Bankruptcy

What We Talk About When We Talk About Postal Banking

February 20, 2014
Publication Image The Weekly Wonk is a digital magazine and podcast from New America focused on the ideas and policy challenges that will shape our future. In this week's edition, Elliot Schreur from the Asset Building Program explains the dynamics and challenges around a recent proposal for the United States Postal Service to offer financial services.

Asset Building News Week, June 4-7

June 7, 2013
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The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include housing, health and wealth, financial services, and unemployment.

Guest Post: Health is Wealth: The Affordable Care Act As a Groundbreaking Asset Building Tool

May 30, 2013
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Editor's note: this blog post was authored by Ambika Panday, Assistant Director of Policy & Advocacy at The Financial Clinic, and is adapted from an article that appeared originally in the Clearinghouse Review Journal of Poverty Law and Policy, March-April 2013 (pp. 492-508).

Chronic illness, poor health, and inadequate health insurance are three major obstacles keeping low and moderate-income families from building their financial security.  While it is unclear whether poor health begets financial insecurity or vice versa, the correlation between the lack of health insurance (and poor health) and poverty is unmistakable.

If the FDIC Settles and No One Hears about It, Does It Affect Consumer Protection?

March 11, 2013
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The Los Angeles Times has a piece out today about the phenomenon of "no press release" clauses that are a regular part of FDIC settlements with banks. Essentially, "the government cut[s] a deal with the bank's lawyers to keep [the settlement] quiet: a 'no press release' clause that required the FDIC never to mention the deal 'except in response to a specific inquiry.'"

The Times explains that "Since 2007, 471 U.S. banks have failed, nearly depleting the FDIC deposit-insurance fund with $92.5 billion in losses. Rather than sue, the agency has typically preferred to settle for a fraction of the losses while helping the banks avoid bad press." The settlements the Times explored cover a whole range of alleged banking violations, including "reckless loans to homeowners and builders; falsified documents; inflated appraisals; lender refusals to buy back bad loans." Furthermore, "At least 10 [of the] undisclosed settlements involved officers and directors accused of contributing to the collapse of their own banks."

These "no press release" clauses allow banks to avoid major hullabaloo following even multi-million dollar settlements with the FDIC. Theoretically, settling has benefits for both the FDIC and the banks in question: "Defendants benefit by settling because they can avoid admitting guilt and limit the damages they might face in court. The FDIC benefits by collecting money without the hassle and expense of litigation." But, as the Times points out, the phenomenon of "no press release" clauses is both an aberration from past policy and raises some serious concerns about the transparency of settlements and the effectiveness of government regulation of bank actions.

The Fiscal Cliff Deal: Making Mortgage Writedowns Possible

January 4, 2013

Tucked away in the pages of the tax bill that averted the Fiscal Cliff (which Aleta Sprague reviewed here) is a crucial lifeline to struggling homeowners. Known as the Mortgage Debt Relief Act,  thousands of homeowners who go through a mortgage modification, short sale, or foreclosure correction will not owe federal taxes on that debt forgiveness. This is a big deal.

Funding Legal Aid is Essential to Preventing Foreclosures

July 19, 2012
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Earlier this summer, I wrote about the significant cuts to the budget of the Legal Services Corporation, which provides funding to around 137 legal aid programs with over nine hundred offices nationwide. These organizations provide crucial services to low-income communities, ranging from foreclosure prevention to domestic violence services to increasing access to public benefits.  LSC-funded programs employ approximately 58% of the attorneys working in the legal aid field. Legal aid programs support asset building by helping clients access basic necessities and maintain their existing assets—including most families’ greatest asset, the home. Unfortunately, insufficient funding has left legal aid organizations struggling, and most families facing foreclosure unrepresented. However, banks have an opportunity to make small changes that could have a big impact with respect to one of legal aid's major funding streams - the Interest on Lawyers' Trust Accounts program.

Preserving Access to Justice: Legal Services and the Safety Net

June 19, 2012
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The Legal Services Corporation (LSC), which provides funding to legal services organizations throughout the country, is an essential feature of the safety net—though rarely described as such. LSC funding is used to provide civil legal services to households at or below 125% of the federal poverty line. Unlike in criminal cases, where the right to counsel is constitutionally guaranteed for indigent defendants, parties to civil cases have no such right under federal law. In other words, depending on where you live, it’s perfectly legal for you to lose your house, all your possessions, and perhaps even custody of your child without ever talking to a lawyer, no matter how little money you make.

LSC-funded services are crucial in helping keep many families afloat. Yet perhaps unsurprisingly, like other social services programs, LSC has faced major budget cuts, and continues to see its funding attacked. Over the past three decades, LSC’s budget has been effectively cut by just around seventy percent. One member of Congress even proposed an amendment to the FY 2013 House Appropriations Bill that would have ended all funding for LSC, citing the organization as “nonessential” and alleging fraud (it failed, but received 122 votes in the House). Like the proposed cuts to SNAP, cutting LSC’s funding—or even failing to increase it—could have truly dire consequences for low-income communities nationwide.

Creating Financially Capable Communities at Home in DC and across the US

April 10, 2012
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Yesterday’s President’s Advisory Council on Financial Capability meeting sharpened the case for making financial capability building a top priority in the US.  Treasury Deputy Secretary Neal Wolin set the stage by stating that, “The economy is regaining momentum.  But we still have more work to do to repair the damage caused by the worst financial crisis in our lifetimes.”  A following panel disc

Asset Building News Week, Mar 12-16

March 16, 2012
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The Asset Building News Week is a weekly Friday feature on the The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include young adult unemployment, student loan debt, banking products, asset building at tax time, and the racial wealth gap.

Lowering Mortgages Payments Inflated Due to Medical Bills

February 1, 2012
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Below is guest post written by a friend of the Asset Building Program, Mark Rukavina. Mark runs The Access Project and is one of the country's leding experts on medical debt and its debilitating impacts. 

If you think it is implausible that co-payments for doctor or hospital visits could increase your mortgage interest rate, think again.  Medical bills, even those that have been paid in full, can and do ruin credit and increase the cost of loans.   

The reasons for this vary.   Healthcare costs, for some, are simply unaffordable and bills go unpaid.  Others are confused by their bills and allow them to go past the due date or be sent to a collection agency.  Studies have found that American patients often do not understand claims well enough to know why they owe the bill or if it is correct.  An American Medical Association study found that one of every five claims is inaccurately processed by health insurers. 

In 2010, thirty million Americans were contacted by collection agencies for unpaid medical bills.  Research published in the Federal Reserve Bulletin found that more than half of all collection accounts on credit reports are medical in nature. 

Total healthcare spending in America amounted to $2.6 trillion in 2010.  Of this total, $300 billion was paid out of pocket, for example through deductibles and co-payment fees.   Between 2009 and 2010, the growth in out-of-pocket spending accelerated as more people switched to higher deductible plans or increased co-payments in exchange for lower premium costs.  

As out-of-pocket healthcare costs increase, people are left wondering whether they or their insurer is supposed to pay the bill.   Understandably, providers want payment in exchange for their services.  When they do not receive prompt payments, they initiate action similar to other businesses and send the bills to collection.

It is a common misconception that medical debt cannot hurt your credit score.  Collection agencies typically report medical bills to the credit bureaus and view all collection accounts as delinquent.  They do so without regard for why the bills were sent to collection. With medical collections, many people pay off the balance promptly upon hearing from a collection agency.  They are frequently surprised to find that these accounts stay on their credit report and lower their score.

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