Subprime Lending News 7/27/16:
Consumer protection takes a hit, a Chipotle scam leaves customers hungry for money, and wage garnishment is called into question.
By Caroline Thompson
Why the House voted against consumer interests, more credit card scams rock Chipotle’s already floundering image, and a Philadelphia couple sues Ford for selling them a lemon. Keep reading for all of today’s top subprime news headlines!
House votes against consumer protection rule.
House Republicans voted against a new rule from the Consumer Financial Protection Bureau, which would have prevented banks and credit card companies from using fine-print arbitration clauses to stop consumers from filing class action lawsuits. The rule was set to help customers wronged by large financial institutions band together and sue, as it is nearly impossible individual of limited means to go up against a bank or credit card company on their own. While the rule has been struck down in the House, it might still pass in the Senate, where the Republican majority is less pronounced. According to the Reuters, Republicans disagree with the law because “mandatory arbitration works quickly to garner individuals substantial awards, while group lawsuits benefit only the attorneys who file them.”
Chipotle credit card scam leaves Chicago family out $700 until local news saves the day.
A recent malware attack at Chipotle Mexican Grill allowed thieves to steal credit card information from thousands of hungry victims. In April and May of this year, thieves installed software that affected 47 different Chipotle locations that designed to access credit card data from customers. The thieves then used that data to buy thousands of dollars in retail items. But the fraud was just the beginning for one Chicagoland family, who found $700 in fraudulent charges at a Philadelphia Walgreens on their bill. When they tried to trigger American Express’ fraud protections, they were met with indifference from the credit card giant. After six weeks of being shuffled from one customer service rep to another, Mary Somers reached out the media. NBC Chicago made one call to American Express, and, “the family says they got their money back within 48 hours.”
Philadelphia couple sues Ford for leasing them a defective car.
After ineffective repair attempts rendered their new, 2016 Ford Escape “useless,” Philadelphia couple Lisa and Donna Weidman are suing Ford Motor Company for allegedly violating both the Magnuson-Moss Warranty Act and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, which are designed to regulate warranties and protect customers from buying defective products. The Weidmans are seeking 50,000 in damages.
Wage garnishment unfair punishment for student loan defaulters, according to the Consumer Financial Protection Bureau.
“We treat struggling student-loan borrowers the same as deadbeat parents and tax cheats,” said Seth Frotman, a senior member of the Consumer Financial Protection Bureau (CFPB) in an interview with Reuters. “Even gambling addicts have more protections.” The CFPB is speaking out against the U.S. Department of Education’s harsh treatment of borrowers who default on their student loans, who are subject to wage garnishment, withheld IRS tax returns, and even a decrease in their Social Security payments. According to Reuters, the U.S. Department of Education has seized $3 billion in garnished wages and $4.8 billion in tax refunds and Social Security benefits from defaulted borrowers, most of whom are struggling financially as it is. Both state and federal regulators say student loan servicers often push these borrowers away from income-based repayment plans, and instead towards forbearance, which — while a net positive for the companies — can lead to serious financial issues down the road for borrowers.