The Raven

Saturday, August 31, 2002

Blogsnobbery

When I updated this page with a link to "blogsnob" at the bottom I appear to have "updated" the page. So I might as well explain what that's about. If you visit blogsnob you can pick up the graphic and the script which puts a random link to another blogsnobber (christ in a gumball machine, blog is so uneuphonious) on your page and a short desc line. When you're bored, you can go blog-hopping, or snob-jumping, or whatever all over the place. Might be a good way to dig up traffic, you never know.

In fact, I just hit a few, and straightaway found a link to a thought-provoking article by Rebecca Blood about the ethics of weblogging. Worth a visit if you like that sort of thing. The Raven does.

7:55:52 PM

The Road to Ruin

Inevitably, the path to a secure future in America involves buying a house. Instead of watching 25 to 50 percent of your wealth disappear into a landlord's pocket, you get to keep that money and get a tax break on the interest to boot. But just as a house is the most expensive item any of us are likely to purchase, big money brings out big predators. In this case, the Bad Corporate Citizen of the Year Award goes to Household International, a Fortune 500 company and the country's second largest mortgage lender.

Funny how just when a major investigation in Washington state ends in a report detailing the extent of Household's rapacity, "the company succeeds in suppressing it." Let's see what Household's up to. Julie Herrington, a disabled former employee of the Federal Reserve Bank, says that "company reps convinced her in February 2000 to refinance her home, promising the deal would save her more than $300 a month." Sounds like a good deal for Julie, right? But the company didn't tell her about taxes and insurance that wound up raising her monthly payment. They also zapped her with $11,000 in closing costs, and saddled her with a usurious 11.9 APR despite her good credit history; "they promised that regular on-time payments would lead to a quick rate reduction, one which never materialized," she laments.

"I thought I was dealing with a reputable company," she explains, "but refinancing with Household was the worst decision I've ever made in my life."

Donald DeBolt, a machinist, also made the mistake of doing the refinance thing with Household, getting slammed with those huge fees and is "still paying 13 percent on his loan, though he says loan officers assured him his interest rate would drop each year till it hit eight percent." It didn't, and he's now close to bankruptcy.

So who wins in these deals? You don't need three guesses:

Household, which has been aggressively expanding its sub-prime lending since 1998, has reaped the benefits, posting 16 consecutive record quarters, with net income passing the $500 million mark in the second quarter this year.

OK, so you say, "Well that's nice Mr. Raven, but they're just a company out to make a profit and they can't be blamed if consumers make bad choices," and to an extent you have an argument. But there's a class action suit in the works filed by Washington attorney Bob Parlette, who notes that "People's lives have been ruined," and Washington State Senator Karen Keiser agrees: "The terms a lot of these people have been pushed into are insupportable."

The misbehavior appears to be nationwide, with claims against Household coming in from California, Massachussets, and points in between, like Illinois where Household targeted Starr Marshall Cash, an attorney who says she was mailed an invitation from Household "offering her a no-hassle $15,000 home equity loan."

It looked nice, but the fine print revealed that the loan came with an interest rate of 24 percent -- nearly five times what banks are charging for similar loans. "What kind of a fool do they think I am?" she wonders.

So her company conducts a study and finds out that many people, "especially African Americans," are falling into the trap, and choosing "subprime lenders like Household, which lend to people who can't or won't get bank loans, and often charge high interest rates and fees that can lead to foreclosure." And sometimes they have little choice, as a study of lending patterns revealed that in one typical Illinois county, 13 of 14 local banks "denied black mortgage applicants at least 1.5 times more often than white applicants. Eight of those banks were more than twice as likely to deny blacks as whites." Curiously, the trend intensifies as blacks move up the economic ladder into the upper-income bracket, "where blacks were 2.4 times as likely to be denied mortgages as were whites."

The Bellingham Herald newspaper in Washington finally got hold of a leaked copy of the suppressed report on Household, and discovered that the company routinely engages in, among other things:

"Misrepresentations" and "dishonest statements" about interest rates, monthly payments, loan fees, prepayment penalties, and insurance.

Coaxing borrowers into signing documents without reading them.

Talking borrowers into refinancing first mortgages at disadvantageous rates, based on misleading interest information, when borrowers originally sought only small consumer loans.

Adding costly insurance premiums to loan amounts either without the borrower's knowledge, or by wrongly leading borrowers to believe they had to buy the insurance to get the loan.

The evidence of willful, conscious, and systemic predation is overwhelming, and in several cases investigators "found reason to believe that HFC employees forged borrowers' signatures to documents agreeing to pay thousands of additional dollars for credit insurance policies that Washington Insurance Commissioner Mike Kreidler has labeled 'inherently predatory.'" Household tries to explain all this away by citing a "rogue office" but this doesn't wash at all. In fact, the cited abuses are statewide in Washington and occur elsewhere, too, "by corporate officers overseeing large segments of the country," according to the state report.

Looking at today's two stories, the Raven detects a pattern of large financial institutions working against the interests of those they do business with, at best, and engaging in outright criminal behavior at worst. What this all means runs, we think, deeper than the surface indicates. When a substantial portion of the population finds itself targeted as an "easy mark" by big firms, the only rational response is one of hostility and paranoia in return. These attitudes subsequently run downhill in the marketplace, where service industry workers and others on the front lines ultimately experience this weakening of the social fabric.
4:08:06 PM

Zero Percent Interest

Actually, the Raven has less-than-zero interest in the daily barrage of credit card offers that arrive in the mail—but when it comes to the telephone calls, then we start contemplating guerilla tactics. Got one yesterday, in fact, that was a live version of the things they mail you, "We at First National want to offer you a credit card with zero percent interest for one year on transfers..." As the marketer wound the pitch down we decided to try a technique recently mentioned in another blog:

"Now, all I need to do is confirm your information, do you still live at—

"Hold on a second. I really ought to tell you that I've just been released from prison."

"That's no problem, Sir, we'll be happy to forward your—"

"No, really, I mean I just got out of prison and I'm on parole. My credit is shot."

"It doesn't matter, we can still apply on your behalf and—"

"Yeah, but I did a stretch for credit card fraud, see, and I don't think they're gonna be interested."

"You'd be surprised, Sir. Now, just let me complete this—"

"Can I ask you a question?"

"Yes, what's that?"

"If you aren't the credit card company, how much money do you get for processing my application? Why can't I just cut you out and apply directly myself?"

In the pause that ensued, I thanked him and hung up. Clearly, this technique isn't as effective as promised, but I'm going to work on it. So how, exactly, do they target us? Well, they use our credit information which they pass around to each other in lists. The citizens of California are trying to fight back with a privacy bill designed to prevent these schmucks from sharing financial information about consumers. But for some reason (I wonder what it could be?) moderate Democracts are "blocking" the legislation.

Despite numerous polls showing sky-high support for strong privacy laws in the state, the Legislature has repeatedly failed to enact such a measure amid furious lobbying by a well-heeled coalition of banks, insurance firms, credit card companies and others that stand to lose from it.

Anything that makes the vermin scurry about like that has to be a good thing, no? Regardless, this bill is due to be killed, but the moderate Demos are going to field a watered-down version of their own, which will still allow large firms to distribute information internally within their group companies. Often, that means hundreds if not thousands of affiliates, and hence is no reform whatsoever. What came as a surprise to me is that the lenders aren't necessarily trying to cherry pick people with good credit histories.

Such so-called financial profiling greatly concerns consumer groups, which contend that the information is often used in a predatory, even discriminatory, manner.

Here's what a worker at CitiFinancial Corp had to say about it in court recently:

"I and other employees would often determine how much insurance could be sold to a borrower based on the borrower's occupation, race, age and education level," said the former assistant manager, Gail Kubiniec. "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the coverages CitiFinancial offered."

How interesting. And this ties in with our Labor Day weekend special on working, those who prey on workers, and what we can do about it. More to come.

9:33:05 AM