Will the Truth in Lending Act Satisfy Consumers?

The term legion refers to an army of over 5,000 soldiers. However, it is appropriate reference to make for the thousands and thousands of people who have written to the National Credit Union, The Federal Reserve Board, and the Office of Thrift Supervision. The legions of activists have noted the Federal government's blind eye toward credit card practices. The Truth in Lending Act has forced credit card companies to make some disclosures, but it has not been as aggressive as some proponents would have it.

Most voters will agree that people should service their debts, however, when it becomes a goal of one institution to enslave another with debt, then it becomes a platform for reform minded politicians. Big business donations be damned! As Americans feel the credit squeeze, there will be more attempts to attack credit card companies with legislation in the upcoming fall elections (1). I am curious whether the attorneys that read this blog see any avenue for class action status against credit card companies.

Speaking of class action suits, shareholders of Fannie Mae (FNM) and Freddie Mac (FRE) should start considering their options against the management and board of directors of these once revered institutions. While there seems to be a constant flow of reassurance that neither of these companies will need to tap the Federal Government's bailout money, many investors just don't buy it. While there have been no reports of a lynch mob (at least not yet), it is apparent that whatever hand Fannie and Freddie are forced to take, the shareholders are going to be left holding the bag. (I just hope the shorts who have gutted this one out will collect before the shares become worthless.) (2)

Capital One (COF) was CLOBBERED in after-hours trading down almost 5% on continued concern over credit risks. According to one group of analysts marked COF as an, "Under-perform" or "Sell" rating and $33 target price on the stock, citing concerns over the weakening credit trends in the company's auto finance and international portfolios. But that really shouldn't bother the bear market bulls, I'm sure they are hoping and praying that there will be a bailout for auto loans and credit cards underwriters. What's fair is fair right? Then came the legions of consumer complaints... and no legislator in their right mind will protect these characters.

Commodity Watch

Continue to follow the trend between the strengthening dollar are the decline in oil and gold... Remember three points:

1. Russians in Georgia (with a naval fleet near the "pipeline").
2. Iran with rocket capability.
3. OPEC meeting in September.

Sources Cited

1. Kovac, Marc. Request for credit card companies generates lots of interest.

2. New  York Times, Fannie Mae News.

Stock position: Short.

Comments

[RoseW:]

Several years ago, I accepted a 4.99% Chase promotional interest rate on a "life of loan" balance transfer. I have not been late nor over limit. Today, I received notice they will now impose a $10 monthly service charge on my account... whether I use the card or have a balance. Chase is quite clear this is a finance charge. Aren't they voiding their own contract in doing this? The 4.99% becomes much closer to 12%.

2008 Nov 07 02:59 AM

[Art Wood:]

My wife keeps asking me why, why would the bank president let this happen? Why would they ruin our lives? What on earth do they have to gain? I keep having to reassure her and remind myself that we can't put a name or a face of a bank executive or board member to this injustice. They don't have a clue what's going on, they've turned this matter over to attorneys and the attorneys get swallowed up in their need for billable hours, it's not personal, it's just how they get paid. During my career as a Special Agent with the U.S. Secret Service, I investigated numerous bank frauds and arrested countless criminals, but I never did like attorneys. Let me introduce myself, my name is Arthur E. Wood, in 1986 I was named Law Enforcement Officer of the Year by the Midwest Chapter of the International Association of Credit Card Investigators. Ten years later, along with my FBI counterpart, I was the lead investigator in the successful prosecution of organized crime for the theft of millions of dollars from a prominent Pittsburgh bank. I could not begin to count the number of presentations I made to train your tellers how to protect against bank fraud, counterfeiting, and credit card fraud. I've long since retired, but I still work part time for the FBI as a consultant. My wife Paula and I have five children, 14 grandchildren and one more on the way.

Helping our kids was one of the reasons we wanted to tap into our home's equity, so we set about to borrow money from your bank. Oh, don't worry, I'm not going to name you, if you want to know if your bank is involved just look up Arthur E. and Paula C. Wood vs. your bank. We did, we arranged to borrow $100,000.00 (one hundred thousand dollars) from your bank. The closing was held at our home, on a Saturday, by a title company. I noticed that something had changed, the loan wasn't exactly as promised and the title company couldn't answer my questions. On Monday, I rescinded the loan by notifying you by phone and then faxing the rescission notice to your bank. We then called another bank, who gave us the loan on the terms that were promised. Everything was fine except that two weeks later my wife noticed that we had too much money in our checking account. Uh oh, the rescinded loan must have been funded in error.
Easy to fix, just call the bank, send them a check and everything would be fine. I did, I called, "so sorry Mr. Wood, we made a mistake, no, don't send us a check, please leave the money in your account and we will electronically reverse the transaction." This was two weeks before Christmas 2005. We are halfway thru 2009, I still have your money, or some of it, having spent thousands on attorneys trying to get you to rescind the loan. I'm sure it was a mistake, and I fully expected you to make it right. I called again a couple of weeks later to tell you the money is still in my account," sorry Mr. Wood, with Christmas and all someone just dropped the ball, but not to worry, it is still in the works and we are reversing the transaction." Then you started to call us, trying to collect on a monthly payment, everyday you would call, and everyday I would tell you the loan was rescinded, Please don't call anymore. Then it got nasty. My new bank called and said that "they were going to have to foreclose on our loan, because they went to record the mortgage and they were not in first place." You were!

I don't have any attorney friends having spent most of my life as an investigator, but, my brother a successful businessman in Virginia had several and he put me in touch with one that suggested that we march ourselves into the Circuit Court here in beautiful Marion County, Florida and sue you for rescission under the Truth in Lending Act. (TILA) That set off a chain of events that lead to the rescission. You did release the lien on our home several months into the action, but then your smart attorneys filed a counter suit against us alleging fraud, conversion and a host of made up charges, they then filed a lis pendens and notice of equitable lien on a lawfully rescinded loan and have effectively stolen our equity by preventing us from selling or refinancing our property.

At this point in my letter you're wondering, O.K. so where's the beef, this should all work it's way out in the court and what's this got to do with American Banker? Well Mr. Bank President, here's the beef! This $100.000.00 loan is going to cost the bank thousands and thousands of dollars in legal fees because these attorneys have to keep billing, and nobody at the bank is minding the store. Your inability to rescind a loan within the time alloted under the statute has triggered the forfeiture section of the Truth in Lending Act so your bank is now in danger of losing the original funded money and your imposition of an invalid lis pendens is going to cost your bank over a hundred grand in lost equity. Rescission under the TILA takes the loan from secured to unsecured and the imposition of a lis pendens is an attempt to circumvent the statutory requirements of the TILA. I wrote this letter to point out to you that the TILA has been amended to help banks by not holding them accountable for actions caused by a bona fide error, however, an error with respect to legal judgement regarding the banks' obligation under the TILA is not a bona fide error. This rescinded loan should not have cost anyone a dime! Now you have allowed your attorneys to ruin the lives of a couple of retirees and your bank is going to lose hundreds of thousands of dollars, for what? You just picked on the wrong guy.

Jun 07 12:35 PM