Daily Archives: May 24, 2015

Kansas’s shocking new law will take poor people’s money and give it to big banks

Kansas Republicans have put forward a new policy initiative that’s almost shocking in its clear intent to harm the interests of poor people. The provision, which takes effect July 1, will ban welfare recipients from taking out more than $25 in benefits a day from an ATM.

Other broadly similar benefits-restriction measures — things like laws that require drug testing for welfare or food stamp recipients, for example, or that ban food stamp recipients from buying seafood or steak — normally have at least a veneer of an anti-fraud or public health rationale. But the ATM rule is simply a financial hardship and a logistical hassle that can’t possibly help anyone other than banks collecting the fees.

As the Washington Post’s Max Ehrenfreund explains, this places a massive burden on recipient families. For one thing, it’s a de facto benefit cut. As of last July, a single parent family of three in Kansas with no other earnings received $429 a month from Temporary Assistance for Needy Families (TANF, a.k.a. welfare), according to the Center on Budget and Policy Priorities. Most ATMs don’t stock $5 bills, so the Kansas rule effectively limits withdrawals to $20.

Taking out that money isn’t free. Many banks charge substantial fees for withdrawals from Electronic Benefit Transfer (EBT) accounts to which TANF money is distributed. I called Intrust Bank in Wichita, which says it charges $2 per EBT transaction. Emprise Bank says it charges $1.50. In addition to that, Kansas itself charges $1 per ATM withdrawal. So taking the cheaper option, withdrawing $420 from Emprise under the new rules would mean $52.50 in fees. Effectively you’d be limited to taking out $380 a month if you didn’t want to go over your monthly allowance, fees inclusive.

Assuming you could only take out $420 at a time before, that’s a nearly 10 percent benefit cut. If you went with Intrust, it’d be a nearly 14 percent cut. Say what you will about benefit cuts, but usually the money all goes to the state. Here, most of it goes to banks. It’s like if Congress slashed food stamps and decided to hand the savings over to Citigroup.

Read on.

N.Y. Regulators Say 11 Lenders Will Monitor, Maintain Vacant Properties

New York regulators said Monday that 11 lenders have agreed to monitor and maintain vacant properties in an effort to protect them and combat neighborhood blight.

The banks, mortgage companies and credit unions represent nearly 70 percent of the New York market and will adopt practices to limit damage from so-called “zombie properties,” according to the Department of Financial Services. They agreed to best practices that include checking within 60 days any residential properties that are delinquent on loans to begin determining if they are abandoned, the department said.

The 11 lenders are Wells Fargo, Bank of America, Citi Mortgage, Ocwen, Nationstar, PHH, Green Tree Servicing, Astoria Bank, Bethpage Federal Credit Union, M&T Bank and Ridgewood Savings Bank.

“The wave of zombie properties that arose in the wake of the financial crisis harms local communities and threatens the long-term health of the mortgage market,” department Superintendent Ben Lawsky said. Many homeowners defaulted on mortgages in the aftermath of the 2008 national financial crisis when the housing bubble burst. “These commonsense actions are an immediate and vital part of repairing that damage as we continue to pursue additional legislative reforms,” he said.

After the initial external inspection within 60 days, the lenders are to check the property every 25 to 35 days. If they determine it’s abandoned, they will secure it by posting a notice with their contact information, change at least one door lock, board up any broken windows and doors and remove nuisance features and fix significant safety issues. Properties will be put on a state list to be shared with municipal authorities.

Read on.

THE INSURANCE SCAM THAT’S FLEECING LOW-INCOME DRIVERS — AND HOW POLICE ARE MAKING IT WORSE

One evening last month, as custodian Tracy Martin took in a Detroit Pistons game at the Palace of Auburn Hills, her cell phone rang. “They’re towing your car,” her husband, who is paralyzed, told her. Later, when Martin arrived home, she found a flyer left behind by the Highland Park Police, which along with the police departments of neighboring Ecorse and Hamtramck, belonged to the COBRA Multijurisdictional Auto Task Force.

The leaflet, placed where her 2004 Ford truck had been parked, explained that Martin’s vehicle had been towed as a result of auto insurance fraud; it also listed a number for her to call.

“They said I couldn’t get my vehicle back, I have to wait to get it at auction,” Martin said, recounting that first conversation. “Then I talked to someone else who gave me an appointment to talk to a detective, but [he said] my best bet was to be ready to buy it back at auction.”

A task force representative told Martin her vehicle was towed after an insurance company reported her fraudulent policy to the Michigan Secretary of State, which checks proof of insurance when it issues license plates. The Secretary of State, in turn, was required to contact the police after it was notified of the fraud. So Martin called the Secretary of State’s office, and spoke with someone who told her the office “doesn’t tow vehicles for insurance fraud.”

With no apparent recourse to retrieve her car, Martin has resigned herself to buying it back at auction. Authorities have not given her an auction date.

“I called Progressive,” she said, “and they’re like, it’s a whole lot of you all in Detroit. There are many victims there.”

Martin was taken in by a widening scam in which crooks, posing as auto insurance agents, prey on working people struggling to find affordable policies. Under the scam, the perpetrator offers auto insurance for a low price — low because the scammer, posing as a broker, will buy an authentic policy using fraudulent means of payment, keeping the policy just long enough to collect a proof of insurance card.

The racket is a growing problem in New York City and South Florida, according to an insurance industry group, but seems most prevalent in Michigan, where premiums are inflated by a state mandate that drivers purchase insurance plans which have unlimited lifetime medical benefits, among other features. Victims in Michigan are thrown even deeper into crisis when police, as is common there, accuse victims of being in on the scam and seize their vehicles and other assets under civil forfeiture laws.

The scam and seizures show how crooks and cops can end up working in concert to further imperil those already on the economic brink. Indeed, in this case, low-income residents are pinched at every turn. They start off with especially high insurance premiums, consumer advocates argue, because insurance companies sometimes charge people in low-income communities more for auto insurance in a practice some have labeled modern redlining.

Read on.