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BY JOE CARLSON
jcarlson@nwitimes.com
219.662.5339 | Monday, November 27, 2006 | (No comments posted.)
GARY | For folks like Gary resident Perrie and Daniece Bonner, a declaration of personal bankruptcy can trigger a strange side-effect: loads of mail from banks and finance companies offering to extend them credit.
GARY | For folks like Gary resident Perrie and Daniece Bonner, a declaration of personal bankruptcy can trigger a strange side-effect: loads of mail from banks and finance companies offering to extend them credit.
But reading the fine print, when it even exists on such offers, can reveal the companies also are selling high interest rates, hidden membership fees and other "predatory" terms, Chicago finance lawyer Daniel Edelman said.
The result is people who can least afford it can wind up with the most expensive kinds of loans, said Edelman, who has represented the Bonners in at least 14 lawsuits in the Northern District of Indiana regarding lending and collections practices.
In an effort to combat the predatory credit industry, Edelman has filed dozens of cases in Midwestern federal courts, alleging the companies illegally accessed consumer-credit reports to find people willing to pay exorbitant costs for credit.
"What we have discovered is that a lot of creditors use this process simply to send people sales pitches, which is not permitted," Edelman said.
The Bonners declared bankruptcy in 1998, seeking protection from mortgage and medical debts, records filed in Hammond federal court state.
Debt collectors eventually came knocking, and the Bonners hired Edelman to file several lawsuits against the collectors for violating the Federal Fair Debt Collection Act that prohibits overly aggressive collections tactics. A Times review turned up four lawsuits in 2004 and 2005 that settled out of court.
Soon after, Edelman and the Bonners began filing class-action suits against companies that sent what Edelman contends are sham offers of credit because of his clients' checkered credit history.
One of the offers, from a South Dakota bank in 2005, offered a $300 line of credit at 19 percent interest. The fine print revealed that more than $200 of the credit would be eaten up in application fees.
In that suit, as in nine others from the Bonners, Edelman said the banks illegally used the Bonners' private credit information without their permission to target them for the mailing.
Edelman represents a sizeable number of people who filed similar suits in Indiana and Illinois, using the tool of class-action lawsuit to force lenders to change their practices. The plaintiffs can collect up to $1,000 per case in damages.
"I'd like to stop predatory lenders from using credit information to target people for essentially bogus sales pitches," Edelman said.
The approach is not without critics.
Walter Olson, a senior fellow with the conservative-leaning think tank, The Manhattan Institute, said last week that class-action suits can be tools for positive change or for lawyerly exploitation.
"It's a blunt instrument," Olson said. "Lawyers can use it when they see violations that really are central to the regulations, and they can also use it against violations that are of a more technical nature."
Legal action
Chicago attorney Daniel Edelman has filed dozens of class-action lawsuits against so-called subprime credit lenders, saying the companies prey on low-income and bankrupt individuals because it's profitable to make "predatory" offers to people with a poor understanding of finance.
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