Only one way to tell. Name the client and the attorney and let us decide. If they're in court, should be part of the public record anyway so you wouldn't be violating any confidences.

I assume she just made it up to try and prove her "point," and I suspected as much at the time. There are lots of smart, combative, anonymous cranks on the internet, who are plenty willing to simply make things up.

I don't think the fake story made Wells Fargo look good. It made them look like they rubber stamped whatever ridiculous loan they could get away with, and immediately flipped it to a speculator for a fee.

Regardless, the Senate record of McCain advisor Phil Gramm is an excellent financial regulatory guide. Approximately everything the man stood for should be illegal.

Ellen's definitely weird, and given the nonsensical nature of most of her posts, I think she may be mentally ill.

Ellen's story may not be true, but the original story doesn't add up either. If there was no credit card payoff, then the only way for the numbers Dr. Warren originally quoted to work is for the "total amount of debt...$48,852" to be the Total of Payments: Amount Financed + Finance Charges = Total of Payments or 72 times the monthly payment equals $48,852 or the Total of Payments. This means the actual debt (principal amount) is $29,799, not $48,852 Based on the facts presented in the original, I cannot make the numbers work for $48.8K at 16.24%; maybe $46.8K.

Just based on the numbers, Ellen's add up; Dr. Warren's don't.

Warren's original post implied that the principal increased from $23,649 to $48,852. That was extremely confusing, because the fees charged and additional cash disbursed were just $6,150--leaving some $19,053 in increased debt unexplained.

It now seems clear that the attorney was comparing the principal prior to refinancing with the total loan cost (principal plus fees plus interest) after the refinancing. That's an apples to oranges comparison and therefore not necessarily a fair comparison--but it makes the loan look as bad as possible--which of course was the attorney's goal.

Sadly, the attorney didn't have to make an unfair comparison to make the point that the loan was a bad one. Given the 3% interest rate on the original $23,649 principal(and assuming there was somewhere between 2 and 4 years left in the loan term) remaining finance charges on the original principal would have been around $1,000 or $2,000 (depending on remaining loan term). The new loan had finance charges (fees plus interest over six years) of about $17,000. So the woman increased her overall costs during the next six years by about $15,000 to get a bit less than $5,000 in cash today. That's a terrible deal, one you would take only if you were desperate for cash, had no idea what you were doing, or had an investment opportunity with a guaranteed 20% per year return.

Should the bank have offered the loan? Probably not. But the woman's bankruptcy also probably wasn't caused by the loan. From the information given, we can't calculate exactly how her monthy payments changed, but they were likely about the same both under the old and new loans (somewhere around $650). She had $4,850 in extra cash and roughly the same monthly loan payments, so her cash flow was likely improved by the loan in the short term. It's even possible that such a loan, because of its short-term cash flow benefits, could have prevented a bankruptcy. From the perspective of a woman about to go into bankruptcy, the loan may not have been a completely bad choice. As expensive as it was in the long term, if it actually prevented bankruptcy the cost might have been justified. And if it didn't prevent bankruptcy, the loan costs probably would not have to be paid anyway.

From the bank's perspective, the loan was clearly risky because of the woman's tenuous financial situation. But it also offered a chance for extraordinary profits if the woman could avoid bankruptcy. As it turns out the bank (or the investors the bank sold the loan to) lost on this one--but had the woman avoided bankruptcy they would have profited handsomely.

Was the bank acting badly or the woman stupidly? I'm not sure. The bank certainly was greedy--but it also was taking on a lot of risk as subsequent events proved. Would it have been better for the bank not to have given the woman the cash and let her go into bankruptcy even quicker? Or was it okay for the bank to give her the cash she needed for her bills, balancing the substantial risk of her default with the potential for a large profit? Was the woman stupid to agree to such an expensive loan? Or was it okay to take on large long-term expenses to lessen short-term cash flow problems and possibly avoid bankruptcy? These are tough questions to answer. It's hard for me to completely dismiss the bank as predatory given the risks of lending to people in marginal financial situations. But at the same time, it's clear that loans provided by profit-making institutions generally aren't very effective tools to help people in marginal financial situations get back on their feet.