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Major Illness Frequent Cause of Bankruptcy, Study Finds

Major Illness Frequent Cause of Bankruptcy, Study Finds...


WASHINGTON, April 26, 2000 -- A forthcoming study finds that about half of the one million Americans who file for bankruptcy each year do so because of medical bills and other problems arising from serious illness or injury, The Washington Post reported.

The study emphasizes the fragility of middle-class existence, one of its authors said. These families are "just one serious illness away" from financial collapse, Prof. Elizabeth Warren of the Harvard School of Law said.

Contrary to expectations, many of those filing for bankruptcy had health insurance but were not sufficiently covered for catastrophic illness and for the job losses that often accompany serious illness.

The study comes as Congress is considering a number of "reform" measures that would make it more difficult for consumers to file Chapter 7 bankruptcies, which wipe out most debts. Instead, they would have to file Chapter 11, which requires heavier payments to creditors.

Warren, a former member of the National Bankruptcy Review Commission, and her colleagues studied bankruptcy filings in eight judicial circuits around the country. Projecting their findings nationally would mean that nearly 600,000 of the one million bankruptcies in recent years were related to major illness within two years of the filing.

In many cases, it is a combination of heavy consumer debt and major illness that makes it impossible for families to recover from a catastrophic illness, Warren said.

Without being able to wipe out their debts in the bankruptcy process, Warren said many families would "face collection for the rest of their lives."

The banking and credit card industries are lobbying heavily for tougher bankruptcy laws.

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Minnesota Settles Consumer Fraud Suit with MemberWorks

Minnesota Settles Consumer Fraud Suit with MemberWorks...

Attorney General Mike Hatch announced today the settlement of a consumer fraud lawsuit against MemberWorks, Inc., a national company that uses consumers bank account information to market membership programs offering discounts on merchandise and services. The settlement was submitted to Hennepin County District Judge Marilyn Rosenbaum.

The Attorney General filed the lawsuit in July 1999 against MemberWorks following numerous complaints from consumers that they did not believe they had authorized membership charges to their checking or credit card accounts. The settlement requires MemberWorks to substantially change its business practices and provide double refunds to consumers who did not fully consent to the MemberWorks charge.

"When a consumer receives a telemarketing call from MemberWorks, the scales are already tipped in the companys favor, because, unknown to the consumer, their financial institution has already supplied their name, account information and ability to charge their account," said Attorney General Hatch. "This settlement will give MemberWorks an incentive to compete fairly because from now on, every time it fails to get meaningful consent from a consumer, MemberWorks must pay a double refund."

In the complaint against MemberWorks, Hatch alleged the company used consumers personal financial information, such as checking account or credit cards numbers, account balances, addresses and phone numbers, to conduct direct mail and telemarketing campaigns to Minnesota consumers. MemberWorks typically solicited customers with a "free 30-day trial membership" pitch. At the end of the 30-day "free" trial, the company charged customers an annual membership fee using information provided by their banks, even though consumers had not given MemberWorks billing information. The companys practice led scores of customers to feel that they had been "slammed" with services or products they did not believe they ordered.

Issuing Double Refunds to Future Customers for Unauthorized Charges
Under the settlement, MemberWorks must inform each customer that the verification portion of the telephone conversation will be taped. The company must maintain verification tapes on each of its telephone solicitations for 24 months. Consumers who believe that MemberWorks wrongfully charged their accounts have 24 months to submit a claim to MemberWorks. MemberWorks must give each consumer a double refund if it cannot produce a tape showing the consumers specific consent (outlined in the new changes to the companys telephone script below).

Making Refund to Past Customers
Any consumer with an existing claim that MemberWorks made an unauthorized charge may apply to the company for a refund. If MemberWorks does not make the refund, a consumer is eligible for arbitration via a telephone conference call with an independent arbitrator who can award a double refund. The decision of the arbitrator is binding on MemberWorks. The independent arbitrator is former Hennepin County District Court Judge Patrick Fitzgerald. MemberWorks must pay for Judge Fitzgeralds arbitration fees. Past customers have until July 1, 2002 to submit their claims. Any customer with a past claim for unauthorized charges should contact the Attorney Generals Consumer Assistance Line at either: (651) 296-3353 or (800) 657-3787 for more information.

Changing Memberworks Telephone Solicitation Script
The State alleged that the scripts that MemberWorks currently uses to get so-called authorization from the consumer are very confusing, with the consumer essentially giving consent by supplying their birthdate at the end of a lengthy and confusing paragraph. Under the settlement, MemberWorks must obtain the customers consent by reading the following script language verbatim:

"[Memberworksclient name, e.g. the name of the consumers bank] will automatically charge your [account type -- usually credit card or checking account number] at the end of your 30 day trial period and at the beginning of each new membership year unless you call to cancel. If you decide to cancel your membership, call [800#] within the next 30 days. Will it be alright to charge the annual fee of $___ on your [MemberWorks client name] account unless you call to cancel?"

If the company does not read this language and the consumer doesn't say "yes," the customer is entitled to a double refund.

Reinstating a Method to Notify Consumers of the Annual Automatic Renewal Process
MemberWorks current practice is to enroll customers in programs where the customers account automatically will be charged an "Automatic Renewal Fee" each year unless the consumer calls to cancel.

Under the Settlement, MemberWorks must, on the first page of its membership enrollment kit, tell customers that their account will be charged in 30 days unless they cancel and that their account will be re-charged each year thereafter unless they cancel. In addition, MemberWorks must send a letter and envelope with 14 point font saying "Upcoming Charge for Membership Renewal," before each annual renewal. The letter also must say, "if you take no action your account will be charged to automatically renew your membership."

Giving the Attorney General the Right to Audit Memberworks to Verify Compliance with the Settlement Terms
Under the terms of the settlement, MemberWorks must make available to the Attorney Generals Office all records of consumer complaints including the number of complaints received; the number of arbitrations conducted; and the number of double refunds the company issues. It also must provide other evidence the Attorney General reasonably requests to ensure compliance with the settlement.

Other Provisions
In addition to the above, MemberWorks shall comply with the following provisions:

  • If MemberWorks uses a bank name to solicit Minnesota consumers, MemberWorks must clearly and prominently disclose that MemberWorks is a separate company.
  • MemberWorks must not give false, misleading or inaccurate responses to consumers about its relationship with the banks who supply the customers personal financial information.
  • MemberWorks must refrain from representing that the consumer is not making a purchase decision during the call unless it discloses in the same sentence that the consumer must cancel within the trial period to avoid a charge
  • MemberWorks must not say its trial period is "free" unless the consumer is not charged for any portion of the trial period.
  • When MemberWorks represents the benefits of its Membership Program and states that a consumer can obtain a discount, rebate, savings or any other similar benefit related to the purchase of merchandise, it must clearly disclose the following when applicable: that the consumer has to use a rebate procedure to obtain savings; that the represented savings are limited in dollar amount; that a minimum purchase is required to obtain a benefit; that the consumer must purchase a coupon to obtain a benefit; or that the benefit may not be available through a retail store in the consumers area.
  • MemberWorks shall not inaccurately represent the value of any discount, rebate, savings or benefit, including the amount of any dollar or percentage savings.
  • MemberWorks must pay $75,000 to the State of Minnesota.

If consumers have further questions about the settlement they should call the Attorney Generals Office at (651) 296-3353 or outside the Twin Cities at: (800) 657-3787.

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Alpine, EcoQuest Air Cleaner Claims Questioned Again

Alpine, EcoQuest Air Cleaner Claims Questioned Again...

The Federal Trade Commission and the Department of Justice have filed a motion in Federal Court to hold Alpine Industries, its officers and a related company, EcoQuest International in civil contempt of a Court order issued in January 2000.

The government is asking the Court to order the companies to stop making prohibited claims in marketing their air cleaning products, remove prohibited product claims from their Web sites, and impose daily fines if they continue to violate the order.

In January, a Federal judge ordered Alpine, a manufacturer of ozone generating air treatment machines, to stop claiming that its machines provide relief from any medical condition or that they effectively remove or reduce a wide variety of air pollutants from indoor environments. The injunction followed a November 1, 1999, verdict in which a Federal jury found unanimously that Alpine violated a 1995 FTC order by failing to have "competent and reliable scientific evidence" to support hundreds of claims for their air cleaning products. Alpine was also found to make unsupported claims that its products control indoor ozone levels.

The government's motion alleges that Alpine violated the January order by making prohibited claims about its ozone generators. Shortly after the Court's January order, Alpine sold its marketing operations to EcoQuest International, a new corporation.

Alpine Industries is a privately held, multi-level marketing company that claims to have between 75,000 and 100,000 active dealers nationwide. Its main facilities are in Greene County, Tennessee. William J. Converse is the company's president and chief executive officer. Michael Jackson is vice president and heads the company's marketing activities, which are now run by him through EcoQuest. The flagship product of Alpine Industries is the XL-15, which sells for approximately $600 per unit.

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Office Supply Scam

One of the largest office supply operations in Southern California charged with sending unordered merchandise to small businesses around the country and th...

WASHINGTON, April 18, 2000 -- One of the largest office supply operations in Southern California charged with sending unordered merchandise to small businesses around the country and then billing them for it has agreed to settle Federal Trade Commission charges that it was violating federal law. The settlement requires Ultra Ribbons, Inc., and Allstate Imaging, Inc., based in Chatsworth, California, and their principals to pay a $500,000 civil penalty and consumer redress.

According to the FTC, the defendants' telemarketers contacted the businesses at random offering to send "free trial" shipments of ribbons, cartridges or other office supplies. They also guaranteed that their products would last twice as long as those of the original manufacturer and told the businesses that if they were not satisfied with the products, they could return them during the trial period at no cost.

The FTC alleged that the defendants frequently refused to accept returns and used abusive collection practices to intimidate businesses into paying for the overpriced merchandise. In addition, the FTC alleged, the invoices often included exaggerated, undisclosed shipping and handling charges, and the initial shipment was often followed with additional unordered shipments and invoices.

To settle the FTC charges, the defendants would be required to pay a $500,000 civil penalty and provide redress to all businesses that complained about Ultra Ribbon or Allstate Imaging to a Better Business Bureau or a government agency since 1996. Ultra Ribbons and Allstate Imaging would be barred from shipping unordered goods, from billing for unordered goods, and from misrepresenting the purpose of their phone calls, the fact that samples are free, that a person has ordered supplies, or that businessess have an obligation to pay for merchandise they didn't order. In addition, the settlement would bar the defendants from attempting to collect money from businesses which had received unordered merchandise.

The FTC's complaint names Ultra Ribbons, Inc., Allstate Imaging, Russell Leventhal, Stuart Leventhal, Frank Montelione and Alan Jurick.

The complaint and proposed consent decree was filed on April 17, 2000, in the U.S. District Court for the Central District of California, Western Division, by the Department of Justice at the request of the FTC. The settlement is subject to court approval.

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Graco Baby Swings Recalled

Graco Baby Swings Recalled...

After six infant deaths, Graco and the U.S. Consumer Product Safety Commission (CPSC) have announced a campaign under which Graco is providing new safety restraints to upgrade about 7 million infant swings made before November 1997.

The restraint systems on the older swings consist of a waist belt only and a hinged or removable tray, which serves as a restraint. If parts are missing, the restraints are not used, or the tray pops off, infants can slip down into the seat and strangle or fall from the swing.

The commission said it knows of six deaths. These occurred when parts were missing or the restraints were not used and infants slid down the swings' seats and became tangled in the restraints. In five instances, the swings were second hand.

Of 209 incidents, 181 were reports of infants falling from the swing. In nine of the falls, infants suffered serious injuries including bone fractures and concussions. Twenty-two infants were caught at the neck or chest.

Graco is offering a free, new safety restraint to replace the swings' old restraint systems. The safety restraint kit comes with instructions and can be installed easily. The new safety system has a buckle that assures the crotch strap is used each time the waist belt is buckled, so that infants are securely fastened into the swings.

If consumers have a Graco infant swing, they should call Graco to determine if their swing needs a new safety restraint. The swings are battery-powered or wind-up, and are either the traditional A-frame or open top design. Some models have removable seats, which can be used as an infant carrier. Graco will help consumers identify swings that need new safety restraints.

Mass merchandise, juvenile products and major discount stores nationwide sold the Graco swings through approximately January 1998 for between $70 to about $120.

Consumers should stop using the swings immediately. To receive the free safety restraint, consumers should call Graco at (800) 934-9082 anytime. Consumers may also visit Graco's website or write to Customer Affairs, Graco Children's Products Inc., P.O. Box 100, Elverson, PA 19520. Consumers should have the swing in front of them when they call so that Graco can determine if the swing needs the new safety restraint.

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Phone Scam Hits Adult Site Visitors

Many visitors to Web-based "adult" sites are getting some unpleasant news in their long-distance bills lately. AT&T warns that X-rated Web sites are tricki...

April 12, 2000

Many visitors to Web-based "adult" sites are getting some unpleasant news in their long-distance bills lately. AT&T; warns that X-rated Web sites are tricking unwary consumers into running up long-distance bills of several hundred dollars or more.

Here's how it works: The site lures visitors with free previews of steamy pics, then throws up a disclaimer that, somewhere in the fine print, warns that if the visitor click "yes," his computer modem will hang up and redial a special number. In a variation on the scheme, the victim gets an email with a software attachment promising free access to a steamy site. In either case, the consumer's modem dials a number in Chad or any of a number of other offshore locales, at a cost of $7 per minute or more.

Want more bad news? As far as AT&T; and other long-distance companies are concerned, this is not fraudulent and they're not about to cancel the charges. The user made the call voluntarily, after all.

It's highly likely this particular scam will also spread to other types of sites, possibly including financial tip and chat sites, work-at-home-sites, gambling sites and others which tend to attract consumers who may not be fully alert to the possibility of fraud.

AT&T also suggests parents closely monitor their children's use of the computer.

We're heard from many victims of this scam, including ...

Michael of Vero Beach, FL, writes:

I have been on-line to adult sites that all have said 100% free sites. I have read the disclaimers fully and there were no charges listed! I went through this before with AT&T and they said that the adult sites are international calls and that the bill was $760.00. I sent them $460.00 and my wife told AT&T to put an international block on our phone.

Now I thought these sites were free but I got a bill for $2200.00. I have never been into porn before and I am definitely finished with it now! at&t; has caused a tremendous hardship on me as well as my family economically and emotionally. I know that there are a lot of people who have made the same mistake. Please will someone help us?

Unfortunately, there's nothing anyone can do. The perpetrators are the foreign Web sites.

Mark of Tempe, AZ, writes:

I noticed a charge from Chad, Africa, on my phone bill and called AT&T to file a dispute. I spoke to a rep and was told this $42.35 would be credited and she gave me a confirmation. After two months and no credit, I called and was told the adjustment had been denied.

Now they're telling me it was some adult web site? It doesn't matter, I have not authorized this amount and have never been billed by any 'adult site' in the past nor will I be in the future. To accuse me of this is an insult to my strong religious beliefs.

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Cosco, Safety 1st Fined $1.75 Million for Failing to Report Product Defects

Largest fine against children's product manufacturer in CPSC's history

Cosco, Safety 1st Fined $1.75 Million for Failing to Report Product Defects...

Cosco Corp. and Safety 1st Inc. have agreed to pay a total of $1.75 million for failing to report product defects that caused serious injuries and deaths to children, the U.S. Consumer Product Safety Commission (CPSC) announced. Both companies are subsidiaries of Dorel U.S.A. Inc., of Columbus, Ind.

Under federal law, companies are required to file a report with the CPSC if they learn that one of their products presents a substantial risk of injury to consumers.

Cosco has agreed to pay $1.3 million to settle CPSC charges that it knowingly withheld information about defects with its cribs, strollers, car seat carriers and high chairs. In each case, Cosco made design or label changes to the products after receiving injury and incident reports from consumers, but failed to inform CPSC about the hazards presented by those products in homes or on store shelves. Two babies died and more than 300 children were injured while using the products. Cosco is the largest manufacturer of strollers and car seats in the United States.

Safety 1st has agreed to pay $450,000 to settle CPSC charges that it knowingly withheld information about defects with its walkers and wipe warmers that caused six injuries to children. After receiving reports from consumers about problems with the products, Safety 1st made design changes, but failed to inform CPSC about the risks of those products in homes and on store shelves.

In the past 10 years Cosco has had 12 recalls of children's products and Safety 1st has had five recalls. Both companies have been penalized in the past for failure to comply with reporting requirements. In 1996, Cosco paid a $725,000 civil penalty. In 1998, Safety 1st paid a $175,000 civil penalty.

Among the CPSC's latest charges:

  • Cosco knew of 24 non-fatal incidents of children becoming entrapped in its full-sized metal cribs over a 2-year period before an 8-month-old child in White Lake, Mich., died of asphyxiation in one of the cribs on June 24, 1997. During that period, Cosco initiated a number of warning label and assembly instruction changes but did not inform the CPSC.

  • Cosco knew about 10 incidents of the mattress sold with its cribs compressing allowing infants to become entrapped in the mattress platform. An 11-month-old in Joliet, Ill., died when he fell feet first through the slats of the mattress platform and became entrapped at the neck. Cosco knew about incidents occurring with the crib at the same time it was in talks with the CPSC to settle allegations from an earlier civil penalty case. Cosco paid a $725,000 fine in 1996 for not reporting incidents associated with its toddler beds.

  • Cosco learned of children being injured in its Two Ways Tandem Strollers, but did not report this information to CPSC. In one case, the stroller with two children inside collapsed in the path of an oncoming car and was nearly hit. After a complaint from a retailer, Cosco added a secondary locking mechanism to all strollers in its inventory. Cosco also offered consumers, "upon request," a fix consisting of a secondary locking mechanism. When asked by the CPSC, Cosco reported it had received 3,000 complaints of locks failing, including 250 reports of strollers collapsing.

  • Safety 1st discovered that children's teeth could get caught on the steering wheel of its Mobile 4 Wheelin' Walkers, but did not inform the CPSC until it had received reports of six incidents, including five where children had their teeth pulled out by the walker.

"This is the largest fine against a manufacturer of children's products in CPSC's history," said CPSC Chairman Ann Brown. "The law is there to help catch problems quickly so products can be recalled before a child is injured or, as in this case, killed. I want this fine to send the message that we won't tolerate companies that hide safety information from the public."

Although the companies agreed to pay the civil penalties, Cosco and Safety 1st deny the charges. Dorel, the parent company of Cosco and Safety 1st, has pledged to CPSC that it is making reforms to eliminate any future reporting problems and to continue to improve the quality of its products.

"I personally met with the Chief Operating Officer of Dorel who pledged to make safety improvements," said Brown. "I welcome this commitment."

ProductProblemReports to CompanyInjuries
390,000 Cosco cribs
7/9/97 recall
Mattress platform used as side rail could entrap baby471 death, 24 non-fatal entrapments
62,000 Cosco crib mattresses
2/17/99 recall
Mattress could compress and entrap baby111 death, 10 non-fatal entrapments
57,000 Cosco tandem strollers
2/17/99 recall
Stroller locks could break causing stroller to collapse3,000 reports of locks failing; 250 collapsed strollers200 injuries
670,000 Cosco car seats/carriers
7/8/99 recall
Carrier handles release causing seat to flip forward5323 injuries
1 million Cosco high chairs
11/27/00 recall
Seat separates from frame, slips from set height, restraint slips from seat9337 injuries
170,000 Safety 1st walkers
8/8/00 recall
Child's teeth get caught in steering wheel, phone buttons break off, antennas poke children339 injuries
101,00 Safety 1st wipe warmers
3/29/01 recall
Potential electric shock from cracked unit17No injuries



For detailed information about these recalled products, consumers should contact CPSC at (800) 638-2772 or www.cpsc.gov. Consumers can participate in the recalls by calling Cosco at (800) 221-6736 or Safety 1st at (800) 964-8489.

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