Subprime Lending News 7/18/17:
Payday lender sues the city of Norfolk, billions in private student loan debt may be forgiven due to shoddy paperwork, and even more shady Wells Fargo news.
By Caroline Thompson
Here’s how poor organization could lead to the elimination of your student debt, why a New Mexico couple are suing a tax-return lender, and even more subprime news to pad out your Tuesday afternoon!
Missing paperwork might spell debt forgiveness for some private student loans.
Tens of thousands of borrowers who took out private loans to fund their college education may qualify to have that debt forgiven in court. For the most part, these loans were originally made by banks, then sold to investors, but if a creditor is unable to provide accurate, up to date documentation proving who now owns the student’s debt, the borrower can not legally be held accountable for that debt. So far, thousands of these cases against borrowers have been thrown out in court, and more are popping up every day. The National Collegiate Student Loans Trust, one of the country’s largest owners of private student loans, has a policy of doggedly pursing legal action against borrowers who fall behind on payments, a policy which is now backfiring, as it struggles to provide accurate documentation on who owns the loans. “It is fraud to try and collect on loans that you don’t own,” explained Donald Udertiz, founder of a private equity firm which is the beneficial owner of National Collegiate’s trusts. Experts estimate that at least $5 billion of these “troubled loans” exist, and a creditor’s inability to collect on them could spell disaster for the student loan industry.
Class-action lawsuit targets predatory lenders in New Mexico.
Three businesses operating in New Mexico towns that border the United State’s largest Indian reservation are being sued for allegedly violating the Truth in Lending Act. The businesses, T&R Market Inc., Tancorde Finance Inc and T&R Tax Service Inc., all offer what they call “tax-refund anticipation loans,” as payday loans are illegal in New Mexico. However, a loophole in the law allows lenders to issue loans in anticipation of tax refunds. The lenders are facing charges of unfairly targeting low-income Navajo Nation residents, who often end up financially crippled by the high interest rates charged on their loans. The husband and wife at the center of the lawsuit were charged a whopping 385 percent annual interest on the $1,250 loan they took out to pay for Thanksgiving food and travel in November 2014.
Even more drama for Wells Fargo.
Wells Fargo is no stranger to controversy. Over the past few years, it has been sued for everything from discriminatory lending practices to making up fake accounts to meet sales goals. As we reported last week, the bank has also been using fine print arbitration clauses to prevent customers from bringing class-action lawsuits against it, a practice which has recently been banned by the Consumer Financial Protection Bureau. Now customers are bringing a class action lawsuit against the bank for something called debit card reordering. As explained by VICE, “Let’s say you have $100 in your bank account, and you make three purchases, costing $20, $30, and $110. Under Wells Fargo account guidelines, the bank can charge you a $35 overdraft fee for taking out more than you have in your account. But by reordering the transactions from highest to lowest, putting the $110 charge first, the bank could charge three separate overdraft fees, one for each attempt to draw insufficient funds. Simply by altering the transaction order, Wells Fargo could make an additional $70. Multiply that by millions of customers, and you’re talking about serious money.”