Current Events in February 2000

CHICAGO, Feb. 29, 2000 -- The consumer law firm repesenting owners of Ford vehicles today issued the following response to Ford's press release regarding its warranty extension.

On December 9, 1999, in Chicago, Illinois, a class action lawsuit was filed against Ford Motor Company by Horwitz, Horwitz and Associates, Ltd. on behalf of plaintiff Lance Lhotka. Mr. Lhotka owns a 1995 Ford Windstar which experienced premature head gasket failure.

In June of 1998, Ford issued extended warranty 98M01, which extended coverage on affected vehicles to 5 years or 60,000 miles. However, Ford has failed to honor the explicit terms of 98M01, even though the 1995 Windstar and other Ford vehicles are infamous for repeated instances of premature head gasket failure.

The suit alleges that Ford's failure to assume full responsibility for the defective condition of the 3.8 liter engine and the costly repairs necessary to the vehicles of Mr. Lhotka and thousands of other Ford customers amounts to Breach of Warranty and Breach of Contract. The suit seeks compensatory damages, punitive damages and attorneys' fees.

On February 25, 2000, in response to the class action lawsuit and growing consumer pressures, Ford issued a press release which indicates that Ford will extend the warranty on vehicles covered by the lawsuit to 7 years or 100,000 miles. The release also indicates that Ford will either reimburse consumers for head gasket repairs already performed or offer a $4,000 coupon on the purchase of a new Ford, Lincoln or Mercury vehicle.

Ford's press release leaves unresolved several issues of great importance to consumers:

• Ford still has not acknowledged that the 3.8 liter engine is defective.

• Ford has not stated whether it will reimburse consumers for the cost total engine replacement caused by head gasket failure.

• Ford has not stated what criteria will be applied to consumers seeking reimbursement for repairs.

• Ford has not stated whether it will provide reimbursement for costs associated with head gasket repair, such as towing bills and car rental bills.

Even at this late date and after a year of frustration for consumers prior to the filing of the class action, Ford apparently maintains that the class action lawsuit had nothing to do with its newly announced program.

The attorneys at Horwitz & Associates are presently in discussions with Ford to determine the extent of Ford's newly announced program and its impact upon consumers. The attorneys intend to seek the Court's assistance in obtaining Ford's cooperation in safeguarding the interests of consumers victimized by the 3.8 liter engine.

-- Horwitz, Horwitz, and Associates, Ltd. Clifford Horwitz, Richard Doherty

After thousands of customer complaints, two class action consumer law suits and a growing tide of negative publicity, Ford Motor Co. has agreed to extend its warranty on head gaskets in the 3.8L V-6 engine in certain 1994-95 models.

Response from consumers was heavily negative, both in an online poll and in emails.

Warranties are being extended to seven years or 100,000 miles, whichever comes first. Ford said it was taking the action "in the interest of customer satisfaction."

It's the second warranty extension for the groubled engines, found in the 1994 Lincoln Continental, 1994-95 Ford Taurus and Mercury Sable and 1995 Windstar.

The original extension, issued in 1998, was for five years/60,000 miles for the Taurus, Sable and Windstar vehicles, and six years/75,000 miles on Continental.

"When Ford issued the original warranty extension, our data indicated that the extension would cover the affected vehicles over the time and mileage where owners were most likely to have a head gasket concern," said Ann O'Neill, director, vehicle service and programs, Ford Customer Service Division.

"But, as these vehicles have aged, we have received new data that indicate that some owners are having failures outside the original warranty extension."

Owners of these vehicles who experienced head gasket failures during the 7year/100,000 mile time frame will be eligible for a full refund for past repairs, or for a limited time, may choose a $4,000 certificate to be used towards the purchase or lease of a new Ford, Mercury or Lincoln.

Vehicle owners will receive a communication from Ford via first-class mail in March explaining the warranty extension, the company said.

"Victory is ours!" screamed an Internet email from Chuck Catanese, a Windstar owner who has rallied fellow Ford owners through emails and postings to Web sites. But later in the email, Catanese coneded the "victory" may be less than total.

"Still won't help the now-crappy resale value, but at lease I feel more at ease with keeping the van for a while," he said.

Attorneys involved in the class action suits against Ford said they were studying the Ford announcement.

UICI (NYSE: UCI) today announced that United Credit National Bank (an indirect, wholly owned subsidiary of UICI) had agreed to the issuance of a Consent Order by the U.S. Office of the Comptroller of the Currency (the "OCC"). The terms of the Consent Order will govern for the indefinite future the capitalization, funding activities, growth and operations of United Credit National Bank (the "Bank"), a special purpose national bank headquartered in Sioux Falls, South Dakota.

The Consent Order requires the Bank within thirty days to submit to the OCC for approval a near term and three year capital plan, the terms of which will demonstrate the ability of the Bank to maintain Tier I capital at levels no less than 10% of risk weighted adjusted assets and 7% of actual adjusted total assets. The capital plan will also set forth the Bank's plans and projections for the maintenance and sources of adequate capital in future periods.

To immediately supplement the capital of the Bank and in order to maintain combined Tier I and Tier II capital at the Bank at a level in excess of 10% of total risk-weighted assets (as disclosed in the Bank's December 31, 1999 Call Report as currently filed with the OCC), United CreditServ, Inc. (the Bank's direct parent and a wholly owned subsidiary of UICI) contributed $10,065,000 in cash to the capital of the Bank on February 25, 2000. The OCC is currently conducting an ongoing examination of the operations and capital adequacy of the Bank, following the previous announcement by UICI in December 1999 of significant losses in the fourth quarter of 1999 attributable to charges to the credit card loan loss reserves at the Bank.

A liquidity and capital assurances agreement, dated May 15, 1998, provides that, upon demand by the Bank, UICI will purchase certificates of deposit issued by the Bank to assure sufficient liquidity to meet the Bank's funding demands and will contribute capital to the Bank sufficient for the Bank to comply with its stated policy of maintaining Tier I capital at a level equal to at least 10% of total risk-weighted assets and a total risk-based capital ratio of at least 12%. Total risk-based capital includes both Tier I and Tier II capital.

Under the terms of the Consent Order, the Bank is prohibited from accessing the brokered deposit market and from soliciting or accepting deposits over the Internet. The Bank had, as of February 21, 2000, voluntarily suspended soliciting or accepting brokered deposits. As of February 28, 2000, the Bank has $310 million of certificates of deposits outstanding, the majority of which are scheduled to mature over the next 12 months. At February 28, 2000, the Bank held approximately $125 million in cash, cash equivalents and short term U.S. Treasury securities.

The Consent Order requires the Bank, until further notice from the OCC, to cease all activities with American Credit Educators, Inc. (ACE) and American Fair Credit Association, Inc. (AFCA), independent marketing associations through which the Bank has marketed its credit card programs to customers with limited or impaired credit records. The Consent Order further requires the Bank, until further notice from the OCC, to cease all transactions with affiliated parties (including UICI but excluding Specialized Card Services, Inc., the servicer of the Bank's credit card accounts), and to conduct an immediate review of all agreements with all third parties to assess whether such agreements are on terms fair and reasonable to the Bank. The Bank, in particular, has engaged PricewaterhouseCoopers LLP to independently review the terms of all agreements between the Bank and Specialized Card Services, Inc. (an indirect wholly owned subsidiary of UICI and the servicer of the Bank's credit card accounts).

The Bank is further prohibited under the terms of the Consent Order from introducing new products or services, without accompanying policies and procedures reviewed and approved by the OCC providing for, among other things, appropriate risk management, internal control, management information and data processing systems. Under the terms of the Consent Order, the Bank is generally prohibited from increasing its assets in the future unless the OCC has approved a capital plan submitted by the Bank and the Bank is in compliance with the capital plan.

Separately, UICI announced that UICI and the Bank had been named as party defendants in separate suits filed in U.S. District Court in Colorado by American Credit Educators, Inc. (ACE) and American Fair Credit Association, Inc. (AFCA), the independent marketing associations through which the Bank formerly marketed its credit card programs. In the suits, ACE and AFCA have alleged, among other things, that UCNB has breached its marketing agreements with ACE and AFCA. ACE and AFCA are each controlled by Phillip A. Gray, the former head of UICI's credit card operations. Neither UICI nor the Bank has yet answered the complaints. UICI believes that UICI and the Bank have significant counterclaims and meritorious defenses to the allegations, and UICI intends to vigorously pursue the counterclaims and assert those defenses.

CORPORATE PROFILE:

UICI, headquartered in Dallas, Texas, is a diversified financial services company offering financial services, health administrative services and insurance through its various subsidiaries and divisions to niche consumer and institutional markets. UICI provides health insurance through its insurance subsidiaries, UGA-Association Field Services and Cornerstone Marketing of America; enrollment, billing and collection claims administration and risk management services for healthcare payors and providers through UICI Administrators; credit cards for individuals with no credit or troubled credit histories through United CreditServ; financial services and products for college, undergraduates and graduate students, including providing federally-guaranteed student loans through the Educational Finance Group; and manages blocks of life insurance and life insurance products to select markets through its OKC Division. UICI also holds a 44% interest in HealthAxis.com, Inc., a leading web-based insurance retailer providing fully integrated, end-to-end, web-enabled solutions for health insurance distribution and administration.

WASHINGTON, Feb. 17, 2000 -- Cadet Manufacturing today announced the recall of more than 1.9 million Cadet and Encore brand in-wall electric heaters, implicated in more than 320 incidents, including three deaths.

This recall announcement follows the resolution of the lawsuit filed by the Consumer Product Safety Commission (CPSC) staff against the company on January 14, 1999.

CPSC alleges that the following Cadet and Encore brand in-wall electric heaters are defective and can overheat and catch fire: models FW, FX, LX, TK, ZA, Z, RA, RK, RLX, RX and ZC. The recalled heaters were distributed mainly in California, Idaho, Montana, Oregon and Washington.

Flames, sparks or molten particles can spew through the front grill cover of the heater into the living area of a residence, putting consumers at risk from fires, including burn injuries, smoke inhalation and property damage. The heaters also can become energized creating a risk of electric shock.

CPSC is aware of more than 320 reports of heaters that smoked, sparked, caught fire, emitted flames, or ejected burning particles or molten materials. These incidents have allegedly resulted in three deaths, two serious burn injuries and property damage claims exceeding $1.2 million, which include five partial or total house fires.

The heaters that are part of the recall announcement are the following models of Cadet and Encore brands: FW, FX, LX, TK, ZA, Z, RA, RK, RLX, RX and ZC. The brand and model are located on a label on the front of the heat box, behind the grill. Before removing the grill to check the identification label, consumers must disconnect the power supply to the heater at the circuit breaker. If power is not disconnected, consumers risk electrocution and shock.

Cadet is offering consumers replacement heaters at a significantly reduced cost. Each heater will cost between $25 and $57, depending on the model. Consumers who already have replaced the recalled units from October 23, 1997, until today can file a claim for partial reimbursement for $25 per heater. Consumers must register to participate in this recall by February 17, 2002. To register, contact Cadet anytime at (800) 567-2613 or at www.cadetco.com/recallprogram.html.

CPSC routinely requires companies to pay the full costs associated with recalls. In this case, Cadet has recently emerged from bankruptcy and is unable to provide free replacements or full reimbursements.

In October 1997, Cadet recalled its model FW, FX, LX and ZA heaters to replace defective over-temperature black plastic limit switches. By December 1997, Cadet informed CPSC that it could no longer pay the full costs of the recall, and that the number of heaters involved were far greater than it had originally known.

While attempting to resolve the problems with the limit switch recall, the CPSC staff discovered additional problems with the heaters involved in the 1997 recall, as well as problems with some other Cadet and Encore models. In addition to the switch defect, the heating elements and internal wiring connections are defective and can fail. Even if consumers have had the heaters' switches repaired, the heaters have additional problems and need to be replaced.

CPSC strongly urges consumers to participate in this recall. Since the recalled heaters pose a fire hazard until they are replaced, consumers should have at least one fully operational smoke detector on every floor of their home, especially near bedrooms. To ensure that the detector's batteries are working, test the detector every month.

Consumers also should have a well-defined and rehearsed escape plan and an alternate escape plan in the event of a fire. You can get information about this from "Your Home Fire Safety Checklist." To obtain a free hard copy of this publication, write to CPSC, Washington, D.C. 20207.

WASHINGTON, Feb. 17, 2000 -- The Federal Trade Commission has launched a three-part initiative to help consumers combat identity theft.

Identity theft occurs when con artists hijack a consumer's personal identifying information -- name, address, credit card or Social Security number -- and use the data to open new charge accounts, order merchandise, or borrow money.

Consumers targeted by identity thieves usually do not know that they have been victims until the hijackers fail to pay the bills or repay the loans, and collection agencies begin dunning the consumers for payment of accounts they didn't even know they had. The Commission's actions follow Congress' mandate that the FTC be the nation's clearinghouse for ID theft information including consumer education and ID theft complaint data.

"When someone hijacks a consumer's identity, it can be a nightmare," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

"But there are some precautions consumers can take to help reduce the risk of identity theft. And when identity theft does occur, there are some actions consumers can take to mitigate the damage. We hope the initiatives we are announcing today will help give consumers the tools they need to help combat identity theft."

The FTC has installed a toll-free number, 1-877-IDTHEFT ( 877-438-4338) where consumers who have been victims of identity theft can report the crime and get advice from telephone counselors trained to provide assistance to ID theft victims.

Using the data from ID theft victims, as well as data from other agencies such as the Social Security Administration that take ID theft calls, law enforcement agencies will be able to target prosecutions where they will be most effective, and the FTC can analyze the data to determine how best to cut down on ID theft.

The agency also has developed an online consumer complaint form located at www.consumer.gov/idtheft

ID theft victims can enter their complaint data directly into the FTC's secure database from that site. The site also provides links to numerous consumer education materials, as well as state laws governing ID theft, articles, reports and testimony.

The third element of the FTC's ID theft program is a strong message to consumers on how to protect themselves against this pernicious form of fraud, and, if already victimized, how to limit the damage to their credit history and other critical information.

As part of this campaign, the FTC announced today the release of a 21-page booklet that addresses identity theft. This publication, which is available through the www.consumer.gov/idtheft site covers a wide range of topics, including how identity theft occurs, how consumers can protect their personal information and minimize their risk, what steps consumers should take upon finding out they are a victim, and how they can correct credit-related and other problems that may result from identity theft. It also describes federal and state resources available to consumers who have particular problems as a result of identity theft.

How to prevent ID theft