The best place to get an answer to that fundamental question is to ask Elizabeth Warren, the Harvard Law School professor who has been a powerful voice for consumers on the front lines of the financial reform effort, landing on the front page of Time Magazine, and numerous other publications, in the process. Her common sense defense of American families and the middle class, as well as her ability to explain what is happening, makes perfect sense.

On July 2, 2010, Warren issued a statement, explaining her view of the new Consumer Financial Protection Bureau, which she herself had a strong role in forming. "They created a strong, independent consumer agency that will have the tools to rein in industry tricks and traps and to cut out the fine print. For the first time, there will be a financial regulator in Washington watching out for families instead of banks."

Elizabeth Warren's name is on the short list of President Obama's nominees to lead that new agency. He could hardly find a more qualified candidate, with a common touch and perfect sense.

In an interview that appears in today's Huffington Post online, Professor Warren talks about the difficulty consumers have in making informed credit choices, "Today, the big banks churn out page after page of incomprehensible fine print to obscure the cost and risks of checking accounts, credit cards, mortgages and other financial products. The result is that consumers can't make direct product comparisons, markets aren't competitive, and costs are higher."

On the relationship between financial reform and our economic future, she adds, "If the playing field is leveled and the broken market fixed, a lot more money will stay in the pockets of millions of hard-working families. That's real stimulus -- money to families, without increasing our national debt." For the full text of the HuffPost interview, and to learn where financial reform stands today, click here.

For many years, car dealers have claimed that these after-market products do not qualify as insurance and they do not have to be licensed to sell them. That may change. On June 17, 2010, the California Department of Insurance issued a Cease and Desist order against Consumer Direct Warranty Services and related entities. You can read the Department's full press release here.

Some dealer service contracts fall within an exception to the insurance rules. However, in order to exploit that loophole, car dealers must follow certain procedures, have back-up insurance, provide cancellation rights and comply with other regulations.

"If you want to sell insurance in California, you must obtain a license, have adequate financial reserves and you must not deceive consumers," said Commissioner Poizner. "In order to protect California consumers, there are specific requirements for insurance companies seeking to do business in California. If companies do not abide by these requirements, they will not be permitted to sell insurance in our state."

The Insurance commissioner's website goes a step further to promote consumer protection. Check out its "Guide to Auto Service Contracts and Agreements" here. If you have purchased a service contract or extended warranty that does not comply with these rules, contact us even before your car breaks down.

Its new website provides information on NCLC's recent reports, numerous publications and current initiatives. Among other things, NCLC publishes reports on scams and predatory trends in consumer transactions, manuals and treatises on a wide variety of legal topics affecting consumers, as well as other books for lawyers and the public alike. NCLC is the publisher of "Return to Sender - Getting a Replacement for Your Lemon Car" by Nancy Barron.

In addition to its publications, NCLC funds research, legal conferences and consumer education programs on a wide range of important consumer topics -- from automotive fraud and warranty law, to financial abuse of the elderly, energy policy, student loans, and predatory lending.

Kemnitzer, Barron & Krieg is actively involved in the work of NCLC. Bryan Kemnitzer is a member of the partner's council and Nancy Barron currently serves on its board of directors.

The landmark financial reform package that is working its way through Congress would greatly improve financial oversight of lenders. This means a wide variety of entities who share in the business of lending money, not just banks. After the House and Senate passed different versions of the bills, lawmakers from both bodies are in the process of reconciling the two versions. The battle is drawn, because the House passed a bill that exempted car dealers from financial reform, but a similar amendment failed in the Senate.

The outcome of this process will greatly affect the way cars are sold in coming years. NADA is lobbying for its car dealers to be exempt from financial regulation, and is trying hard to persuade committee members that dealers don't get involved in car loans. Nothing could be further from the truth. As Paul Wiseman of USA Today reports, "auto dealerships originate 79% of auto loans and leases." He goes on to quote the non-partisan Cambridge Winter Center for Financial Institutions Policy as concluding "that auto finance is demonstrably susceptible to unfair and deceptive practices." You can read USA Today's article here.

The argument made by car dealers that they are all small mom & pop shops is also far-fetched. While many are indeed locally owned, thousands of dealerships are controlled by mega-dealers like AutoNation whose 100+ stores have reportedly sold more than 7,000,000 cars. These multi-state conglomerates keep a short leash on customer finance through their tightly controlled on site dealer finance departments and preferred lender programs which direct dealer-arranged financing to a handful of financial institutions.

Just this week, the trade publication, Automotive News reported NADA to be particularly concerned that the proposed consumer financial protection agency would have scrutiny over sale of service contracts and aftermarket items. As we have often discussed on this blog (click on "Shopping for Car Loans") regulation of dealer finance departments is long overdue.

With summer just around the corner and masses of Californians – especially students – on the move, many car owners find they need long term storage for a car or truck. If you are in this category, think it through. Will storage costs of an old car exceed depreciation over the rental term? It might be best just to sell the car now, and buy another used car when you return. Do not expect to be able to just park it on the street. Whether you are in the city or suburbs, most communities have a local ordinance limiting parking to 24-72 hours or by permit only. The best thing, of course, is to find a friend with an empty carport or a three-car garage. Good luck with that! More commonly, you may have to find long-term vehicle storage for a price. The E-How website has some good advice for storing vehicles, including the selection of a dry facility, adding a fuel-stabilizing additive to the gas tank, jacking the body up to relieve weight on tires, washing and covering the car. Further details can be read here.

We also advise that you remove all valuables from the car, even though it is in a locked space. This includes all information concerning the vehicle, like the owner’s manual, purchase documents and warranty history. Never keep the title with the car. Remove even the registration and insurance papers you would normally keep with you when driving. And of course, do not leave a set of keys in the vehicle. Self storage units are notorious for their high burglary rate, and although you hope the car will be secure, don’t take any chances with things you can easily remove.

The demise of Mercury will mean the end of an era for Ford. From one perspective, it seems like an odd time to make the cut. Mercury was created during the Great Depression as a mid-priced alternative to the more luxurious Lincoln models.

Mercury later developed the now-classic 60's and 70's designs of the Cougar brand. The Cougar GTE was the epitome of a real "muscle car." To this day, devotees roll up their T-shirt sleeves when cruising in those classics. But muscle cars and other "manly" vehicles just don't sell like they used to, as GM learned when it decided to close down Hummer this year.

The numbers only tell part of the story, but it is the part that Ford executives will be listening to come July. Apparently Mercury's U.S. sales took a slow motion dive from more than 500,000 units in 1978 to less than 100,000 units in 2009. That's a free-fall of more than 75%.

Nonetheless, dropping Mercury is not an obvious choice. We at Kemnitzer, Barron & Krieg share the view of consumer advocate and Ohio lemon lawyer Ron Burdge, who notes that there are less reliable vehicles left in the market. Yellow might be a popular color for Cougars, but there are worse lemons in all colors out there on the road.

Several years ago, a man and his wife came into our office. They had purchased a truck advertised to have driver’s and passenger’s side airbags. When their grandchildren came to visit, they looked for a switch (sometimes called a PSIR) that can suppress the airbag when children are present in the front seat. There was no suppression switch. Why? Because there were no airbags! Somehow, the manufacturer had engineered the vehicle in just such a way that the airbag did not fit on the passenger side. Oooops. The manufacturer (in that case GM) later argued that it “forgot” to tell the buyers they had left the airbags out. The vehicle could not be modified to add the airbags later. We filed a class action and, in the end, the owners of thousands of vehicles were entitled to rescind and return their trucks.

Learning that the advertised airbags were missing was like tossing a packed lifeboat into the water only to watch it sink instead of float and deploy. Even with airbags in vehicles, it is wise (and required under California law) to buckle up as well for the best protection in a crash. While they should not be relied on in place of seatbelts, properly manufactured airbags do save lives.

The Center for Auto Safety deserves credit for being an early proponent of airbags, and remains a good source of information concerning the variations in safety records of different brands. Nissan has been no stranger to problems in its sudden restraint systems over the years. For that reason, it was not a total surprise today when NHTSA announced a Nissan recall for nondeployment of passenger airbags in 2005-2007 Infiniti cars. See NHTSA Campaign ID Number 10V175.

Consumers may not have the means to hop a commercial airline, much less a corporate jet, to meet in person with Congress before Senator Dodd brings the Bill (S. 3217) to the floor of the Senate next week. But that doesn’t mean that consumers can’t be heard. All you have to do is call toll free 1-866-544-7573. When you input your zip code at the prompt, you will be connected automatically to your U.S. Senator’s office. A senate staffer on the other end of the line will ask the purpose your call. You should be prepared to say something like this: “Please tell Senator________ [name] to vote to support financial reform that holds banks accountable and creates a strong, independent Consumer Financial Protection Agency. I am against the Brownback Amendment or anything else that excludes car dealers and automotive lenders from this important reform."

Numerous consumer organizations vehemently oppose such an amendment. These include The Military Coalition, Americans for Financial Reform and the National Association of Consumer Advocates, to name just a few. If the financial reform legislation currently under debate is intended to bridge the gap between Wall Street and Main Street, it can’t by-pass the local Auto Mall.

The Obama Administration issued a report today entitled A Look Back at GM, Chrysler and the American Auto Industry. Actually, it is a short look back through the last tumultuous twelve months, to announce the unexpectedly rapid progress that General Motors and Chrysler are making toward repayment of their federal bailout money. "GM’s early repayment of its $6.7 billion loan leaves the remaining U.S. government stake in the company at $2.1 billion in preferred stock and 60.8% of the common equity," the notice reports. And, while the announcement does not say Chrysler has fully repaid its government loan, the news that “Chrysler Financial has already fully repaid (with interest) the $1.5 billion TARP loan that it received to support auto financing” is encouraging.You can read the entire report here. While Chrysler's relatively rosy outlook and General Motors' early repayment of billions will come as good news to taxpayers, their corporate success is small comfort to consumers whose warranty rights were trampled in the messy restructuring of both companies. The car buying public remains cautious. Like the manufacturers themselves, consumers are eager to pay off debts before going on a spending spree. Whether these icons of American industry will recover market share once pent-up demand spills over and credit eases will depend on whether improvement in vehicle safety and design follows the companies' financial improvement.

A midnight visit from the repo man is one of those things no one ever thinks could happen "to me." Yet, in 2009 alone nearly 2 million vehicles were repossessed. That's 2,000,000 cars and trucks! While some people got themselves into cars they just couldn't afford, many other people may have missed a single payment or been told by the lender not to worry while a late check was in the mail. Based on what our clients tell us, lenders and debt collectors are increasingly aggressive.

Most alarming is a map of the United States showing the location of violent acts associated with repossessions - assaults, battery, use of weapons, kidnapping, impersonation of law enforcement and even fatalities. The authors argue that, because repossessions are one of the only self-help enforcement mechanisms allowed by law, there is in fact a kind of lawlessness in the process. The term "self-help" in this context means that lenders can send out the tow truck by simply alleging that the owner of the car is behind in payments, without any proof or court judgment to back up the claim. "With most repossessions occurring without the involvement of law enforcement, parties often assert their rights in a sort of vigilante justice," the report explains.

This sort of vigilante justice invites a lot of mistakes. Sometimes the tow truck takes the wrong car. That's grand theft. Sometimes the tow truck driver is in such a hurry, he doesn't notice children napping in rear car seats. That's kidnapping. Scroll down through the Consumer Alerts section of our firm website to read "Repossess My Car But Not My Kids". With plenty of evidence and examples to back up their statement that "auto repossession remains a crude, unregulated
and naked exercise of force and guile," Van Alst and Jurgens offer a good case for nationwide reform.

While self-help repossession is still allowed, California has some powerful consumer protection laws to help combat abuses. Read the NCLC Report. And, if you have been a victim of repo-madness, do not wait to give us a call.

Any time you are not paying cash, you need a calculator or a clear head for something called “credit math.” You are buying two separate things: (1) the wheels and steel you will drive off the lot and (2) the money you need to pay for it. Each of these two things makes a profit for someone, and their profit comes out of your pocket. Subtraction and addition, in other words. Throw in some multiplication and division, fractions and percents. Those are the basic functions of credit math.

The mathematical relationship between buyer, seller, lender and borrower is the very crux of our economy. And, at its most basic, a fundamental failure of that relationship is what set off the global economic crisis. Bankers and brokers took advantage of the fact that, in layer after layer of transactions, the person signing the documents had no clue what they meant but assumed that someone, somewhere did. Financial illiteracy got us into this mess.

Consumer literacy should be a matter of national security. All Americans should know how to ask - and get answers to - questions that affect financial health: Can I really afford this loan? What is the difference between credit and debit, or debit and debt? What is my interest rate? What’s an APR? When should I pay cash? Why do I owe this late fee? What factors go into a credit score? How do I protect against identity theft?

Finally, consumer literacy is getting some attention. An article in today's New York Times laments the dearth of financial skills training in standard curriculum. It will be a long time before budget-strapped high schools offer such courses, but there is some evidence that money matters are creeping into the classroom. The National Endowment for Financial Education has produced a number of programs for use in schools. One useful tool mentioned in the NYT piece can be accessed online here While it is billed as “40 Money Management Tips Every College Student Should Know,” there is plenty of good advice for all of us.

Most consumers think that if they can’t meet their monthly payments, their car will be towed away and that is the end of it. Something like home foreclosure. However, that is not how it works. After the vehicle is repossessed, it will be resold at a discount auction for far less than the amount owing; and the lender then attempts to collect the deficiency from the original owner. At that point the consumer has no car, mangled credit and a mound of debt.

The best thing a consumer can do in a repossession situation is to try to reinstate the contract and get the car back. The lender must send the consumer a notice of how to do so - including where to send payment, to whom, and exactly how much. This notice is called an NOI.

Kemnitzer Barron & Krieg challenge NOIs that do not give the borrower sufficient information to reinstate or redeem their contract and recover their car or truck before it is sold at auction. California law provides that, if the post-repossession notices do not comply with the Rees Levering Automotive Sales Finance Act, the lender may not collect a deficiency after the vehicle is re-sold.

The approximate amounts of the deficiency balances defendants have agreed to erase, or otherwise not collect, are summarized in this list of cases that we have settled in the last few months.

• McCoy and Castro v Alliant Credit Union (Alameda County Superior Court Case No. RG 09-444283) $7,370,853.

• Meza and Pelkey v ACC Consumer Finance LLC (Alameda County Superior Court Case Action No. RG09458893) $15,319,729.

• Friedrichs v BMW Financial Services (U.S. District Court,N.D. Cal., San Francisco Case No. C08-04486 PJH) $35,000,000.

• Stephens v Bay Federal Credit Union (San Francisco Superior Court Case No. CGC08478197) $5,159,515.

• Ford Motor Credit Company v O’Neal (San Diego Superior Court Case No. 37-2007-00077225-CL-CL-SC) $110,810,774.

• Lobel Financial Auto Cases (Sacramento County Superior Court JCCP Case No. 4563, coordinated actions) $43,808,147.

In addition to waiver of the deficiency balances, class members entitled to refunds will get a cash return of all or most of the amount they paid. In each case, the terms and procedures involved in the distribution of refunds is included in the class notices that were mailed to each class member. For more information, including the contentions of the parties, settlement terms and identity of co-counsel, click here

The New United Motor Manufacturing Inc. plant, fondly referred to as NUMMI, opened in 1984 and continued for roughly 25 years. In that time it produced about 7.7 million cars and trucks at the massive 5.3 million sq.ft. complex.

In the beginning, NUMMI was hailed as a bold experiment, in which a unionized American manufacturing force melded with Japanese management. NUMMI was a joint venture between General Motors and Toyota, which skeptics dismissed as strange bedfellows. But the relationship turned out to benefit both. Toyota got a “Made in USA” gloss to its products and GM got Japanese manufacturing expertise. The UAW workers were introduced to “kaizan,” the Japanese concept of continuous improvement. The NUMMI marriage lasted amicably for a quarter century of production. But when GM hit the skids last year and pulled out of their venture, Toyota just couldn’t hold on to NUMMI alone.

Despite months of warning and generous severance packages, the union workers express disappointment and devastation. A pall of disbelief hangs in the Bay Area air. A remarkable number of employees are quoted as saying that the atmosphere at the plant was like a family. Many express personal and professional pride in the factory’s well-known record for quality. While Toyota, like every car manufacturer, is occasionally plagued with design defects, NUMMI had a reputation for rarely letting a mechanical defect roll out the door.

The NUMMI plant was often referred to as a “great American success story.” That hopeful phrase now rings as hollow as an echo through NUMMI’s cavernous and empty assembly halls. For more information click here