Legal aid providers are committed to helping families build and preserve wealth by challenging predatory lending practices, addressing fraud, and protecting their rights as consumers. Legal aid providers also educate consumers about the consequences of certain high-risk economic decisions and how to avoid abusive and predatory practices.
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Pursuing Justice for North Carolina Consumers: Three Success Stories
By Karen Fisher Moskowitz, Sharon Dove, and Carlene McNulty
A recent study showed that more than 60% of Americans do not have an emergency fund.1 When these families face unexpected costs such as when a car breaks down or emergency medical attention is required, many families cannot afford to pay for these costs. Legal aid can assist low-income clients facing unexpected and sometimes unlawful expenses before these issues spiral out of control and destabilize a client’s financial future.
Legal aid providers are committed to helping families build and preserve wealth by challenging predatory lending practices, addressing fraud, and protecting their rights as consumers. Legal aid providers also educate consumers about the consequences of certain high-risk economic decisions and how to avoid abusive and predatory practices. Below are three examples of such work.
Karen Fisher Moskowitz
Attorney/Director of Consumer Protection and Employment Program
Legal Services of Southern Piedmont
Moving into a community with a homeowners association (HOA) can have substantial benefits. The community is maintained, repairs to the common areas are taken care of, and a well-managed association can work to increase everyone’s property values. Problems arise when the neighborhood is not well managed, or a homeowner has a hardship and is not able to pay their fees and assessments, or a homeowner has a dispute over what they owe their HOA and the HOA uses strong-arm collection tactics.
Legal Services of Southern Piedmont (LSSP) has been able to assist homeowners when the water to their home has been shut off by their HOA for unpaid assessments or fees. Last year Bernice,* a sweet, older woman, contacted us for help when she fell behind on her unpaid HOA dues and other fees after her budget was strained as a result of an illness that caused her to pay out-of-pocket for very expensive medication. Bernice had been in and out of the hospital when she fell behind on her dues. After getting out of the hospital, she tried to work out a payment plan with her homeowners association, but they insisted on payment of the full balance, which she couldn’t afford on her fixed income.
Last year Bernice,* a sweet, older woman, contacted us for help when she fell behind on her unpaid HOA dues and other fees after her budget was strained as a result of an illness that caused her to pay out-of-pocket for very expensive medication.
When the HOA threatened to turn off her water, Bernice knew she had to get some outside advocacy. Her medical provider told her that living in a home without water would cause her condition to deteriorate, and that she could possibly end up back in the hospital.
Although many city and county housing code sections state that having no water is imminently dangerous to health and safety, some poorly managed HOAs have begun shutting off water to those residents in an attempt to collect on HOA debts. Unlike public utility companies that must adhere to strict rules before disconnecting services, especially to elderly and disabled people, the HOA in Bernice’s case insisted that providing water to homeowners amounted to a “privilege or service” provided by the association. Through a long series of negotiations on Bernice’s behalf, LSSP was able to help Bernice work out a payment plan and keep her water from being shut off.
Another homeowner contacted LSSP after he returned home to the duplex he shared to find that his water had been shut off by his HOA. He was not behind on his dues or assessments at all, but his neighbor was behind, and the main water switch to both units had been pulled. Again, LSSP attorneys were able to assist him, and they continue to assist others like him having water turned back on after an overzealous HOA has shut it off.
*Client names have been changed to protect confidentiality.
Sharon S. Dove
Managing Attorney
Legal Aid of North Carolina-Gastonia
Few things in North Carolina are as important to legal aid’s clients as their vehicles. Without a car, they lack access to employment, groceries, and health care. Yet our clients, who scrape their dollars together for months to buy an old used car, can find this precious possession vulnerable to repossession even when they do not violate the terms of their financing agreement with the dealer. Such was the case for Penny*, a then-unemployed hair dresser and single mother of two young boys, whose car was repossessed on December 30, 2014.
On November 4, 2014, Penny purchased a 2003 Ford, paying $1,000 down and financing the $3,500 purchase price balance at an annual interest rate of 25% from a used car dealer. Penny provided the dealer with proof of insurance coverage on the date of sale. Indeed, Penny kept her insurance coverage and her bi-monthly loan payments current. Her only mistake—which was not a breach of her contract with the dealer—was that she did not tell the dealer she had switched insurance carriers on or about December 9, 2014. Unfortunately, this omission led to tragic consequences for Penny.
At some point after December 9 but before December 30, 2014, the dealer contacted Penny’s original insurance carrier to check whether her policy was current. When the original carrier informed the dealer about the policy cancellation, the dealer set the wheels in motion for repossession even though he had no right to do so. The dealer did not call Penny until noon on December 30, which was the day he had arranged for the car to be repossessed at 2:00 p.m.
With nowhere else to turn, Penny called Legal Aid of North Carolina, and our office began negotiations with the dealer.
When the dealer called at noon on December 30, Penny was interviewing for a position at a beauty salon. The call went to voicemail, which Penny decided she would check after purchasing her family’s groceries. At 2:00 p.m. Penny emerged from the grocery store just as the repo man finished hooking her car to his tow truck. Penny begged the repo man to tell her what was going on. When he did, she pleaded with him to leave the vehicle because she could produce proof of current insurance coverage. The repo man said it was too late and to call the dealer.
Immediately after the repo, Penny listened to the dealer’s noon voicemail for the first time. She called the dealer and even had the insurance agent for her current policy call the dealer as well. However, the dealer was unrelenting, insisting that Penny could not recover the car unless she paid over $400 in fees. Penny called the dealer multiple times after this initial call, and each day the dealer demanded a higher price for return of her vehicle.
With nowhere else to turn, Penny called Legal Aid of North Carolina, and our office began negotiations with the dealer. We informed the dealer that his repo in the absence of a default violated Article 9 of the Uniform Commercial Code—see N.C.G.S. §25-9-609—which subjected him to disgorgement of 10% of the contract principal plus all interest received from Penny—see N.C.G.S. §25-9-625(c)(2). The dealer was persuaded to return the car to Penny immediately without charging her a dime.
Now, Penny’s car is back where it belongs. She can do the things she needs to for her family—drive to work, pick up her children from school, and shop for groceries.
*Client names have been changed to protect confidentiality.
Carlene McNulty
Senior Attorney, Consumer & Housing Project
North Carolina Justice Center
Education has been the cornerstone of the American Dream, as millions of Americans—rich and poor—have achieved a better life through the power of a college degree. Unfortunately, unscrupulous players in the burgeoning for-profit school industry have been selling this dream to unsuspecting students with promises of great job opportunities, leaving them instead with meager job prospects and crushing debt. The North Carolina Justice Center has recently formed a new initiative to focus on this problem. Our clients—graduates of for-profit schools—rarely find themselves in the kind of work they were promised when they enrolled. Alice, for example, was promised a job in the travel industry. Tens of thousands of dollars later, she is working as a clerk in a big-box store, the job she had before she enrolled in school. John wanted to pursue a career in social work. Lured by a fancy advertisement, he signed up for a masters program at a for-profit institution. The internships he was promised did not materialize, nor did the assistance with finding gainful employment. Sixty-thousand dollars later, he has been told by prospective employers that the degree is not worth the paper it is written on.
Over the past two decades, national enrollment at for-profit institutions has increased over 225%, and each year this sector has received a larger share of federal student aid funding. With this growth has come an increased awareness of widespread problems within the industry. For-profit schools charge higher tuition than comparable public or private nonprofit schools, spend a large share of revenues on expenses unrelated to teaching, experience high dropout rates, and too often employ abusive recruiting and debt-management practices.
For-profit schools widely market their services in North Carolina, but many consumers are unaware of the potential problems related to enrolling in a for-profit school. Our nation’s veterans have been a specific target for enrollment at these institutions. Potential students fail to compare other lower-cost education and training programs that are available in North Carolina’s community colleges. Often the programs offered by these for-profit institutions fail to provide the credentials or training that is advertised or that is required for employment. Vulnerable students have fallen prey to the schools’ aggressive marketing tactics.
These for-profit institutions too often leave students with massive debt that will follow them for their lifetimes. Students at for-profit institutions—many of whom are low-income—are more likely to borrow larger loan amounts than their peers at nonprofit and public institutions. Well over 90% of for-profit students take out student loans, compared to less than 15% percent of community college students. Students at for-profit colleges are also more than twice as likely to default on federal student loans as those who attend public institutions.
The Justice Center is using a multi-prong approach to address this problem. In addition to representing consumers victimized by these practices, the center has developed an extensive community education campaign to try to stop the problem before it starts. We educate low income consumers, including veterans, regarding how best to avoid potential abuses by for-profit schools. We discuss the problems associated with taking on too much debt, and encourage workshop participants to explore lower-cost education options such as community colleges.
Karen Fisher Moskowitz is a staff attorney at Legal Services of Southern Piedmont and the director of the Consumer Protection and Employment Law Program. She is a member of the North Carolina, Arkansas, and Georgia Bars, and has worked in legal services for nearly 25 years.
Sharon Dove is the managing attorney of Legal Aid of North Carolina’s Gastonia office, a position she has held since 2003. She previously worked for the Charlotte law firm of Ferguson, Stein, Chambers. Dove earned her law degree from the New York University School of Law in 1998.
Carlene McNulty is the director of litigation at the North Carolina Justice Center and senior attorney of the Consumer and Housing Project. Carlene is also a clinical assistant professor at UNC School of Law in the Consumer Financial Transactions Clinic.
Endnote
1. bankrate.com/finance/smart-spending/money-pulse-0115.aspx, accessed June 16, 2015.