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Wal-Mart Sued In Exercise Injuries

The Consumer Product Safety Commission (CPSC) is suing Wal-Mart Stores for failing to report a series of injuries involving Icon Health and Fitness exercis...

May 26, 2001
The Consumer Product Safety Commission (CPSC) is suing Wal-Mart Stores for failing to report a series of injuries involving Icon Health and Fitness exercise equipment. It's the first time the CPSC has sued a retailer.

The CPSC is seeking $4.5 million in fines from Wal-Mart, Sam's Club and Icon. It charges that 41 Wal-Mart shoppers were injured while trying out the machines and that, though the company knew of the incidents, it failed to report them, as required by law. The suit charges that Icon knew of 68 injuries but did not report them.

The machines involved are:

  • Weider Power Glide;
  • Weslo Shape Trainer; and
  • Weider Shape Glider.

Icon, based in Ogden, Utah, describes itself as the world's largest manufacturer of home exercise equipment. Besides Weider and Weslo, it manufacturers equipment under the brand names NordicTrack, Pro-Form, Reebok, Healthrider, Fit.com, Image and Jumpking.

The CPSC recalled 75,000 of the machines in April 1999 and Wal-Mart contends it did not realize there was a problem with them until that time. A company spokesman said Wal-Mart sold 50,000 of the machines and received only three dozen injuries reports over three years. A CPSC official said companies are required to report all product-related injuries.

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JCPenney Life Insurance Co. Sued For Consumer Fraud

Consumer complaints about JCPenney Life Insurance Co. Sued For Consumer Fraud...

May 25, 2001
An 82-year-old Michigan man has filed suit against JC Penney Life Insurance Co., accusing the firm of drafting his bank account for a life insurance policy he did not order. The suit filed by Nathan Davis seeks to be certified as a class action on behalf of all others allegedly swindled.

In May of 2000, Davis noticed that his statement from Comerica Bank included a $7.95 charge that he could not identify. Upon reviewing earlier statements, he found similar charges dating back to April 1999.

Davis eventually determined that the charges were for life insurance which a JCPenney telemarketer claimed Davis' wife had ordered in a 1999 telephone call. But the Davises said they had never signed an authorization for the insurance, had not received a policy and had not provided their bank account information.

The suit charges that JCPenney was working in concert with Comerica and other banks and that it routinely drafted the accounts of consumers without their knowledge or authorization. The charges mirror complaints filed with ConsumersAffairs.Com since December 1991. JCPenney's telemarketers allegedly obtained information, such as birthdates, that enabled them to obtain bank account numbers from cooperating banks.

Davis' suit alleges that JCPenney routinely uses telemarketers to offer life insurance for a 90-day no-cost "trial period." During the first 90 days, consumers receive coverage without paying for it. But at the end of that time, consumers must cancel the coverage or be charged for it.

Davis alleges that he and other consumers never had an opportunity to decide to continue or cancel the program because JCPenney simply began collecting money from their bank accounts at the end of 90 days.

The suit also charges that JCPenney misrepresented the benefits of the insurance to older persons, failing to tell consumers that benefits for persons over a certain age (usually 70 or 75) were half those for younger customers. For example, telemarketers allegedly told consumers that there was a $1 million benefit for death in an accident involving public transportation, when in fact the benefit for older persons was only $500,000.

The suit seeks actual and punitive damages and asks for a permanent injunction preventing JCPenney from collecting life insurance premiums without explicit written instructions signed by the insured.

Davis' suit was filed in Dallas County, Texas District Court by attorneys Stephen Gardner of Dallas and Steven E. Goren of Bingham Farms, MI.

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New Law Allows Garnishing Social Security Checks

Beginning this month, the Social Security Administration will be deducting payments from checks

For the first time ever, older Americans' Social Security checks are subject to garnishment, not by private creditors but by the federal government....

For the first time ever, older Americans' Social Security checks are subject to garnishment, not by private creditors but by the federal government.

Beginning this month, the Social Security Administration will be deducting payments from checks issued to 55,000 who've defaulted on Veterans Administration mortgages and student loans as well small business and disaster loans. In October it will go after 232,000 who owe money to the Internal Revenue Service.

The unprecedented -- and largely unpublicized -- action is part of an effort to collect $31 billion that individuals owe to various federal agencies. It's the result of an obscure section of the Debt Collection Improvement Act passed by Congress in 1996.

Under rules established by the Treasury Department, the first $750 of an individual's monthly Social Security payment will be off-limits. Fifteen percent of the amount above $750 will be withheld each month until the debt is repaid. Payments to disabled persons and their dependants and survivors under the Supplemental Security Income program are not affected.

Although Congress authorized the garnishments in 1996, the program is just getting underway because of the complexity of linking data from the many different federal departments.

In reality, it will be a while before the program makes much of a dent in that $31 billion. A big chunk of the outstanding bad debt consists of student loans taken out by baby boomers. But putting the program into action now means it should be running smoothly when the boomers begin to retire.

Among today's older debtors are veterans who didn't repay home loans or didn't make required medical co-pays and individuals who didn't repay Medicare overpayments. The average veteran owes $1,000, a VA official said.

Think you might be on the list? The Treasury Department has set up an automated phone number that will tell you. It's 800 304-3107.

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College Resource Management, Inc. Settles with FTC

College Resource Management, Inc. Settles with FTC...

May 11, 2001
The Federal Trade Commission announced that College Resource Management, Inc. (CRM) has agreed to settle FTC charges of misrepresenting their ability to obtain college financial aid for students.

The settlement prohibits the defendants, based in Grand Prairie, Texas, from making any false claims in connection with the marketing and sale of college financial services and from violating the Commission's Rule Concerning Cooling-Off Period for Sales Made at Home or at Certain Other Locations ("Cooling-Off Rule"). The order also requires the defendants to pay $40,000.

According to the FTC's complaint, the defendants marketed their financial aid services through a direct mail campaign targeted to high school students and their parents. The defendants' letter stated that they had identified the student as "eligible" to enroll in their "nationally recognized college financial aid and placement assistance service," and invited the student to call a toll-free number to arrange an interview.

According to the FTC, the interviews, typically held at local hotels, were really high-pressure sales seminars at which the defendants promoted their college planning and financial aid services. These services, ranging in price from $995 to $1,068 depending upon whether parents paid up-front or over time, purportedly helped consumers obtain more financial aid than they could on their own.

The defendants told consumers they would prepare a personalized career profile for their students and find colleges that offered majors in those particular fields with the best financial aid packages, professionally analyze consumers' financial situations, prepare a personalized financial aid report, and design customized strategies to maximize the amount of financial aid consumers would likely receive.

In reality, according to the FTC, the defendants provided consumers only generalized information. The personalized career profiles typically contained only a broad, general discusssion of students' interests. The personalized financial aid reports usually presented the same financial information consumers originally submitted, and the customized strategies were typically broad, general strategies not tailored to consumers' specific financial situations. Many of the recommended strategies, such as pre-paying a mortgage or having the parent enroll in college, are not feasible or practical for most consumers.

The FTC's complaint alleges that the defendants (1) falsely represented that students were selected based upon their qualifications to participate in the defendants' financial aid program; (2) falsely represented that consumers who purchased their services were likely to receive substantially more financial aid than consumers could obtain without those services; and (3) failed to disclose, or disclose adequately, that their service agreement would be automatically renewed each year at a cost of $300 per year unless consumers wrote to cancel at least 30 days prior to the renewal date.

The FTC's complaint also alleges that between December 1996 and January 1999, the defendants falsely represented that they would refund their fee to consumers who did not obtain $2,500 in financial aid. Finally, the complaint charges the defendants with violating the Cooling-Off Rule by (1) failing to furnish consumers with "Notice of Right to Cancel" documentation that informs consumers of their right to cancel the transaction within three business days, and (2) failing to inform consumers orally of their right to cancel.

The stipulated order prohibits the defendants, in connection with the advertising, promotion, offer for sale, or sale of any academic good or service, from falsely representing, expressly or by implication, that:

  • students have been identified by the defendants based on any specific criteria; consumers are likely to receive substantially more financial aid than they could otherwise obtain without the defendants' services;
  • consumers will receive a refund if they do not obtain any financial aid as a result of buying any academic good or service;
  • consumers are likely to receive, or that the defendants' customers have received, a specified amount of financial aid; and
  • consumers will receive customized advice tailored to their specific academic planning or financial needs.

The order also prohibits the defendants from failing to disclose to consumers (a) any policy of automatic renewal, and (b) any material term, condition, or limitation on any refund policy. Further, the settlement requires the defendants to make certain affirmative disclosures in their sales presentations and advertising, including that:

  • purchasing CRM's services does not guarantee that a consumer will get financial aid or get more financial aid than the consumer could have otherwise obtained without purchasing CRM's services; and
  • purchasing CRM's services does not guarantee that a consumer's child will get accepted by any college or university.

In the context of "door to door sales" of any consumer good or service, the order prohibits the defendants from (a) failing to furnish consumers with "Notice of Right to Cancel" documentation, (b) failing to inform consumers orally of their right to cancel a contract within three business days, and (c) otherwise violating the Cooling Off Rule.

The FTC's scholarship scams website, gives students and parents information about spotting and avoiding scholarship scams. A fact sheet, bookmark and poster can be downloaded from the site, or are available free from the FTC, 1-877-FTC-HELP. In addition, the website links to the Department of Education's financial aid information for students.

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Fleet, Citigroup, MBNA Impose No-Lawsuit Clause On Cardholders

Fleet, Citigroup, MBNA Impose No-Lawsuit Clause On Cardholders...

May 11, 2001
There's nothing subtle about the FleetBoston Financial Corp.'s defense against several consumer class-action suits. The bank recently mailed its credit card customers new cardholder agreements under which the customers agree not to sue the bank individually and not to be a party to any class-action lawsuit. Nothing if not audacious, Fleet made the provision retroactive.

Other large banks are following suit. Citigroup Inc. and MBNA Corp. are also issuing new cardholder agreements that prohibit their customers from suing them, requiring them to submit all disputes to binding arbitration. The new agreements also say consumers are barred from banding together to bring a class-action suit, the traditional way of handling a large number of relatively small claims.

The sweeping actions will, if successful, disqualify millions of consumers from exercising their constitutional right to sue.

Whether the courts will uphold the banks' action is open to question. In a similar case in 1998, a Portland, Ore., judge threw out a similar clause imposed by Bank One Corp.'s First USA Division. Legal scholars say it's unclear whether businesses have the power to prohibit class-action lawsuits by unilaterally altering an agreement.

Fleet's motivation is clear. It's already fighting more than a dozen lawsuits seeking certification as class actions. Most of the pending actions accuse Fleet of misleading customers about interest rates.

In Florida, a federal suit has been filed contesting the retroactive clause, among other issues. And a similar suit was filed recently in state court contesting similar clauses imposed by MBNA and First Union Corp.

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