:

• Pay full restitution to all victimized homeowners

• Forfeit $10,000 in civil penalties to the State of Arizona for each violation of the Consumer Fraud Act

• Forfeit $5,000 in civil penalties to the state’s Department of Financial Institutions for each violation of state debt management and mortgage acts

• Reimburse the State for all costs associated with the lawsuit

Popularity: 9% [?]

A group of U.S. democratic senators introduced legislation on Tuesday that would create a new financial regulatory agency to monitor firms offering financial services to consumers and prevent these firms from using predatory or deceptive business practices. (more…)

Popularity: 7% [?]

The economy is bad, but it’s not as bad as it was during the Great Depression, says Christina Romer, an advisor to the Obama administration and an established scholar of the Great Depression (more…)

Popularity: 6% [?]

Out-of-work homeowners with Citigroup mortgages may soon be getting a break from their lender. Citigroup announced that it will be cutting mortgage payments to an average of $500 a month for three months under its new Homeowner Unemployment Assist program, reports The Associated Press (“Citigroup to Cut Mortgage Payments for Jobless,” March 3, 2009). (more…)

Popularity: 7% [?]

The House of Representatives approved a measure Thursday that would give bankruptcy judges the authority to modify the mortgages of homeowners filing for bankruptcy. (more…)

Popularity: 5% [?]

Countrywide Financial Corp. — one of the nation’s largest mortgage lenders — has agreed to reform its lending practices and pay approximately $3 million to Nevada borrowers victimized by its lending practices as part of a settlement agreement with the state’s attorney general. (more…)

Popularity: 7% [?]

A father and son duo from Ohio, whose credit card debt relief scheme caused consumers to lose more than $2 million, have been sentenced to the maximum federal prison terms offered as part of their plea bargain (more…)

Popularity: 8% [?]