Current Events in March 2000

"Can someone explain to me why Ford is only covering certain vehicles with a headgasket failure. I own a 93 Thunderbird & had to replace the head gasket at 55,000 miles. I thought the same engine i.e. the 3.8L V6, was the same engine in the Windstar, Taurus etc. Can someone tell me why it isn't covered by Ford?"

-- Kevin

Kevin's question was partially answered May 1 when Ford extended the warranty on 1994 and 1995 rear-wheel-drive models, just as it had earlier done for 1995 Windstar vans and 1994 and 1995 Taurus and Sable models with the 3.8-liter V6 engine. But that doesn't help Kevin, whose vehicle is a 1993 model, and it leaves many other questions unanswered..

For example, what about the depressed resale value of 1995 Windstars? What about the car rental, towing and other costs many Ford owners incurred during the often-lengthy repair of their engines. What about the many other engine problems that often occur after head gasket failure? What about other models that have the same engine but are not covered?

These and many other questions might have been resolved by the court if a class-action lawsuit that was pending at the time of Ford's decision had been permitted to run its course. Consumers who felt they had been overlooked could have appealed to the court. They now have nowhere to turn, except to Ford

Legalities

Contrary to what many consumers think, automakers are generally not liable for defects that become apparent after the warranty expires. Federally-mandated recalls are only for safety-related issues, not for mechanical problems.

In the Ford case, the class action suits were based on a narrow legal issue involving the wording of Ford's original warranty extension to cover head gasket failure.

Consumer groups proclaimed victory after Ford's Feb. 28 announcement that it was extending the warranty on the models listed above. But the victory is very limited and fragile.

The unilateral action by Ford established no precedent that will help other consumers in similar circumstances, either now or in the future. And it leaves individual consumers at Ford's mercy, as documented in these reports from owners of various Ford models, including both those covered and not covered by the warranty extension.

And how about those refunds and rebates? There do seem to be a few problems here and there.

Attorney General Bill Lockyer and the district attorneys of San Francisco, Alameda and Los Angeles today announced the settlement of a consumer protection lawsuit against Hy Cite Corporation, whose Royal Prestige cookware and water filtration products were being sold by distributors in California using allegedly deceptive advertising and unfair business practices.

In the settlement, the Wisconsin-based company agreed to offer full refunds to the more than 400 consumers named in the judgment and pay $250,000 in civil penalties and costs. The judgment issued by the San Francisco Superior Court also prohibits Hy Cite, its employees and agents from engaging in misleading sales representations about the health benefits of the company's cookware and water filtration products. In reaching the settlement, the company did not admit to any wrongdoing.

Under the judgment, the company and its agents are required to make substantial changes in their sales contracts to remove deceptive or confusing terms. The company and agents also must state clearly the consumer's right to cancel a purchase within three days and have in place procedures to fulfil the customer's cancellation request.

The settlement comes in a joint complaint filed in February 1999. In the case, Attorney General Lockyer and District Attorneys Terence Hallinan of San Francisco, Thomas Orloff of Alameda and Gil Garcetti of Los Angeles sought to have Hy Cite Corporation halt deceptive business practices, provide full restitution for victims and pay civil penalties.

The consumer complaint alleged that the company and local distributors had been targeting the Hispanic community using high-pressure door-to-door sales tactics to get customers to buy expensive pots and pans and water filtration devices. Salespeople in lengthy in-home presentations promoted Royal Prestige products as a "health system"that could prevent anything from cancer to high blood pressure to high cholesterol without a scientific basis.

To sell water filtration devices, Royal Prestige salespeople allegedly told consumers that their water supply was contaminated with lead, acid rain or other environmental hazards and used a phony chemical test to support baseless claims.

The complaint also alleged that consumers failed to be notified appropriately about their right to cancel the home solicitation contract within three days of the purchase, and were presented with confusing sales agreements that failed to clearly and conspicuously disclose that a high interest rate of 21% would be charged.

Provided by the California Attorney General's office

WASHINGTON, March 6, 2000 -- Federal and state agencies have filed more than 68 cases against fraudulent business opportunity promoters, most of them using the Internet and daily newspaper classifieds to peddle their schemes, who bilk hundreds of thousands of consumers out of tens of millions of dollars every year.

Most of the scams involved phony pay phone franchises, vending machine routes and various work-at-home schemes like medical billing opportunities, The schemes typically promise big earnings but usually wind up costing the consumer hundreds or even thousands of dollars.

The crackdown is being conducted by the Federal Trade Commission, the Department of Justice and law enforcement officials from 29 states.

Because many business opportunity offers are pitched to consumers via the classifieds, the FTC and its enforcement partners also announced a partnership with more than 105 newspapers that have voluntarily agreed to run a classified of their own -- one that tells consumers what to look for in a notice for a legitimate business opportunity. The notices refer readers to more complete information from both the FTC and the appropriate state agencies (available at www.ftc.gov/bizop).

More than 85 of the newspapers participating in "Project Classified," as this partnership is known, also have agreed to use their best efforts to screen out potentially deceptive ads, including those that make earnings claims without incorporating a disclosure in the ad about the number and percentage of prior purchasers who have made as much as the promotion claims.

"It's very gratifying that so many newspaper publishers across the country have accepted our invitation to join this partnership to educate consumers about business opportunity fraud," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They are helping us reach consumers exactly when the would-be entrepreneur is focused on the opportunity."

According to Bernstein, the ads generally make promises like these:

• "MEDICAL BILLING. Work From Home-Full or Part Time. From $24K to $50K+ per year. Home Computer Required. CALL NOW!"

• "OWN PAYPHONES. $10K plus monthly potential,"

• "1000 Envelopes=$4000. From Home! $4 per envelope you stuff GUARANTEED!

• FREE info. Call now;" and

• "HERSHEY AND NABISCO VENDING - High weekly income potential. Work 6-8 hrs./wk. Secured and guaranteed locations. $7,000 investment required."

The FTC has a new consumer brochure, Could 'Biz Opp' Offers Be Out for Your Coffers?, with tips on how to spot and avoid these scams. Copies of the brochure are available from the FTC's Consumer Response Center or at www.ftc.gov/bizop. If consumers suspect a business opportunity promotion is fraudulent, they can file a complaint with the FTC's Consumer Response Center by calling toll-free 1-877-FTC-HELP (382-4357). The FTC also has a booklet for classified ad managers, Screening Ads: A Guide for the Media.

The Federal Trade Commission has ordered Trans Union Corp. to stop selling personal credit data to junk mail companies.

Trans Union "made a calculated financial decision to trade privacy for profits," Federal Trade Commission official David Medine said.

The company was not hit with any penalties but the FTC said any further violations will result in court action.

The FTC contends that under the Fair Credit Reporting Act, Trans Union, Equifax and Experian are supposed to limit access to consumers' credit reports to "permissible purposes," such as making decisions about whether to extend credit.

Equifax and Experian have gone along with the FTC's interpretation of the law but Trans Union has not. It sells data to direct marketers through a subsidiary, Performance Data.

Trans Union says it sells information about different types of consumers -- upscale consumers and those who appear to be in financial trouble, for example -- to direct marketers. It denies selling information about credit status and payment history.

The FTC said the practice is illegal and has been taking various enforcement actions against Trans Union since 1992.