July 25, 2015

The Extra Sour Taste of a Lemon Truck

Pick up trucks are sold to men and women. But, let's face it, they are marketed mostly to men. One theme that runs through truck advertising is the image of power, strength, and control. Yet, a truck can end up being a lemon just like a car.

If a defective condition substantially impairs the use, value or safety of the vehicle, and it can't be repaired in a reasonable time or number of attempts, that vehicle could be a lemon regardless of whether it is a car or a truck. Some parts of the lemon law even apply to motorcycles, RVs and boats.yellow%20truck.jpg

The market for trucks has exploded in the last two decades. The first reason for this trend was that trucks were exempt from the fuel economy regulations of CAFE, the Corporate Average Fuel Economy law of 1975. That law set national emissions standards for manufacturers to attain. These were minimum standards that could be averaged across the entire product line or model mix of any particular brand. The legislative compromise that would drive truck production for the next 50 years lay in language that set lower standards for trucks than for cars, initially to protect commercial trucking.

Manufacturers were quick to exploit the loophole. To move the truck inventory and increase the percentage of exempt vehicles in their fleets, automakers beefed up their advertising for family-use trucks. It worked. By the mid-nineties an urban truck craze ran parallel to the increase in another famously exempt category, the SUV. Manufacturers quickly caught on and responded to market demand with extended cabs, extra seats and seat belts for the whole family. Gone are the days when the kids scrambled into the open back and off the family rumbled over dirt country roads. The truck is now a multi-use tool for city dweller or suburban manimal - weekday work and weekend fun. Asked why they bought a truck, many men say it was to cart and carry sports equipment too big to fit in a sedan, or even in an SUV with racks. Bigger is better. But often the "fully-loaded" vehicle has so many options, those extras have over-loaded the chassis. Convenience is the catchword in the glossy brochures. But there is nothing convenient about having a lemon.

If a truck suffers from a substantial defect, the steps to recovery are the same as for a car. First, the owner should return the vehicle to the nearest factory authorized dealer for repairs, carefully describe each symptom or condition at the time of service, and make sure that it is reported in the written repair order. If multiple repair attempts fail to fix the problem(s), the owner's call to the manufacturer with a demand for a new car or a refund may be in order. If that does not work, the consumer's best option is to seek a lawyer's advice. (Make sure you actually speak to an attorney before signing a retainer agreement.)

Trucks remain a symbol of freedom and strength. There is nothing weak about demanding a safe and reliable vehicle. There is strength in knowing and asserting your legal rights.

July 16, 2015

Honda Finance Settles Discrimination Investigation

American Honda Finance Corporation will pay $24 million in compensation and change the way it does business to settle a discrimination case brought by the Justice Department and the Consumer Financial Protection Bureau. The two federal agencies teamed up to investigate complaints about American Honda Finance Corporation's unsavory lending practices. Borrowers alleged that Honda Finance was engaged in a pattern of discrimination in its lending practices. Specifically the joint investigation looked at a system of subjective and unsupervised discretion in loan pricing that resulted in African American, Asian, Pacific Islander and Hispanic borrowers paying higher interest than other loan customers. This was not an isolated instance of a rogue employee doing the wrong thing. The practice was widespread, affecting thousands of minority customers. The DOJ and CFPB coordinated investigation revealed that, on average, African Americans were made to pay more than $250 more than whites over the course of the loan; Hispanics $200 more on average; and Asian/Pacific Islanders $150 more on average. All, because of their race or national origin, not because of their credit-worthiness.

The crux of the problem was that Honda Finance, like other captive auto lenders, allowed car dealers wide discretion to vary the interest rate beyond that which could be justified by objective factors of credit-worthiness. Often the car buyer will ask the finance manager something like, "What's the best rate you can get me?" Or, "What do I qualify for?" The finance manager comes back with a number that is higher than that initially set by the bank, but the borrower has no idea that is not the lowest rate based on credit-related factors. They have no idea the rate offered is based on race-based prejudice rather than market-based factors. Honda Finance encouraged this behavior with its incentive system that paid the dealers more for loans that included a higher interest markup. One might say that Honda Finance incentivized deceptive or discriminatory conduct.

As a result of the settlement, Honda will limit the dealer's discretion to charge interest rate markups and change the way it pays the dealers to place its loans. Justice Department Civil Rights Division leader Vanita Gupta explained, "We believe that Honda's new compensation system balances fair compensation for dealers and fair lending for consumers. We hope that Honda's leadership will spur the rest of the industry to constrain dealer markup in address discriminatory pricing."

It is not hard to read between the lines. Gupta clearly implies that Honda Finance is not alone. Other dealers and lenders also conspire to offer minorities less favorable terms than they offer to whites. Interest should be a function of the cost of credit, related to the ability of the borrower to repay the loan. Whether a borrower has light or dark skin - or comes from Kenya, Tonga or Tennessee - should be irrelevant to the rate of interest he or she pays. The Equal Credit Opportunity Act (ECOA) and other consumer protection laws prohibit discriminatory pricing.

The landmark settlement was filed this week in the Central District of California. The terms must now be approved by the court.

July 10, 2015

FTC Acción Demanda que Termine una Estafa de Deuda Fantasma

La Comisión Federal de Comercio ("FTC") es el organismo superior del gobierno nacional que hace cumplir las leyes de equidad de cobro de deudas. Es un trabajo duro. Esta semana, la FTC anunció un acuerdo importante. Tuvieron éxito en terminar un esquema de cobro de la deuda fraudulenta e ilegal. La operación fue basada en la Florida, pero tocó las vidas de consumidores hispanohablantes en muchos estados. En resumen, los demandados están acusados de haber estafado a miles de personas a partir de millones de dólares, al exigir el pago de deudas totalmente falsas. Ellos llamaron varias veces, amenazaron y engatusaron, y finalmente intimidaron a personas a pagar deudas que ni siquiera debían. Esta práctica se conoce como la recogida de "deuda fantasma," y es muy ilegal bajo las leyes federales y estatales de cobro de deuda justo.

En una estafa típica de la deuda fantasma, los autores llamarán aleatoriamente a consumidores y los amenazarán con consecuencias severas, como la detención, acciones legales e investigaciones de estado de inmigración, si no logran hacer grandes pagos de deudas falsas. Ser el víctima de una estafa de deuda fantasma es estresante y puede ser aterrador, porque muchas personas no están seguros de exactamente cuánto deben ya quién se lo debe. Al recibir una llamada de este tipo, el consumidor debe presentar una queja ante el FTC y/u obtener asesoramiento legal.

La acción de la FTC de esta semana prohíbe una serie de cobradores de deudas intentar a cobrar cualquier otra deuda. Los acusados estaban haciendo negocios bajo una variedad de nombres, incluyendo Centro Natural Corp, Bionore Inc., Jager Interantional Inc., Alianza Inmobiliaria Corp., y las personas relacionadas también citadas en la denuncia. La sentencia suma a casi $6,800,000. Fue una victoria significativa para el gobierno y para las miles de víctimas de la estafa de cobro de deudas. Para más información sobre el caso puede leer el comunicado de prensa completo de la FTC aquí.

La Comisión Federal de Comercio no sólo toma acciones contra los estafadores, sino también ofrece información para todos los consumidores y los prestatarios para mejorar su educación financiera. La página web de la FTC tiene una excelente página explicando el cobro de deudas, que se puede acceder aquí. Cada consumidor debe tomar el tiempo para repasar asuntos de dinero. Al igual que con la salud, prevención es el primer paso en la búsqueda de una cura. Si usted conoce sus derechos, está mejor preparado para protegerse contra el tipo de estafas la FTC acaba de cesar.

Traducido del articulo de 8 Julio 2015 (Nancy Barron) por Rosa Baum, ©Kemnitzer, Barron & Krieg, LLP

July 8, 2015

FTC Action Calls a Halt to Phantom Debt Scam

The Federal Trade Commission ("FTC") is the government's top agency enforcing the nation's fair debt collection laws. It is a tough job. This week, the FTC announced a major settlement, which succeeded in shutting down a fraudulent and unlawful debt collection scheme. The operation was based in Florida, but touched the lives of Spanish-speaking consumers in many states. In short, the defendants are charged with having cheated thousands of people out of millions of dollars, by demanding payment on totally bogus debts. They repeatedly phoned and harassed, threatened and cajoled, and finally intimidated people into paying alleged debts they did not even owe. This practice is commonly referred to as collecting "phantom debt," and it is highly illegal under both federal and state fair debt collection practices laws. FTC-Poised-to-Investigate-iOS-In-App-Purchases-Apple-Business-Practices.png

In a typical phantom debt scam, the perpetrators will cold-call consumers and threaten them with harsh consequences, such as arrest, legal actions, and immigration status investigations, if they fail to make large payments on bogus debts. To be the target of a phantom debt scam is stressful and even terrifying, because many people are uncertain as to exactly how much they owe and to whom they owe it. Upon receiving such a call, the consumer should make a complaint to the FTC and/or get legal advice.

This week's FTC action prohibits a number of debt collectors from ever again attempting to collect another debt. The defendants were doing business under a variety of names, including Centro Natural Corp, Bionore, Inc. Jager Interantional, Inc., Alianza Inmobiliaria Corp., as well as related individuals also named in the complaint. The judgment totals almost $6,800,000. It was a significant victory for the government and for the thousands of victims of the debt collection scheme. For more about the case read the FTC's full press release here.

Not only does the Federal Trade Commission take action against scam artists, but it offers information to all consumers and borrowers to improve financial literacy. The FTC website has an excellent page explaining debt collection, which you can access here in English and here in Spanish. Every consumer should take the time to brush up on money matters. Just like with healthcare, prevention is the first step in finding a cure. If you know your rights, you are better prepared to protect yourself against the kind of scams the FTC has just shut down.

July 1, 2015

Big Banks versus the Consumer Financial Protection Bureau

The banking industry has targeted the Consumer Financial Protection Bureau since the day it was created. The finance industry pours money into a relentless effort to weaken the agency. This continuous lobbying is done in the background, out of the eye of American consumers, who stand to lose the most if the CFPB cannot do its job. One important thing the CFPB has been tasked to do is study the effects of forced arbitration, a procedure which strips borrowers of the right to bring actions in court to enforce consumer protection laws and stop fraud. That study revealed huge injustices in the unlevel playing field between consumers and banks.

The subject of mandatory arbitration is complex, and frankly boring to most people. It is boring until they themselves are cheated by a bank. Or, when a finance company has made a mistake on their loan payments. Or, when they are illegally bullied by a debt collector. Or, when their car or truck has been repossessed and sold without notice. Or, when they are charged illegal interest rates. Or, when a debt collector they never heard of duns them for debts they did not owe. Then arbitration locks the courthouse door. Suddenly denied access to the courts, they wonder how this injustice can be happening to them. There but for fortune go all of us. cfpb.jpg

Paul Bland, Executive Director of Public Justice, is the people's voice, leading the fight to keep the courthouse doors open for ordinary Americans. He is one of the few people who understand that erosion of the CFPB will start quietly in the wood-paneled committee rooms of Congress. Thus last week, he observed a menacing start of that erosive effort in a simple legislative proposal by Steve Womack (AR-3) and Tom Graves (GA-14). Bland notes, "Rep. Womack’s effort to block the CFPB from acting was done without any publicity, on a party-line voice vote that no one noticed. People NEED to notice."

Bland explains that the CFPB has done extensive studies, which demonstrate how harmful forced arbitration can be. The banks want to bury that damning evidence, before the CFPB can order effective regulation to help the American consumer. The current effort is an ugly glimpse into how bank lobbying - subtle and not so subtle - strips ordinary Americans of their right to civil justice.

You can read Bland's excellent article entitled "House Republicans Scheme to Let Banks & Payday Lenders Bar Consumer Law Suits," here.

June 29, 2015

¿Demandado Por un Cobrador de Deudas? Levántese y Defendiese

Demandas de cobro de deudas falsas se han convertido en un gran negocio para los prestamistas sin escrúpulos y para los cobradores de deudas. Con demasiada frecuencia, los prestatarios no luchan contra las prácticas abusivas de cobradores de deudas. Pero cuando lo hacen, puede ser mala noticia para los malos actores. En Mayo de 2015 un en jurado Kansas City otorgó $ 82.000.000,00 en daños punitivos contra la empresa de cobro de deudas llamada Portfolio Recovery Associates. La disputa comenzó por los intentos ilegales de la demandada para recoger apenas $ 1.130,14 en deuda original, y se convirtió en una pesadilla para el prestatario. Los medios de comunicación reportaron este relato aquí.

204756_signing_the_contract.jpg En otra parte de este blog, hemos escrito acerca de una variedad de prácticas de deuda ilegales: el intento de colección de la deuda rancio (una práctica conocida como "deuda zombie"), fracaso de dar avisos después de reposesión requeridos por la ley, falta de presentación de la documentación subyacente para apoyar la afirmación de un cobrador de deudas, y otros abusos.

En resumen, hay muchas defensas a los acciones de cobradores de deudas.

Si usted es demandado por un cobrador de deudas, recuerde estos consejos importantes:

En primer lugar, no ignore la citación y demanda. Si le sirven con una demanda, no se rinda antes de recibir asesoramiento jurídico. Si usted no se presenta en la corte, pierde derechos importantes para defenderse en corte. El cobrador de deudas gana su caso automáticamente y toma un fallo en contra de usted. Usted ha renunciado a su derecho a impugnar la deuda. El prestamista podría entonces tratar de embargar su salario o cuenta bancaria. Incluso si usted no tiene un abogado, asegúrese de comparecer en corte en la fecha prevista. Cortésmente pide al juez que posponga o continúa con la audiencia mientras que usted encuentre un abogado. Incluso si usted le debe a alguien una cantidad, es posible que no sepas si la cantidad demanda es correcta, y usted puede no saber lo que la empresa tiene derecho a cobrar.

La lucha contra el cobro de deudas ilegales requiere un poco de conocimiento de las leyes que proporcionan una defensa. Por lo tanto, la posibilidad de derrotar a una demanda es mucho mejor si tiene un abogado a su lado. La mayoría de los condados tienen un número de teléfono que aparece para los servicios jurídicos de referencia y clínicas legales gratuitas, o abogados de los consumidores privados que trabajan con estos casos. Hay excelentes abogados que manejan estos casos por una base de "honorarios de contingencia ", que significa que el abogado sólo recibe sus honorarios si el caso tiene éxito. Por eso, usted nunca debe pagar a un abogado sólo para reunirse para la primera vez.

Avisos de cobro de deudas que vienen en el correo están diseñados para parecer oficial y espantoso. Algunas veces tienen un montón de tinta roja y amenazas directas o indirectas. Robo-llamadas a su teléfono - y en particular a su celular - también pueden ser el acoso ilegal. Estas tácticas de intimidación no significan necesariamente que la deuda fue válida en el primer lugar, o que la empresa exigiendo el pago es la entidad que puede aclarar la deuda o su crédito. Muchas personas terminan pagando más de una empresa para la misma deuda.

El cobro de deudas es una industria grande en California y a través de los Estados Unidos. Empresas de cobro de deudas compran deudas malas de empresas de tarjetas de crédito o de empresas de financiación por una fracción de su valor nominal. Ellos hacen una tremenda ganancia mediante la colección de la deuda en su totalidad, más los intereses y los honorarios. Sin embargo, cuando estas empresas compran una gran cantidad de estas deudas y lo hacen con prisa, con frecuencia no compran los documentos que necesitan para demostrar su caso en la corte, como el contrato, una justificación del supuesto equilibrio, y la historia de pago. Porque muy pocas personas consiguen asesoramiento jurídico, los cobradores de deudas ganan la mayoría de los casos por incumplimiento. Esto es una parodia de la justicia y, a menudo una tragedia para las personas involucradas.

California tiene una gran cantidad de buenas leyes para proteger a los consumidores contra los abusos en el sector financiero. Sólo tienes que saber dónde encontrarlos. Lo más que consumidores se defienden, lo más que las prácticas de préstamos abusivos desaparecerán.

Traducido del articulo de 17 May 2015 (Nancy Barron) por Rosa Baum, ©Kemnitzer, Barron & Krieg, LLP

May 17, 2015

Sued By A Debt Collector? Stand Up and Fight Back

Bogus debt collection lawsuits have become big business for unscrupulous lenders and down-stream debt collectors. All too often, borrowers do not fight back against abusive debt collection practices. But when they do, it can be bad news for bad actors. Last week a Kansas City jury awarded $82,000,000.00 in punitive damages against debt collection firm Portfolio Recovery Associates. The dispute began over the defendant's unlawful attempts to collect a mere $1,130.14 in original debt, and became a nightmare for the borrower. You can read this extraordinary story here.

204756_signing_the_contract.jpgElsewhere on this blog, we have written about a variety of illegal debt practices: the attempted collection of stale debt (a practice know as "zombie debt"), failure to give post-repossession notices required by law, failure to produce the underlying paperwork to support a debt collector's claim, and other abuses.

In short, there are many defenses to debt collection actions.

If you are sued by a debt collector, remember these important tips:

First of all, do not ignore the summons and complaint. If you are served with a lawsuit, do not give up before getting legal advice. If you do not show up in court, that means you default. The debt collector automatically wins its case and takes a judgment against you. You have given up your right to challenge the debt. The lender might then try to garnish your wages or bank account. Even if you do not have an attorney, be sure to appear in court on the scheduled date. Politely ask the judge to postpone or continue the hearing while you find an attorney. Even if you owe some amount, you night not know if the amount demanded is correct, and you might not know what company is entitled to collect it.

Fighting illegal debt collection requires some knowledge of the laws that provide a defense. Thus, your chance of defeating a lawsuit are much greater if you have a lawyer on your side. Most counties have a phone number listed for legal referral services and free legal clinics, or private consumer lawyers who handle such cases. There are excellent attorneys who handle such case on a “contingency fee” basis, meaning the attorney only gets paid at the end if the case is successful, so you should never pay a lawyer up front just to meet with you a first time.

Debt collection notices that come in the mail are designed to look official and scary. Some times they have lots of red ink, and even direct or indirect threats. Robo-calls to your phone -- and particularly cell phone -- can also be illegal harassment. These bullying tactics do not necessarily mean the debt was valid in the first place, or that the company demanding payment is the entity that can clear up the debt or your credit. Many people end up paying more than one company for the same debt.

Debt collection is a major industry in California and through the United States. Debt collection companies buy bad debts from credit card or finance companies for a fraction of their face value. They make a tremendous profit by collecting the debt in full, plus interest, plus fees. However, when these companies hastily buy the accounts in bulk, they often do not purchase the documents they need to prove their case in court, such as the contract, an accounting of the alleged balance, and past payment history. Because very few people get legal advice, debt collectors win most cases by default. This is a travesty of justice and often a tragedy for the people involved.

California has a host of good consumer laws to protect borrowers against abuses in the finance industry. You just have to know where to find them. The more consumers fight back, the more predatory lending practices will disappear.

May 14, 2015

Exploding Airbags, Exploding Recalls

The story of exploding Takata airbags just gets worse and worse. We previously wrote about this problem here and here. airbag.jpeg

Now it looks like the recall itself can't be contained. Early efforts to limit its effect to certain makes and models, or geographic areas, or other arbitrary parameters have failed. Yesterday, the recall expanded again with Honda issuing a global recall for another 5 million cars. The original manufacturer, Japan's Takada, has not been able to keep pace with replacement parts; now suppliers from Sweden and elsewhere have stepped into the breach.

Honda's latest action comes on the heels of its previous recalls of 11.4 million vehicles equipped with Takata airbags since 2008. Earlier this week, Toyota and Nissan recalled a combined 6.56 million vehicles as well.

You can read about Honda's recall program here, Nissans recall program here, and Toyota's recall program here. Be prepared to enter the VIN number found on your purchase documents or on the inside of the driver's door, so that you can obtain precise information for your vehicle.

These recalls concern a safety issue with the airbag itself, not just a failure to deploy as a supplemental restraint. Anyone whose car is subject to the recall should definitely take steps to obtain replacement parts.

May 11, 2015

Driverless Cars: A Preview

It was eerie. I was driving along the freeway between San Francisco and San Jose, comfortably guided under cruise control, when I noticed a car smoothly glide by on my left. Its occupants were engaged in conversation. They were not looking at me. They were not focused on the road, particularly. The man in the front lefthand seat was not holding the wheel. I'm not even sure there was a wheel. Suddenly, I realized no one was driving the car.

I felt the need to reassert myself in the driver's seat of my own vehicle. I turned off the cruise control, tapped my foot on the brake and accelerator. I touched the turn signal. I gripped the wheel. I stared ahead, glancing now and then in the rearview mirrors.

A driverless car? It feels futuristic. But as it turns out, the future is here.

I had just been passed by the Google car.driverless%20car.jpg

The real question everyone is asking is: will they be safe? Will they be safer than cars are today? In more than six years of experimenting and nearly one million miles of road testing, the Google car has only been in 11 minor accidents. Google spokesman Chris Urmson hastens to add that “Not once was the self-driving car the cause of the accident.” You can read more about the research and development of driverless cars here

Accidents do happen. The safety question must be viewed against present statistics. In 2012, NHTSA reported 5.3 million vehicle collisions, in which 2.2 million people suffered injuries. And, more than 32,000 deaths in addition to those injuries. Earlier studies by NHTSA show that the human factor is a significant cause of those crashes. Strong state lemon laws and consumer advocates have helped make cars safer over the last few decades -- but a safe car also needs a safe driver. A 2008 NHTSA study of more than 5,000 collisions found that the human element was a significant contributing factor to vehicle crashes. The human frailty factor included things like distracted driving, poor judgment, illegal turns and lane changes, aggressive driving, failure to brake in time, inattention and simple loss of control. Not to mention the problem of DUI. Broken down like this, it is conceivable that robotic components and technology might yet be better than people are at the controls.

Some of the technology that will power driverless vehicles already exists in the cars we drive today. Forward collision avoidance, blind spot alerts, lane assist technology, and other advanced warning devices, are already installed on some makes and models on the roads today. Manufacturers are still working out glitches in some of these components. And of course, there is that early form of driverless technology, the ubiquitous cruise control function I was using when I was passed by the Google car.

As driverless cars enter the marketplace, the law of accountability will have to catch up. But the purpose of the lemon law could never be more clear: to ensure safe and reliable transportation no matter who is in control.

April 11, 2015

Lights Out for GE Capital

General Electric announced last week that it was selling off GE Capital, its financial services division, and returning to its core business of manufacturing. Consumer advocates lauded the change. Marcus Stanley, of Americans for Financial Reform hailed the news, "I see this as a win not just for too-big-to-fail, but for the extension of the regulatory perimeter in Dodd-Frank." Stanley further explained, "You basically had one of the largest consumer and investment banks in the country stapled onto a major industrial corporation, and because it was part of this conglomerate, it wasn't being regulated like a major bank. When the Fed changed that regime, GE decided it wouldn't be as profitable." light%20switch.jpg

GE had previously claimed that, "By recognizing upcoming shifts in regulation, a company can help mitigate costs by shifting business operations well in advance of the new rules or by implementing compliance regimes gradually rather than at the last minute." However, this time, GE's action was not taken soon enough to avoid that "regulatory perimeter" altogether. And, it turned out that size was not the only problem on the governing agencies' radar. While GE Capital had been on the Federal Reserve's watch list for some time due to its significant size, the Consumer Financial Protection Bureau hit GE Capital with a whopping $225,000,000 fine for deceptive practices in credit card lending. You can read more about the CFPB action here.

In publicizing its decision to shut down GE Capital, the parent company GE complained that the banking business had become less profitable due to the regulatory climate. Clearly a penalty of $225 million would cut into profits. But the purpose of such a penalty is to discourage and deter illegal and predatory misconduct. GE Capital had faced challenges to its business practices in connection with its automotive lending practices and other financial products before and was no stranger to litigation. The implication that unlawful and predatory banking practices are essential to profitability in banking gives life to the saying, "the best way to rob a bank is to own one," which has been called the "oldest joke in finance."

At the same time, there is a good twist to the news from GE. In a Harvard Business Review article entitled, "Is the End of GE Capital Good News for Ecomagination?" environmental author Andrew Winston looks at the positive side of GE's decision to refocus on is core manufacturing products. "Yes, we need a financial system to help manage all of this, but we truly need the GEs of the world to focus on making our very concrete essentials leaner, smarter, and cleaner. GE’s newly trim company is a victory of making stuff over making markets, and that’s a good thing."

Meanwhile, it looks like GE's exit from financial services may be good for business. Company stock prices rose on the news.