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Payday lenders cannot avoid certain federal consumer protection statutes simply because the lenders align themselves with American Indian Tribes. Image: Fotolia.
Payday lenders cannot avoid certain federal consumer protection statutes simply because the lenders align themselves with American Indian Tribes. Image: Fotolia.

Payday Loans Make Subprime Look Good

AUG 15, 2013 3:17pm ET
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WE’RE HEARING about payday lenders running into trouble with the FTC and New York State for alleged violations of federal and state laws. The FTC cases were unique because of a defense that the payday lenders were trying to use that was thrown out by a federal magistrate. The FTC cases resulted in a partial settlement prohibiting the settling defendants from using threats of arrest for collecting debts and from requiring all borrowers to consent to electronic withdrawals from their bank accounts.

The payday lenders included AMG Services Inc. and a handful of others. The victory for the FTC was the court held that the payday lenders cannot avoid certain federal consumer protection statutes simply because the lenders align themselves with American Indian Tribes. Nice try but the court held that TILA and the Electronic Fund Transfer Act apply to payday lenders regardless of their newly found Native American friends.

Over in New York the AG has sued Western Sky Financial and a few others for violations of New York’s usury laws. Oddly none of the defendants are licensed in New York but the AG says that does not matter and if you set up shop on tribal lands to avoid New York law it will not fly. According to the AG since 2010 the defendants made almost 18 thousand loans totaling 38 million in principal. The loans have come with $185 million in finance charges. Makes you wonder why people complain about the mortgage industry.

Moving to the West Coast and checking in with Oregon we are hearing that the state’s building code is changing to increase energy efficiency. The rules when finally adopted would kick in April 1, 2014 just in time for new construction and home repair season. The new rules are estimated to increase construction costs between 75 cents to $3.80 per square foot.

The increased building costs are supposed to pay for themselves over a five-year period. A few years ago I wrote about a similar energy efficient change to construction in another state and recall at that time a lot of opposition. The concerns then were that new energy efficient policies would be bad for home sales because the increased costs would be passed on to the consumer who could not afford it. This in turn would be bad for mortgage lending.

Lastly we are hearing about mineral rights. For people in large metro areas you are probably wondering what I am talking about. Well in the Midwest and other states with a lot of land there is a lot of money in the earth. The FDIC has recently started reserving mineral rights in deeds for properties it resells when there is a lot of land involved. I have clients coming to see me to review proposed leases of their land from oil and gas development companies all the time.

Homeowners with land think they are going to get rich with royalties from the oil and gas below the earth. However, these leases and the ultimate development of the property raise a number of concerns. Lenders may or may not want to allow them or even deal with them and the potential destruction of the property if something goes wrong. Usually things do not go wrong but when they do it is like a plane crash, as in oil leaking and polluting and destroying property.

Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at jamcd@comcast.net.

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