America’s out-of-date, unfair laws for collecting debts could be dramatically improved by these simple steps.
New rules put forward by the Consumer Financial Protection Bureau would have a major impact on the high-cost loan industry. But if history is any guide, lenders will quickly find some loopholes.
Non-profit hospitals get big tax breaks for providing care for patients who can’t afford it. Under new IRS rules these hospitals must take extra steps to inform poor patients they may qualify for financial assistance.
One Missouri hospital has sued thousands of uninsured patients who couldn’t pay for their care, then grabbed a hefty portion of their paychecks to cover the bills. “We will be paying them off until we die,” one debtor said.
In the latest move against companies targeting military customers, federal regulators prohibit two Virginia-based lenders from suing out-of-state debtors in Virginia courts.
Public hospitals can be among the most aggressive in collecting debts from poor patients, not only garnishing their wages, but cleaning out their bank accounts. “It makes me sick,” said one legal aid attorney.
A 1968 federal law allows collectors to take 25 percent of debtors’ wages, or every penny in their bank accounts.
Courts are required to appoint attorneys for service members if they are sued and can’t appear. But the law says little about what those lawyers must do. Some companies have taken advantage.
With stores near military bases across the country, the retailer USA Discounters offers easy credit to service members. But when those loans go bad, the company uses the local courts near its Virginia headquarters to file suits by the thousands.
Acknowledging that a previous law did not go far enough, the Defense Department says it needs to expand rules.
TitleMax, one of the fastest growing high-cost lenders in the country, has found a clever way around laws passed by several Texas cities: offer an initial loan at zero percent interest.
What lessons can we take from Washington?
In state after state that has tried to ban payday and similar loans, the industry has found ways to continue to peddle them.
Last year, activists in Missouri tried to limit what high-cost lenders can charge. The ensuing fight exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious efforts to stay legal and stay in business.