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Protect Consumers from Predators: Payday Lenders Need Tighter Controls

December 5, 2009 Leave a comment

Article Printed in The Concord Monitor – 10/21/2005

Under the cover of opposing government regulation, business interests have successfully advanced an incremental legislative agenda over the last six years that has devastated legal protection for New Hampshire consumers.

This business offensive has gained ground under the radar, with minimal scrutiny from the media or the public. Outside of a handful of consumer advocates, the loss of legal rights has attracted little attention.

Three developments have been instrumental in the consumer defeat: the exemption of most businesses from the consumer protection law, the growth and legalization of payday lending and the repeal of the interest rate cap on small loans.

Probably the most important has been the exemption of businesses from the reach of the consumer protection statute. In 2003, the Legislature gutted the heart of the consumer statute by deciding that any business subject to a regulatory board like the banking or insurance department should be exempt. That removed entire industries from the law.

This meant that consumers lost their right to sue in state court over unfair and deceptive business practices. For example, if you are a victim of an unscrupulous used car dealer or a predatory home mortgage lender, you have no recourse under the consumer protection law.

Instead of the right to sue for damages, the Legislature offered consumers the right to complain to the banking department. This was a huge loss. The banking department lacks any public record of aggressively protecting consumers. What has this department done to publicize its consumer protection role? In fact, it identifies more with the industries it regulates than with consumers.

Also in 2003, the Legislature approved the predatory practice of payday lending. Payday lenders offer small short-term loans at exorbitant interest rates. There are now over 50 payday outlets in New Hampshire.

In a typical loan, the consumer writes a personal check drawn on his or her bank account for the amount borrowed plus a fee. The fee, stated as a percentage of the check or of the loan, translates into triple-digit annual interest fees. The lender agrees not to deposit the check until the consumer’s next payday. If the consumer cannot pay in full on the next payday, the lender will rewrite a new loan with more fees attached.

The Legislature actually allowed lenders to roll over a loan 11 times if the consumer continues to be unable to pay the balance owed.

Payday lending is a debt trap in the guise of a service. Consumers keep borrowing out of fear they will be prosecuted for writing bad checks. The fear of bouncing checks and defaulting is a powerful form of pressure.

Payday lenders are like loan sharks. Unlike responsible lenders, neither checks to see if a borrower will be able to repay the loan. It is enough that a prospective customer has a checking account and regular income.

There is a national struggle going on over this form of lending. Fourteen states prohibit payday loans through small-loan interest rate caps, usury laws or specific restrictions on check cashing. New Hampshire is the only state in New England that allows them.

In 1999, New Hampshire repealed its interest-rate cap on loans under $1,500. This paved the way for payday lending and a revival of usury. Usury is an old-fashioned word defined originally as charging a fee for the use of money. It came to mean the charging of unreasonably high interest rates.

In the early 20th century, states all over the country developed usury laws specifying the maximum legal interest rate at which loans could be made. Unfortunately, the national trend has been away from state usury laws. I would suggest that the rehabilitation of usury should not be considered progress.

Consumer protection has a long and honorable tradition in America. It is about fairness in the marketplace. It offers protection against fraud, harassment and economic victimization. I think back to the muckraking journalist Upton Sinclair and his novel The Jungle, an exposé of the lack of food safety and horrible working conditions in the Chicago meatpacking houses. More recently, in the 1960s, ’70s and ’80s, there is the example of Ralph Nader and Nader’s Raiders.

New Hampshire needs some local Ralph Naders. The mantra of small government has opened our state’s consumers to being fleeced by every variety of shyster and hustler.

On the positive side, Republican Rep. Elizabeth Hager has introduced a bill for the 2006 legislative session that will seek a study of the adequacy of current consumer protection law.

Before business interests remove any remaining consumer remedies, a bright light needs to be shined on the damage done. It is time for our sleepwalking around consumer protection to end.

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Consumer Protection? Don’t Bank on it…

December 5, 2009 1 comment

Article Printed in The Concord Monitor on – 09/30/2005

On Oct. 17, a new bankruptcy law goes into effect. Known by the Orwellian heading Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, this law makes a contribution to the well-established American political tradition of false labeling. Substance is utterly contrary to title.

The last thing this law is about is protecting consumers. It is the baby of the credit card companies, banks and other corporate interests. They drafted this one-sided legislation eight years ago, nursed it along and ultimately shepherded it through Congress.

Under the new law, more people will be forced

into five-year repayment plans to creditors. The fresh start, previously considered the great plus for financially strapped consumers, will be more elusive.

A new and different means test will be the vehicle for these changes. The means test will apply to debtors with income over the state’s median – $50,411 for a single earner in New Hampshire. The new law will require the court to use predetermined government figures for expense items based on IRS guidelines for tax cheats. It will base a debtor’s income on an average of the previous six months, even if the debtor has been laid off or his or her circumstances have otherwise changed for the worse.

Under current law, a bankruptcy court judge looks at a debtor’s actual income and expenses in evaluating abuse and deciding whether a discharge of debt should be granted. A danger is that the new formula will result in overstated income and understated expenses, suggesting that debtors have greater repayment ability than actually exists.

The law essentially replaces a flexible, judicially supervised process that has worked well (at least in New Hampshire) with a mechanical one-size-fits-all model almost guaranteed to spawn more litigation. The means test is the place where it is most likely the consumer will be harmed since it remains unclear how much numbers will reflect reality.

There are many other objectionable aspects to this legislation, the scope of which is massive. Debtors will face increased costs and filing requirements. Even if they cannot afford it, they must obtain pre-bankruptcy credit counseling. They also must complete a personal financial management course. More debts will be classified non-dischargeable, and the ability of debtors to discharge credit card debt will be significantly reduced. It will be harder for tenants to use the bankruptcy law to protect themselves from eviction.

When the bill passed last spring, Congress voted down virtually every effort to afford some consumer protection. Amendments to discourage predatory lending, to protect the homes of the elderly and the medically infirm and to protect servicemen and women were all defeated.

Even the plight of hurricane victims was ignored. Your loan debt will continue to exist even if your house, car and all personal possessions are located somewhere in the Gulf of Mexico. On Sept. 8, Rep. John Conyers introduced further legislation to protect the hundreds of thousands of families devastated by Hurricane Katrina who will suffer under the anti-debtor provisions of the new bankruptcy law.

False stereotype

The corporate interests who sponsored the original legislation portrayed bankruptcy as a system where deadbeats totally escaped paying their debts. The consumer recklessly using credit cards for frivolous purpose was their image of choice. Think mall shopping spree with no intent to repay.

Behind the stereotype lies a complex set of reasons why consumers file bankruptcy. I would estimate that for every person gaming the system, there are at least 20 who file bankruptcy due to a personal tragedy like illness, job loss or divorce.

While federal statistics do not indicate why people file, we now have good academic data about who turns to the bankruptcy system. Professor Elizabeth Warren of Harvard Law School, a bankruptcy law expert, argues that the amount of medical debt is substantial. Warren has stated that more than one-quarter of all filers cite illness or injury as a specific reason for bankruptcy. Another quarter cite uncovered medical bills of over $1,000.

It is hard not to connect the inadequacy of health insurance coverage with the need for bankruptcy protection. Probably the most common scenario I have witnessed is illness leading to job loss resulting in big debt. If we had national health insurance, there would be far less bankruptcy. Gaps in coverage, underinsurance and no insurance all leave people at risk. Only really comprehensive health insurance would help.

This law does no credit to either political party. Shamefully, many Democrats supported it. If lawmakers are serious about consumer protection, they should look at the ridiculous extension of credit, including to minors. Credit card solicitations and profits have vastly increased. These companies have bled consumers dry with their fees, penalties and interest. The other side of bankruptcy is their predatory practices, which this legislation ignores.

Consumer protection has become a joke. A better name for this law would be the Credit Card Protection and Fleecing the Consumer Act of 2005. In passing it, Congress acted like a physician who misdiagnoses the patient and prescribes wrong treatment. Forgotten was the old medical maxim “First, do no harm.”

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Proposed State Medicaid Cuts are a Budget Boomerang: State Must Take Financial Responsibility

December 5, 2009 Leave a comment

Article printed in the Concord Monitor – 06/05/2005

As our Legislature wrestles with the budget deficit, a variety of fixes have been suggested. Many center on cutting Medicaid, a joint federal-state program that provides health services to especially vulnerable populations. Medicaid serves around 95,000 people in the state.

These legislative proposals include cutting Medicaid reimbursement rates to hospitals, counties and other medical providers, putting an asset test on the Healthy Kids program and imposing monthly premiums on Medicaid recipients.

The proposals have been put forward in the name of fiscal responsibility. But it is not fiscally responsible to make proposals that ignore significant adverse effects on the health-care system as a whole. A better characterization would be passing the buck.

The suggested Medicaid measures mask cost shifting that ultimately harms consumers of health care along with private businesses. This cost shifting is a budget boomerang that needs to be more widely understood.

The clearest explanation I have seen about health-care cost shifting comes from Doug Hall of the New Hampshire Center for Public Policy Studies. In 2003, Hall reported that New Hampshire Medicaid reimbursed only 77 percent of actual expenses incurred by hospitals. That means taking any Medicaid patient is a losing proposition.

Of course, hospitals will not simply eat the loss. They shift costs to private insurance and private-pay patients to compensate for lost revenue. Hall compares the revenue structure of a health-care provider to a hydraulic system. He says push down on one revenue source and another must rise to compensate.

When public programs like Medicaid fail to pay real cost and do not increase their payments consistent as costs rise, insured and private-pay patients will have to make up the difference. In publications, both Hall and the Business and Industry Association have well described this reality.

Hall reports that in 2001 New Hampshire hospitals shifted $198 million in costs onto insurers and self-pay patients. This amounts to a 23 percent surcharge over the true cost of health care.

Legislators who propose further Medicaid reimbursement reductions are not thinking through the consequences of their actions. Their acts will cause a ratcheting up of costs outside Medicaid while weakening that program.

It is ridiculous that the state has built the Medicaid program on the expectation that health-care providers should donate their services for Medicaid recipients without fair compensation. This amounts to undermining the program. It is not a recipe for any long-term survival.

The problem has gotten much worse during the last decade. Ten years ago, New Hampshire paid much closer to the actual cost of Medicaid patients. According to the New Hampshire Hospital Association, we are now last among the states in the adequacy of Medicaid payment. Our reimbursement rates are nearly 20 percent lower than the national average.

Further underpayment of Medicaid has additional dark sides. More medical providers will limit access of Medicaid patients in the future because of the steeper financial loss. When care is denied, the patient in need will still be there. If the patient gets care, the likely place will be an ER and the likely result of the delay will be more expensive treatment due to a worsened condition.

I am no expert, but I expect the Medicaid cost shifting is approaching a breaking point. Public rates are too low and private rates are too high. Something will have to give. Yet the government, in effect, looks away.

At its best, New Hampshire is a genuine community based on a shared sense of caring. A community must take care of its members. We need an organized way of helping the sick and infirm. It undermines our community when Medicaid is significantly under-funded.

Fiscal responsibility requires adequate public funding, in part, so that the private system does not pass on even more exorbitant price increases that would turn health care into an even more unaffordable commodity than it is at present.

In stepping back from the immediate crisis, I find it embarrassing that our neighbor Vermont can actively consider universal health care while we remain mired in a dispiriting, backward-looking legislative debate that will deny care to more citizens. It is time New Hampshire moved in a different direction.

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Time to Raise the Minimum Wage

December 5, 2009 Leave a comment

Article printed in the Concord Monitor – 03/23/2005

The Legislature is poised to take up again the issue of raising the state’s minimum wage. House Bill 665, which has many sponsors, including Rep. Sandra Keans, Rep. Terie Norelli and Sen. Dick Green, proposes to raise the minimum wage from $5.15 an hour to $6.65 an hour over a three-year period. The bill proposes yearly 50-cent increases.

This will be the fourth attempt at the state level to raise the minimum wage over $5.15 an hour. It has been eight years since the last increase. Last year, the House speaker broke a tie vote to kill the bill. Before that, the House had passed an increase, but the bill died in the Senate.

The reasons to raise the minimum wage are both moral and practical. As an economic justice issue, it is fundamentally about fairness for low-wage workers. There is a core value in America that if you work hard, you should be treated fairly and you should have adequate resources to provide for your family. That means full-time workers should be paid enough to feed their families and put roofs over their heads without government assistance.

The current minimum wage fails to protect low-income families against hunger and homelessness. A wage of $5.15 an hour does not provide enough income to pay for basic necessities. Finding affordable housing in New Hampshire on that wage would be a miracle.

A minimum wage increase is not a guarantee against economic hardship. No doubt, families will still struggle. But an increase would provide more tangible help to pay for food, rent or medicine. Having a little more money might prevent an eviction, a utility shutoff or repossession of a car needed to get to work.

During the last eight years, while the minimum wage has stagnated, the cost of living has risen. Consider gas prices or rents. When the minimum wage does not keep pace with living costs, its value erodes.

The value of the minimum wage in 2005 is less than it has been in 46 out of the last 48 years. The minimum wage is worth only 33 percent of the average American wage, its lowest level since 1949. The minimum wage was instituted in 1938 and reached its peak value in 1968.

There has been one unrecognized cost in the erosion of value of the minimum wage. More people need to seek town, city or state government to survive because their wages have not kept up with the cost of living.

Welfare, food stamps and fuel assistance see more applicants. Government ends up subsidizing the businesses that pay bottom-of-the-barrel wages.

Polls and referendums find raising the minimum wage is overwhelmingly popular. In the last election, in two red states that voted for George Bush, voters approved ballot measures to raise the minimum wage by $1, to $6.15 an hour.

In Florida, over 70 percent of voters supported the increase. In Nevada, over 68 percent supported it. In these states, hardly liberal bastions, the minimum wage increase won in every county in both states. A new poll by the nonpartisan Pew Research Foundation found that 82 percent of Americans stated that raising the minimum wage was an important priority. Only 6 percent opposed an increase.

In New England, all our surrounding states have raised the minimum wage above $5.15. Vermont is at $7 an hour, Massachusetts $6.75 and Maine $6.35. The latter two states are considering additional increases. Rhode Island is at $6.75, and Connecticut leads at $7.10.

Having observed the debate over this issue over the years, I believe most opponents of the increase in New Hampshire do not think there should be any minimum wage. They see a wage floor as intrusive government regulation of the marketplace.

There has been no consistency in opponents’ arguments. Arguments have included: not enough people would be affected; too many people would be affected; and small business would be hurt.

Having a minimum wage protects the value of work and the idea that work should be rewarded fairly. Without an hourly wage floor, employers could exploit the lack of bargaining power of low-wage workers. Nothing in the market would prevent a down spiral in worker pay scale. Pretty soon, some employers could be offering the equivalent of Third World wage

Congress will not act on the issue. Even though Congress has given itself cost-of-living pay raises five years in a row, the U.S. Senate failed to step up when it recently defeated the minimum wage amendment to bankruptcy legislation.

A modest minimum wage increase like that presented by House Bill 665 makes good economic sense, and it is the right thing to do.

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Gun Seizure Bills Deserve To Fail: Weapons, Domestic Violence A Fatal Mix

December 5, 2009 Leave a comment

Article printed in the Concord Monitor – 02/22/2005

The Legislature will soon debate two bills that seek reconsideration of laws that allow judges and police officers to seize guns in domestic violence cases. Rep. Howard Dickinson, a Republican from Center Conway, is sponsoring a bill to study gun seizure law, and Rep. Richard Kennedy of Contoocook is promoting a bill to reshape the law itself.
Neither bill deserves support. When the Legislature reformed the domestic violence laws several years ago, the issue of guns and domestic violence got extensive review. There was testimony from all sides at a public hearing in Representatives Hall.
After months of deliberation, legislators decided that people who committed domestic violence forfeited their right to possess guns for the 12 months of their restraining order. Unless the abuser poses a continuing threat, courts will return the guns after the year is up.
There is no good reason to revisit this law now.
The reasons for the seizure law are straightforward. The most important is public safety. Gun seizures may save lives. Removing guns lessens the chance of homicide and suicide by taking one risk factor out of the equation.

Domestic violence commonly features heightened emotional volatility. Out-of-control anger may not be far from homicidal rage. In a heartbeat, in the context of an argument, guns can turn domestic violence into homicide. Taking the guns makes it harder to murder.

It is not as though we lack experience with domestic violence-related homicide. Two-thirds of our homicides in New Hampshire are connected to domestic violence. That is a long-standing pattern consistent with national figures.

Women are far more likely to be killed by a spouse, an intimate acquaintance or a family member than by a stranger. Most often, it happens during an argument. Guns are the most common murder weapon.

It is hard to miss the almost routine homicide stories that appear in the media with numbing regularity. The story varies little: A current or former boyfriend or spouse shoots an abused girlfriend or wife. Then the boyfriend or spouse kills himself, explaining he would rather die than see his ex with a new lover.

I received my own education on the role of guns in domestic violence cases from my former client, Karen. She and her ex-husband had an ongoing custody battle after their divorce.

Karen’s ex-husband always had multiple weapons on his person, including guns and knives. He wore a shoulder holster and an ankle holster. He maintained a large gun collection in his mobile home. It was like every day he was preparing for a battle.

Gun display was his form of intimidation. He had previously threatened Karen while holding a gun to her head. He made death threats. To the great distress of his son, he shot and killed the family dog. He used weapons to communicate physical menace and to try and keep Karen in line.

He also specialized in psychological abuse. He consistently belittled Karen and called her demeaning names. Everything was always her fault. He never could see his responsibility.

Years after the divorce, he continued to stalk Karen. He would park across the street from her apartment and monitor her whereabouts, her activities and her visitors. He kept a log detailing what he observed, including descriptions of visitors, their license plate numbers and speculation about Karen’s activities of which he disapproved.

During the course of the case, I obtained a copy of the log he maintained. It included almost daily entries and read like he was a private investigator or a police officer. After the court issued a restraining order against him, he contacted me and claimed he was the victim of an elaborate plot hatched by his ex-wife and her supporters.

In an article in the Monitor in early January, Rep. Dickinson stated there is excessive paranoia about guns and they may have nothing to do with a couple divorcing. He believed the gun seizure laws demonstrate too much caution. He also expressed concern about the lack of care given to valuable guns after they are confiscated by the police.

Such comments trivialize domestic violence and the well-documented role guns have played in homicide and intimidation. No right, including state constitutional rights about guns, are absolute. Domestic violence abusers lose their right to possess weapons because of their behavior, not their beliefs.

I am curious if the legislators sponsoring the study bill think convicted felons or those with severe mental illness should still have access to weapons. Maybe they want a study committee about that, too.

Rep. Kennedy’s bill reads like a Batterers’ Protection Act. He proposes raising the burden of proof in all civil domestic violence cases to make it harder to prove abuse. And, surprise, he wants to make it far harder to remove weapons. His bill would be a comfort to abusers everywhere.

These bills are sour grapes. Some pro-gun legislators did not like the law change requiring removal of weapons if the court finds abuse. Giving a domestic violence abuser a gun makes about as much sense as putting a drunken driver behind the wheel. In this instance, it appears that pro-gun legislators care more about their precious guns than precious lives lost.

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