When you think of lawsuit abuse, what do you think of?  I'll bet if most people were to list three or four cases of so-called lawsuit abuse, all of the cases would involve an individual suing a business.  But by far, the greatest number of abusive lawsuits are threatened or filed against consumers. 

There are many court rulings documenting these abuses, but they hardly receive attention.  The reason is consumers do not have the resources of business organizations to organize media campaigns to call attention to these outrageous cases.

Here is just one of a countless number of examples.  A credit card bank is attempting to collect more than $20,000 from a consumer.  The creditor has certificates of deposit frozen at a bank.  That's not unusual.  It is the typical credit card debt--outrageous fees and interest have exploded the debt far beyond anything actually charged on the card.  But that's not the outrageous part.  I hear the exploding credit card story on a weekly basis and am getting used to that.  What's outrageous in this case is the creditor is attempting to collect the entire amount from the consumer's 81 year old widowed mother.  The widow had nothing whatsoever to do with this credit card.  Her mistake was to start, but not finish, the process of putting her son's name on CD's owned by her and her husband after her husband died two years ago.  She thought if she became disabled, somebody could pay her bills.    

But times are tough for credit card banks.  I suppose they need the money more than an 81 year old widow.   

A story in the New Jersey Star Ledger reports credit card companies are now raising interest rates for consumers who are late on only one payment, take out another credit card, or who make a large purchase on an unrelated card.  One consumer reports being one day late on a payment with Chase and having his interest rate explode from 7.99 percent to 29.94 percent, raising his minimum payment from $300 to $700.  Another credit card bank charges late fees if payments are not received before 2:00 p.m. on the due date. 

I assume the only remaining step is a clause in the cardholder agreement allowing the credit card bank to hold you up by your heels once a month and shake the change out of your pockets.  

The Star Ledger story goes on to quote John Hall, a spokesman for the American Banker's Association, as saying "[i]f you become a riskier customer, the only thing the card companies can do is raise your rates or lower your credit limit."  With all due respect to Mr. Hall--what a bunch of B.S. This isn't about credit risk.  This is about greed and the "how can we mislead you now" attitude of credit card banks. 

I would assume if Chase or another credit card bank unexpectedly raises a consumer's interest rate from 8% to 30% retroactively, that consumer is going to become somewhat more of a credit risk not only to Chase, but to other creditors as well.  But that doesn't change the fact that Chase caused the problem in the first place.  I had a client forced into bankruptcy for no reason other than she missed a payment on one credit card, and a completely different credit card bank defaulted her and declared her entire balance due and payable because of the missed payment on the unrelated card.

What's happening with credit card debt in this country is a national disgrace.  It is allowed to continue because consumers suffer silently.  There is little public debate because consumers don't particularly care to discuss with their friends and neighbors how maxed out their credit cards are.  In fact, many don't care to discuss it with their spouse.  Politicians in both parties are addicted to special interest campaign money.  As a result, they lack the political will or courage to make needed reforms. 
 
If you wold like to get an idea of just how serious this problem is, go to Iowa Courts Online and type in the names of a few credit card banks or Iowa debt collection lawyers.  You will soon get a feel for the number of debt collection lawsuits being filed in Iowa.  Keep in mind that many of these lawsuits are being filed on time barred debt purchased by debt buyers for pennies on the dollar, but that has accumulated interest at outrageous compound default interest rates for several years.  A consumer who has no attorney (just about all consumers) and who defaults on that lawsuit (just about all consumers), faces asset freezes or wage garnishments for years to come.  The Iowa legislature should end this practice by enacting a 2 year statute of limitations on open accounts.

Eventually I will get to a blog on the practice of letting credit card banks hawk low limit credit cards to cash strapped students at Hawkeye football games, but when you see those 19 year old standing in line for those "free" t-shirts, you can rest assured that a substantial number of them will leave college with serious financial problems from credit card debt. 

On AOL it was reported 20,000 workers at Nike's factory in Vietnam went on strike seeking a 20% pay raise. 

I'm sure Nike wonders where these greedy women get off demanding a 20% pay increase.  After all, the AOL report claimed Nike pays them a whopping $59 a MONTH.  A 20% raise would take these demanding human beings clear up to $70.80 a month.  With raises like that, next thing you know these women will be able to purchase a pair of Nike shoes for less than a month's work.

C'mon Nike--Just Do It.  Pay the measly 20% pay increase.

The Bush Administration has announced its plan to deal with the subprime mortgage crisis.  By now expectations for this Administration are low, but this plan rivals the Bush Administration's response to Hurricane Katrina in its level of incompetence. If your house ever catches on fire, you can count on the Bush Administration to show up several hours late with a fire hose spraying gasoline.  Bush's plan also comes with a healthy dose of blaming consumer victims for the failures of federal regulators in his own Administration.

Basically, the Administration's plan is to deal with the subprime crisis caused by under-regulated Wall Street investors and banks with even less federal regulation and absolutely no role for state legislators or regulators.  In other words, deal with the problem of foxes eating chickens by continuing to let the foxes guard the chicken coop, have fewer fox hunters and tear down the fences separating the foxes from the chickens. 

It is estimated that next year alone there will be 1.2 million foreclosures.  The Bush Administration's plan attempts to stabilize the market by freezing interest rates for a very small percentage of borrowers.  Consumers who can pay the higher interest rates on their adjustable rate loans (for a few years at least) will receive no assistance.  Those who have little chance of paying for their homes (those most likely to have been victims of fraud) receive nothing.  This plan falls into the "how stupid do they think we are" category.  The plan is not a plan to assist the vast majority of consumers, it is a plan to bail out Wall Street and federally chartered banks--those responsible for the problem in the first place--and then reward them with a deregulation plan that will ensure that history repeats itself during the coming years.

A better plan for the future would be for Congress to strip away protections from federal banks that shield them from state regulators or state legislation.  Former New York Governor Elliot Spitzer had the right idea as Attorney General when he targeted federal banks for making high interest rate loans in the subprime market (his idea to get involved in prostitution--not so good). 

Let states investigate and prosecute deceptive and fraudulent lending practices and make laws to deter such practices.  Consumers who lost their homes as a result of fraud should have adequate laws to sue those responsible for damages.  Make brokers post bonds in the future so cheated consumers can obtain relief after the fact when crooked brokers disappear.  Insurers who write bonds are quite capable of screening out crooks when their own money is at stake.  No bond--no crooked broker.

As for consumers and lenders who made bad deals this time around, they need to get together and work out individual solutions that lower interest rates and payments.  There may be a role for the federal government in facilitating the process, but not in bailing out the parties or setting up arbitrary, victim blaming categorizations to determine who gets a seat in the life raft and who will be left to drown.  And by the way, the Titanic of this mortgage crisis is already at the bottom of the ocean and its consumer victims are bobbing in the water.  Bush's plan takes effect when?

Those investors who invested in pools of securitized adjustable rate mortgages might want to join in and work toward a reasonable solution with consumers that keeps consumers in their homes, or they can face the music and deal with their worthless investments.  Letting investors and federal banks sit around waiting for a government bail out while consumers in record numbers continue to lose their homes to foreclosure does not solve anything.

A plan for the future should also include meaningful civil remedies for consumers to stop widespread fraud before it can ever take root.  Had such policies been in effect years ago, brokers and lenders engaging in fraud and deception would have been deterred or put out of business by our civil justice system years ago.  Yes, civil lawsuits do serve a very important function in our society.  While banks and lenders were screaming law suit abuse, they were quietly cheating consumers.  Now they are filing their own lawsuits against consumers by the tens of thousands to garnish wages, freeze bank accounts and kick consumers and their families out onto the street.

Finally, let Wall Street sustain its losses without a taxpayer funded bail out.  Do not aid federally regulated banks in implementing policies that allow these banks to pass their losses on to consumers who acted responsibly, while at the same time allowing responsible corporate executives to retire with golden parachutes. 

Foreclosures are a terrible thing and should not be taken lightly.  I certainly do not.  I have a link to the story of Michael Knox on my web site for a reason.  But every cloud has a silver lining, and some low income consumers who have already lost their homes and who have been priced out of the housing market may finally find affordable housing to purchase or to rent as the real estate bubble bursts and sanity returns to housing prices. 

Enacting sound policies could prevent this from happening again.  Lobbyists and corporate campaign contributions ensure that there will be no meaningful reform and at some time in the future history will repeat itself.   

If you think a Phishing scam relates to cheating at the Bassmaster Classic, please read on. 

Phishing is the attempt to pry confidential information from you, such as bank account numbers, social security numbers or passwords.  The information is then used to drain bank accounts, take out credit cards in your name, or for many other purposes--none of them particularly good for you.

Phishing is often by e-mail, but it is done by phone as well.  You receive an e-mail requesting you update your account information.  A phone solicitor claims to be with your bank and wants you to verify your account number.  Rule No. 1--Don't give out the information.  Rule No. 2--delete the e-mail or hang up the phone, because continued communication with the crook can lead to violating Rule No. 1. 

That's really all you need to know.  No legitimate company is going to ask you to provide confidential information by e-mail or even by phone where you have not initiated the inquiry.  If there is a "legitimate" company who does do this, you do not want to do business with that company anyway, because the company is clearly too stupid to be trusted with your confidential information.

So respond to e-mails seeking verification of your account information at your own risk.  And while you're at it, perhaps you are interested in purchasing the Brooklyn Bridge?  Swamp land in Florida?  Maybe some ocean front Property in Arizona?  How about a fee t-shirt for signing up for a low limit credit card at the next Hawkeye football game?

(The last one's facilitated by the powers that be at the University of Iowa--but that's a subject for a future blog).