California Credit Law Blog

Today, the 9th Circuit Court of Appeal issued a ruling in a case in which the plaintiffs are accusing Aspire VISA, a subprime credit card, its marketing is a violation of the Credit Repair Organization Act. That Act prohibits companies from seeking advance payments for fixing the consumer's credit.

Aspire VISA offered a $300 credit limit VISA card as a way for consumers to rebuild their credit. The catch was that Aspire VISA charged consumers a $29 finance charge, a monthly $6.50 maintenance fee, a $150 annual fee all charged against the $300! The consumer received a mere $63 in credit while being charged $257. The plaintiffs in the case alleged this was an advance payment in violation of the credit repair act.

The 9th Circuit Court of Appeals held that the Act did not allow the credit card company to force the consumers into arbitration.

Yesterday, the Wall Street Journal reported that 25% of Americans now have credit scores less than 600. This compares to 15% before the rescission.

This means one in four consumers cannot get a mortgage loans unless they qualify for some special program. 650 is the cutoff score for Fannie Mae or Freddie Mac to accept mortgage loans. Persons with such scores will have a tough time getting a car loan at a reasonable rate. Landlords may not rent to them. Employers may not hire them.

In November of this year, the US Supreme Court hear arguments in AT&T Mobility v. Concepcion, a case that could decide the fate of consumer and employee class actions for years to come.

The case involves the widespread practice of using standard-form contracts to ban class actions. Courts in California and other states have held that class-action bans are unenforceable, however AT&T Mobility has asked the Supreme Court to find that state laws are preempted by the Federal Arbitration Act.

The problem is that class-action bans are often disastrous for consumers and employees. Class-action bans in consumer contracts prevent consumers and employees from ever participating in class proceedings. According to attorney Paul Bland of Public Justice, companies love imposing class-action bans because they dramatically undermine enforcement of consumer- and employee-protection laws. It is no answer to point to government consumer protection agencies which which handle but few cases. Class actions and the threat of such actions in many cases are the only protection against corporations picking the pockets of consumers.

By October 2010, new FTC rules will prohibit debt settlement companies from collecting fees on the promise they will reduce or settle a consumer debts. The rules are necessary because the debt settlement companies falsely advertise they can drastically reduce consumers' debts by negotiating with the consumer's creditors. The companies demand and get thousands of dollars in fees even though they do not accomplish anything.

Consumers often pay the fees and end up in a worse position than when they started. The new rules should put these companies out of business. Query--why did it take the FTC so long to make these rules?