Consumer Law

More Times Reports on Foreclosure Issues, Student Loans, and Target Marketing

By Jeff Sovern

More reports from the Times: yesterday's issue included "Another Student Loan Company Settles With New York," about the settlement struck by Attorney General Andrew M. Cuomo with Goal Financial; Goal will become the ninth lender to adopt a marketing code of conduct. 

Back on October 23, the Times ran a series of short but painful pieces under the headline "After the House Is Gone" about the impact of foreclosures on some families.  The day before, October 22, David Leonhardt wrote a column, "Life Preserver For Owners Under Water," in which he explained that the desire to help homeowners in danger of losing their homes also risks helping borrowers who can afford to make their payments but face a temptation to walk away from their underwater homes.  Which borrowers should be bailed out?  Here's what Leonhardt said:

Let?s start by acknowledging that morality cannot be the main criteria, unfortunately.

The government has already passed the point of drawing fine moral distinctions and is now in the business of stabilizing the economy by whatever means necessary. Someone might argue, then, for rescuing everyone who might end up in foreclosure, regardless of the reason.

The problem with this approach ? and it?s the heart of the problem with any big-time homeowner rescue ? is probably obvious. As soon as the government announces that it will help everyone at risk of foreclosure, a lot of people are suddenly going to decide they?re at risk of foreclosure.

Homeowners who are under water will have an incentive to think of their homes in cold economic terms and threaten to walk away, while those who can just barely afford their monthly payments will have reason to slide into delinquency. Multiply 19 million mortgages by a couple of hundred thousand dollars, and the government could be left with $4 trillion in obligations.

That same day, the Times ran "Drawing a Bead on Debtors" about how banks use databases to make loan offers to consumers who have recently emerged from bankruptcy, other distressed consumers and so forth.  The article reports on both target marketing and lending issues.

I don't know about you, but I'm ready for some good news about consumer law. 

Full post as published by CL&P Blog on November 04, 2008 (boomark / email).