Finance and Economic

Georgia Labor Commissioner Michael Thurmond said Friday that Democratic presidential hopeful Hillary Clinton’s plan to deal with the nation’s mortgage crisis could pay dividends here.

Thurmond and Laura Tyson, former chair of President Bill Clinton’s Council of Economic Advisers, told reporters in a conference call that Clinton’s plan would help in Georgia, where the rate of delinquent mortgages was third-highest in the country earlier this year.

Thurmond, who has endorsed Clinton, said the U.S. senator from New York, “has the vision to not only meet the challenge but develop plans and strategies that ultimately will have a very positive impact.”

Clinton’s plan includes:

• A moratorium on foreclosures in the sub-prime market.

“We have such large numbers [of foreclosures], it’s unprecedented,” said Tyson, an economic adviser to Clinton’s campaign.

• A five-year freeze on adjustable rate mortgages.

• And creation of a $5 billion federal fund to help state and local communities deal with the crisis fallout.

“Senator Clinton really saw this problem first, and she has been consistently suggesting solutions,” Tyson said.

All of the candidates in the race for the Democratic nomination have addressed the mortgage situation.

Former U.S. Sen. John Edwards of North Carolina has railed against what he calls predatory lenders since before the crisis began in early 2007. Edwards has called for national legislation to ban what he says are the worst abuses in the mortgage market: loan-flipping, mandatory arbitration clauses, balloon loans and pre-payment penalties. He would allow predatory lending victims to get new terms for mortgages.

U.S. Sen. Barack Obama of Illinois has proposed the Stop Fraud Act that increases funding for law enforcement to combat mortgage fraud and create criminal penalties for it. He wants to create a fund to help homeowners avoid foreclosure.
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While government statistics show consumer spending is holding steady, some economists fret about the rising level of debt Americans are putting on credit cards, and whether or not they’ll ever be able to pay it off.

The Associated Press reported this week that its analysis of data from credit card lenders shows a big spike in the number of accounts more than 90 days in arrears. That’s the delinquency period when most debt is turned over to collection agencies.

As more consumers fall behind on credit payments, states are grappling with increasing activity of so-called debt counselors and debt settlement services.

In West Virginia, Attorney General Darrell McGraw has won a court order temporarily forbidding a Florida law firm from offering debt settlement services in the state.

McGraw says the firm, Hess Kennedy, of Coral Springs, Florida, claims to assist consumers who are struggling financially to make payments to their creditors. McGraw said he has seen more of this increasingly common, and sometimes controversial business as consumer credit card debt has ballooned in the past few years.

Debt settlers such as Hess Kennedy make repayment plans to help consumers repay outstanding debts, at a deep discount, to avoid being sued or filing for bankruptcy. Monthly payments are then made by consumers to the debt settlers in turn for which the debt settlers claim to negotiate with creditors to reduce the amount of debt owed.

Although debt settlement services are unrestricted in some states, West Virginia’s law regarding debt settlement only permits for-profit companies to charge a monthly service fee of two percent of the payments made by consumers.

Although McGraw’s investigation is incomplete, the attorney general says it appears that Hess Kennedy was charging more than the two percent fee allowed by state law.

“Although the debt settlement approach to debt relief may work for some persons, the service has legal consequences and should only be offered by persons licensed to practice law in West Virginia,” McGraw said.

“My office will continue to scrutinize the debt relief industry in an effort to protect consumers who are already facing dire financial circumstances from paying excessive fees for services that may leave them in worse shape than before.”

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