Current Events in September 2003

A consumer class action lawsuit accuses AOL of deliberately double-billing hundreds of thousands of customers through a deceptive scheme involving multiple screen names. The suit also names ICT Group, which operates customer service centers for AOL, a division of Time Warner.

The lawsuit alleges that over the past two years, AOL has regularly double-billed many of its subscribers by creating what it refers to as "spin-off sub accounts."

"I noticed in Feb., March, April, 2003, I was getting double-billed for one account. I contacted AOL, told them of the problem and was told that I could only be reimbursed for 2 of the months," a consumer from Michigan told ConsumerAffairs.com recently.

The spin-off accounts are created for subscribers who maintain multiple screen names in a deceptive manner that's intended to deter customers from realizing they are being billed for two separate accounts, the suit charges.

Allegedly, AOL charges subscribers' credit cards at the beginning of the month for one subscription fee and will then post a second subscription fee towards the end of the month. Consumers reviewing their credit card statements see two charges for $23,90 and assume that one charge is for the most recent month and the other is for the current month.

Only by carefully examining their credit card statements each and every month would consumers realize they were being billed each month for two accounts, attorneys said.

When consumers discover the double billing and contact AOL to remedy the problem, they encounter the brick wall for which AOL has become famous -- a complex maze of voice-mail prompts and long periods on hold, both intended to discourage consumers from pursuing the matter, the suit charges.

When consumers finally do reach a live representative, who in most cases is an ICT Group employee, they are subjected to a vigorous sales pitch encouraging them to keep both accounts. If the consumer persists in demanding a credit, the representative flatly refuses to provide a full refund.

"I found out that I was double-billed $23.90 by AOL, from February 2002 - to October 2002," said Jill of Carson, Calif. "When, I finally caught the error, I called AOL and they said my stepson called and opened his own account. My husband and I both of accused of him of this and he swore up and down that he did not do it."

ConsumerAffairs.com is collecting evidence from consumers victimized by AOL's double-billing. Affected consumers should file a consumer complaint immediately.

September 25, 2003

About 50,000 "Member's Mark" gas grills sold by SAM's CLUB stores are being recalled because the bottom edge on the front control panel is sharp and can cause lacerations to the hands.

The units were manufactured by Grand Hall Enterprise Co. Ltd., of Taiwan. Grand Hall has received four reports of consumers who sustained cuts or lacerations on their hands, while trying to move the grill or reaching under the control panel.

The recalled grills have a stainless steel construction and have the name Members Mark on the front control panel. The grill has four caster wheels, a side shelf, and a side burner. Only units with model number Y0005XC-2 are included in the recall. The model number can be located on a silver ID tag on the back of the grill head.

SAMS CLUB stores sold these grills exclusively from August 2000 through December 2001 for about $600.

Consumers should avoid contact with the bottom edge of the grill until it is repaired. Grand Hall will mail repair kits directly to all grill owners.

Consumers who have not received a repair kit should call Grand Hall at (888) 735-5709 between 8 a.m. and 4:30 p.m. CT Monday through Friday.

Sears, Roebuck and Co. today announced it has entered into a definitive agreement to sell its National Tire & Battery (NTB) business to TBC Corporation for $260 million. Sears expects to recognize a pretax gain in the range of $50 million to $100 million on the deal.

"This transaction is a further refinement of Sears' focus on our core business strategy," said Alan J. Lacy, Sears chairman and chief executive officer. "We believe this sale is in the best interests of Sears and its customers. National Tire & Battery will benefit from being a part of the broader 900-store TBC network."

TBC calls itself the "industry's premier private brand tire marketer." Its brands include Carroll Tire Co., with a network of 5,000 retailers in the Southeast; Big O Tires, with 450 stores in 19 states; Tire Kingdom, with 150 stores in the Southeast; Northern States Tire, a wholesaler in the Northeast; TBC de Mexico; and Superior Tire, a Las Vegas-area retailer.

Most of NTB's 3,500 employees of NTB will become employees of TBC. National Tire & Battery operates 226 locations nationwide and currently generates annual revenues of about $425 million.

The New York City Department of Consumer Affairs (DCA) announced has cited 19 car dealerships citywide - totaling more than 2,800 counts - for deceptive and misleading advertisements, and in some cases, unlicensed activity.

The agency monitored advertisements placed in various New York City newspapers from February to June 2003 citing the most egregious cases. Dealers face possible penalties with fines ranging from $100 - $350 per count.

Deliberately enticing car buyers with half-truths and exaggerated claims is not just infuriating, it's illegal, said DCA Commissioner Gretchen Dykstra. Dealers should know and abide by longstanding rules that were put in place to protect consumers from deceptive trade practices. Car dealers should also know that we are keeping a close eye on their advertising practices and will continue issuing violations where warranted - guaranteed.

Under New York Citys Consumer Protection Law and other related laws, dealers are required to adhere to strict rules and regulations regarding advertisements. DCA recently issued violation notices for:

• false advertising (advertising damaged or used cars as new),
• false prices (listing buy for prices based on restricted rebates or requiring financing that automatically increases the cost of the advertised car),
• failing to disclose required information. (license number, credit, and pricing information was not listed in a clear and conspicuous manner), and
• misleading credit claims (i.e. balloon payments listed in footnotes and implying that credit will be approved instantly).

In some cases dealers were cited for not being licensed by DCA as second-hand auto dealers, a requirement for dealers accepting trade-ins, as well as those that just sell used cars.

DCA charged the following dealers with related violations:

• Northern Boulevard Dodge Inc., 209-01 Northern Blvd., Bayside, NY (94 counts)
• Northern Boulevard Dodge Inc., 209-35 Northern Blvd., Bayside, NY (231 counts)
• Kia of Bayside, 211-08 Northern Blvd., Bayside (120 counts)
• Bayside Chrysler Plymouth / Jeep Eagle, Inc., 212-19 Northern Blvd., Bayside (107 counts)
• Bronx Automobile Group, Inc., 3305 Boston Rd., Bronx, NY (461 counts)
• Bronx Automobile Group, Inc., 3329 Boston Post Rd., Bronx, NY (309 counts)
• Kia of the Bronx, 3350 Boston Post Rd., Bronx, NY (526 counts)
• Bronx Hyundai, LLC, 4353 Bronx Blvd., Bronx, NY (120 counts)
• Cox Nissan, Inc., 1235 E. Tremont Ave., Bronx, NY (192 counts)
• Cox Nissan, Inc., 3700 Boston Rd., Bronx, NY (192 counts)
• Regan Pontiac, Buick, GMC Truck, 43-20 Northern Blvd., Long Island City, NY (134 counts)
• SG Hylan Motors Inc., 1220 Hylan Blvd., Staten Island, NY (216 counts)
• Staten Island Honda, 1232 Hylan Blvd., Staten Island, NY (96 counts)
• Star Auto Sales of Bayside, Inc., 205-11 Northern Blvd., Queens, NY (93 counts)
• Star Auto Sales of Queens Village LLC, 211-44 Jamaica Ave., Queens Village, NY (23 counts)
• Star Nissan Inc., 206-14 Northern Blvd., Bayside, NY (704 counts)
• Metro Chrysler Plymouth Inc., 210-11 Jamaica Ave., Queens Village, NY (228 counts)
• Kings Plaza Jeep Eagle Inc., 2286 Flatbush Avenue, Brooklyn, NY (497 counts)
• Popular Ford Sales, Inc., 6501 Fort Hamilton Parkway, Brooklyn, NY (136 counts)

When purchasing a used car consumers should always call 311 to check a dealers complaint history and whether they are licensed, determine their needs and budget, and spend some time shopping around before making a quick decision, urged Commissioner Dykstra.

There are currently 1,300 licensed second-hand auto dealers in New York City. Last year, DCA received 317 related complaints, and secured nearly $300,000 in consumer restitution.

DCA enforces the Citys Consumer Protection Law and other related laws at thousands of businesses throughout New York City. Fostering a marketplace where consumers are protected and businesses can thrive, DCA licenses more than 60,000 businesses in 55 different categories citywide. Through free community seminars, licensing forums, and other informational materials, DCA educates consumers and businesses alike about their rights and responsibilities.

To file a complaint or for a copy of the DCAs Guide to Used Car Purchases, call 311 or visit DCA online at www.nyc.gov/consumers.

Patients should not take the newly approved cholesterol drug, rosuvastatin, which AstraZeneca will sell under the name Crestor, because it has a significant potential to cause kidney damage and failure, as well as muscle destruction, Public Citizen's Health Research Group said today.

The U.S. Food and Drug Administration (FDA) approved the drug on Aug. 13 and it is just now becoming available by prescription.

Public Citizen will issue a "Do Not Use!" warning about Crestor in the October issue of Worst Pills, Best Pills News. Although the site usually requires that users subscribe to read its articles, the full text of the warning on Crestor was posted today at no charge because of the serious danger that Crestor users may face.

Public Citizen made a formal presentation to an FDA advisory committee in July, strongly opposing the drug's approval based on its unique kidney toxicity.

The drug was approved on the condition that it be available only in five, 10 and 20 milligram strengths, with restricted distribution of a 40 milligram dose. Such restrictions, however, will not adequately protect patients, Public Citizen charged.

"It was irresponsible of the FDA to approve this drug without requiring routine urine testing for protein and blood to monitor for the early signs of kidney damage, " said Sidney Wolfe, M.D., director of Public Citizen's Health Research Group. "This drug is already showing signs that it is too dangerous for people to take, and it is only a matter of time, after 'enough' people have been injured or killed, that it will have to be pulled from the market."

In studies before its approval, seven people were struck by cases of rhabdomyolysis, an adverse reaction involving the destruction of muscle tissue that can lead to kidney failure.

Baycol, another statin, was removed from the market in the fall of 2001 after at least 31 reports of fatal rhabdomyolysis. For more than three years before it was banned, Public Citizen warned patients not to use Baycol. Even so, Baycol did not show life-threatening rhabdomyolysis in pre-approval clinical trials. Crestor is the only statin to have the reaction arise before its approval.

In addition to the risks of kidney damage, patients should avoid Crestor because it has not been shown to reduce the risk of heart attacks and strokes, which is a benefit of lower cholesterol levels. Three other statins - lovastatin, pravastatin and simvastatin - have shown such a benefit.

In the past, Public Citizen's Do Not Use! warnings have preceded safety-related withdrawals of drugs such as Baycol, Propulsid and Rezulin by months, sometimes years. The Health Research Group has listed more than 200 drugs as Do Not Use! during the past 15 years.

The National Highway Traffic Safety Administration (NHTSA) is upgrading an investigation of a possible safety defect in the ignition-transmission interlock of more than 1.4 million Honda vehicles.

NHTSA says it has received hundreds of complaints and some injury reports that Honda vehicles' keys could be taken out of the ignition even when the transmission was not shifted into park.

Complaints to ConsumerAffairs.com have chronicled a variety of problems with the ignition switch:

• Ruthy of Los Angeles said she had "almost been killed 5 times" when her ignition would suddenly cut off in traffic.
• When Matthew of Tallahassee took his ignition key out, various warning lights remained on.
• Therese said her CRV "car does not always register when it is in park" and it is imossible to remove the key.

Reuters reported that the agency has upgraded its preliminary investigation into 1.3 million Honda Accord sedans from model years 1998 to 2001, as well as about 62,000 Honda CR-V sport utility vehicles from 2002.

NHTSA said it has received 135 complaints from Accord owners and 34 complaints from CR-V owners about a failure of the ignition-park interlock, which is designed to keep vehicles from rolling away after being shut off.

The complaints include reports of 21 crashes and one injury from Accord buyers, and 7 crashes with 3 injuries from CR-V owners. NHTSA also said Honda had 112 warranty claims for the Accord and 29 CR-V warranty claims that were related to problems with the interlock.

NHTSA will now conduct an engineering analysis to determine exactly what caused the problems, and rule whether a recall is necessary.

August 11, 2003
Californians who worked recently for Abercrombie & Fitch will share in the $2.2 million settlement of a lawsuit that charged the retailer will forcing its employees to buy and wear its clothing while on the job.

State labor department officials had alleged that the company's "Appearance/Look Policy" was used to require store employees to buy and wear the company's clothes. California and most other states require employers to pay some or all of the cost of uniforms and other required apparel.

The agreement covers nearly 11,000 people who worked at Abercrombie & Fitch, Hollister Co. and abercrombie stores in California from Jan. 1, 1999, through Feb. 15, 2002.

"These are workers who, by and large, may have been making more than minimum wage, but not a lot more," said Miles Locker, a California Labor Commission attorney.

Abercrombie says it has revised its policies. It will make reimbursements ranging from about $200 to $490 to more than 11,000 people who worked in its California stores during the period covered by the action.

The settlement is separate from similar class action lawsuits over Abercrombie's dress-code policies.

The company also faces charges of employment discrimination. A lawsuit filed last month charges that the New Albany, Ohio, chain discriminates against blacks, Hispanics and Asians with a corporate policy that requires all sales people to exhibit an all-white "A & F look."

A nationally advertised company that claims to be a nonprofit credit-counseling service is defrauding debt-ridden consumers, Missouri Attorney General Jay Nixon charges in a lawsuit. Nixon says AmeriDebt Inc. deceives consumers through excessive, hidden fees and by secretly transferring consumers accounts and money to its affiliated for-profit companies.

Nixon filed suit in St. Louis City Circuit Court against several companies and individuals associated with AmeriDebt, including members of the Pukke family, which owns and operates the various companies named in the lawsuit.

Illinois filed a similar suit earlier this year.

The lawsuit claims the supposedly nonprofit companies have taken in millions of dollars in personal profits for the Pukke family and other officers and directors from consumers needing help with unsecured debt and have violated Missouri consumer protection laws.

Consumers in financial dire straits often will reach out to those offering credit counseling services to keep them afloat, particularly if the services are aggressively advertised on television or on the Web as being nonprofit, Nixon says. Unfortunately, with its high, hidden fees and lack of any significant credit counseling, AmeriDebt has served more as an anchor than a life preserver for many consumers.

In addition to AmeriDebt, the defendants in the lawsuit include

• Debticated Inc., which also claims to be nonprofit;
• Debtworks Inc.,
• Ballenger Group Inc.,
• Ballenger Group Holdings Inc.,
• Infinity Resources Inc. (later renamed F&M Mortgage Inc. and then Fidelity and Trust Mortgage Inc., also defendants); and
• owners Andris Pukke and his brother, Eriks Pukke.

The Pukkes and their companies are based in Germantown, Md.

Nixon says that while AmeriDebt tells consumers it is a nonprofit organization that operates at cost and does not make money, the company functions like a profit-driven company. Employees referred to as credit counselors or debt professionals actually perform more as salespeople to sell fee-based debt management plans to consumers and are compensated in part on commission, Nixon says.

AmeriDebt aggressively advertises that it charges no upfront fee to consumers, Nixon says. What the company downplays or hides is that the first monthly payment a consumer makes which typically is three percent of the consumers total debt, and averages $327 does not go to the creditors, but is instead pocketed by AmeriDebt and the Pukkes for-profit companies.

This payment is termed a voluntary contribution by AmeriDebt, Nixon says, and results in the consumer going further into debt since the creditors are not paid with it. In addition, AmeriDebt charges consumers fees of up to $70 per month over the life of the consumers debt management plan; the plans generally last between three and five years. Most of those monthly fees also are secretly transferred to the Pukkes for-profit companies.

Those monthly fees, which also are characterized by AmeriDebt as voluntary, add on between $1,000 and $2,000 to how much consumers pay, Nixon says. This is not the kind of help people in debt need.

The lawsuit also says that AmeriDebt falsely advertises that it provides credit counseling. Nixon says the employees with whom consumers consult on the phone are salespeople, not trained credit counselors, and they provide no significant help with budgeting or education and training about personal or household finance.

True credit counseling would help consumers work their way out of debt and stay there, Nixon says. AmeriDebt has salespeople competing for commission and bonuses by selling debt management plans. They are not trained or qualified to know what course of action is going to be best for the individual consumer with whom they are speaking.

Nixon also says the statements AmeriDebt makes that it will negotiate with a consumers creditors to obtain the best terms and lowest interest rate are false as well. The creditors dictate to AmeriDebt, in advance of the consumer contact, what interest rates and terms will be given to consumers who go on a debt management plan.

The lawsuit notes that in September 1996, defendant Andris Pukke pleaded guilty to the federal felony of trying to defraud consumers by falsely promising debt consolidation loans, then not providing them. Pukke and his wife formed AmeriDebt Inc. the same month he pleaded guilty to the federal charge. The defendants do not disclose the conviction information to consumers, yet Pukke companies still entice Missouri consumers by promising debt consolidation loans, Nixon says.

The lawsuit asks the court to void any contract made between Missouri consumers and the defendants, and order consumer restitution of the money not forwarded to creditors. Nixon also is asking that the defendants pay civil penalties of up to $1,000 for each violation of Missouri consumer protection laws, as well as pay all investigative, attorney and court costs to the state.

"As an organization that has worked with many states to fight fraud and deceptive practices by firms in the consumer credit counseling arena, AmeriDebt is both surprised and disappointed to hear about the lawsuit filed today by Attorney General Jay Nixon," AmeriDebt Counsel Rob Herrell said in a statement.

"AmeriDebt has been in operation nationwide for more than six years and has an exemplary record of helping needy debtors negotiate lower interest rates and payments," he said

Retailing giant Wal-Mart has entered the online contact lens business. Wal-Mart, the world's largest company, already sells contacts in about 1,800 stores and is now promising quick turnaround on online orders.

The announcement coincides with Congressional consideration of a bill that would require that sellers of contact lenses verify the accuracy of the consumers lens prescription with the optometrist or ophthalmologist who wrote the prescription. It would also require that optometrists and ophthalmologists provide contact lens wearers with copies of their prescriptions.

About 34 million Americans wear contact lenses. Wal-Mart's immense buying power enables it to offer rock-bottom prices, making it a threat to other players in any industry it enters.

Those most likely to be hurt by Wal-Mart's latest move include local optometrists, established online contact suppliers and chain stores such as Pearle Vision and Sterling Optical.

Wal-Mart says that orders filed with its Web site will be filled within one to two days and the lenses will be shipped either to the customer's home or to the local Wal-Mart store's vision center.

Contact lens brands available on www.walmart.com include Johnson & Johnson's JNJ.N Acuvue and Acuvue 2 and Focus Dailies, made by Novartis AG's NOVZn.VX CIBA Vision unit.

H.R.2221, the Fairness to Contact Lens Consumers Act, was introduced by Rep. Richard Burr (R-NC). Burr says its major goal is to require eye doctors to give patients their contact lens prescriptions. (Currently, eye doctors are only required to give patients their eyeglass prescriptions).

Additional provisions include:

• Set a 1-year floor for the expiration length of a contact lens prescription and allow state flexibility beyond that requirement. (States have varying expiration lengths from 1-2 years.)
• As found in the current eye glass rule: a) eye doctors cannot require payment for the release of a prescription and, b) their liability on the content of the prescription is not waived by releasing it to the patient.
• Make it against the law to represent that patients can receive prescription contact lenses without a prescription.
• Require the FTC to study the different prescription verification processes around the U.S. and report back to Congress in 9 months.
• Define "contact lens fitting" and "contact lens prescription."

Testifying before the House Energy and Commerce Committee, the Federal Trade Commission said it supports the goal of promoting greater competition among contact lens sellers and enhancing consumer choice.

Competition among contact lens sellers benefits consumers through lower prices, greater convenience, and improved product quality, said Howard Beales, Director of the FTCs Bureau of Consumer Protection.

In 1988, the FTC challenged advertising restrictions on eye care goods and services by the Massachusetts Board of Registration in Optometry concluding that the restrictions didnt serve any legitimate purpose and were anticompetitive. The agency ordered the board to stop restricting the advertising, thereby increasing competition among sellers, and reducing costs and increasing choice for consumers.

Increased competition among sellers through advertising, however, does not benefit consumers if the claims made in the ads are false or misleading, Beales said. To prevent such claims from being made in the marketplace, the FTC sued sellers who made deceptive advertising claims for eye care products.:

The testimony cites recent settlements with two of the largest LASIK eye surgery services that bar unsubstantiated claims that the surgery eliminates the need for glasses or contacts for life and that LASIK surgery is less risky than wearing contact lenses. Our cases have enhanced the ability of consumers to make better-informed choices concerning eye care products, Beales said.

One of the countrys largest credit-repair operations has agreed to pay more than $1.15 million in consumer redress to settle Federal Trade Commission charges that it violated federal law.

The settlement resolves charges leveled by the FTC against six Michigan-based defendants in a federal court complaint. The defendants, who sell credit-repair services through a multilevel marketing organization, allegedly falsely claimed that they could remove derogatory information from consumers credit reports, even if that information was accurate and not obsolete.

The defendants purported to do this through the use of a one-of-a-kind computer disk that they claimed could search and identify errors in the process used by the credit reporting agencies to enter negative items onto consumers credit reports. The Commissions complaint alleges that the defendants representations about the computer disk are false and deceptive.

Consumers who find themselves with less than perfect credit histories should be wary of anyone offering a quick fix to the problem, said Howard Beales, Director of the FTCs Bureau of Consumer Protection. "Mistakes can be corrected, but there is no substitute for time and self-discipline to improve your credit report if the information is accurate.

The Commissions Complaint

The Commissions complaint is brought against six related defendants, all based in the Detroit, Michigan area. Those defendants include ICR Services, Inc.; a Livonia, Michigan-based company; and its three officers and directors, Bernadino J. Pavone, Jr., his mother Gloria Tactac, and Abood Samaan.

The remaining defendants are National Credit Education and Review (NCER), based in Canton, Michigan, and its president Todd Renzi. The defendants currently sell their credit-repair service through NCER under the name National Credit Repair. Since 1996, the defendants have sold their credit-repair service to more than 183,000 consumers, taking in more than $53 million on those sales.

The Commissions complaint alleges that in operating their credit repair business, the defendants engaged in a series of deceptive practices that violate both the FTC Act and the Credit Repair Organizations Act.

According to the complaint, the defendants and their nationwide network of approximately 50,000 sales representatives regularly told consumers that the defendants were able to remove negative items such as bankruptcies, foreclosures, and late-payments from credit reports even if the items were accurate, verifiable, and not obsolete. To convince consumers that they actually could do this, the defendants allegedly represented that they had a one-of-a-kind computer disk, developed over several years by defendant Pavone, that was able to identify inaccuracies in the entry process employed by the credit reporting agencies.

According to the FTC, the defendants told consumers that the computer disk was so unique and amazing that it had been valued at more than $200 million in an independent appraisal, and once had been insured by Lloyds of London for $15 million. They allegedly also told consumers that the credit reporting agencies themselves wanted the disk so badly that one of them offered $10 million for it. The Commissions complaint alleges that all of these representations are false and deceptive.

In particular, the Commissions complaint alleges that the defendants do not have a computer disk or any type of software program that is able to do the things they represent to consumers. According to the Commissions complaint, the defendants credit-repair service simply entails challenging in a dispute letter each negative item that appears on a consumers credit report. The complaint alleges that just like everyone else, these defendants are not able to remove negative items from credit reports that are accurate, verifiable, and not obsolete.

In addition to these core misrepresentations, the Commissions complaint alleges that the defendants violated federal law by requiring consumers to pay in advance for the credit repair service, by misrepresenting the terms of their 110 percent money back guarantee, by making untrue and misleading statements about their customers credit standing to the credit reporting agencies, and by failing to provide their customers with a written notice as required by federal law.

Terms of the Order

The stipulated final order settling these charges requires that the defendants pay more than $1.15 million in consumer redress. It also requires that the defendants distribute a notice detailing the terms of the settlement to their defendants national network of sales representatives.

More information on credit repair.

The Federal Trade Commission has charged subprime lender Stewart Finance Company with violating federal lending laws and has asked a U.S. District court to immediately halt their practices and order redress for consumers who were victims.

Stewart Finance operates approximately 60 branch offices in Georgia, Louisiana, Missouri, Illinois, and Tennessee. The company's owner, John Ben Stewart, Jr., and nine related companies are also named in the FTC complain.

Stewart Finance provides small personal loans to consumers in the subprime market, typically in amounts less than $1,000 to be repaid in less than one year. Many of the borrowers are recipients of Social Security or other government benefits who may have difficulty obtaining financing from prime lenders.

The FTC alleges that Stewart Finance engages in deception and other illegal practices to induce consumers to unknowingly purchase expensive add-on products, such as insurance and Car Club membership, to obtain costly refinance loans, and to participate in a direct deposit program, which carry additional fees.

For example, the complaint alleges Stewart Finance sells accidental death and dismemberment insurance and Car Club memberships with its consumer loans, setting high goals or quotas for the sales of these products. The entire cost for the products is due up-front and the defendants allegedly package the finance of these products as part of the loan. As a result, consumers pay additional interest and other finance charges, according to the FTC.

The agency alleges that Stewart Finance employees do not tell customers that the add-on products are optional or that they cost money in addition to the loan. Some consumers who notice the additional charges and object to purchasing the products allegedly find themselves disqualified from taking out a loan for which they were previously approved or are told the products are mandatory.

In many cases, Stewart Finance has sold Car Club to borrowers who do not own cars or do not have drivers licenses, and has sold accidental death and dismemberment . . . .to borrowers who are not eligible for the product due to age restrictions, the FTC complaint says.

According to the FTC, Stewart Finance frequently and aggressively solicits its customers to take out additional loans through cash available promotions. Instead of offering the borrower a new loan for the specific amount of cash offered in the promotion, however, Stewart Finance allegedly refinances the customers existing loan. This renewal loan is larger and more expensive than the one Stewart Finance advertised.

In addition, the FTC alleges that Stewart Finance employees frequently tack on another Car Club membership or insurance policy without canceling any pre-existing memberships or policies, or offering any refunds on the premiums paid for the products. In many instances, borrowers had, and paid for, two overlapping memberships or policies.

The FTC further alleges that Stewart Finance actively solicits consumers by offering loans of $150 if they sign up for Stewart Finances direct deposit program at a financial institution Stewart designates. Stewart Finance trains its employees to tell customers that direct deposit is a free service that will not cost you any money. When consumers sign up, Stewart Finance allegedly charges the consumer a fee for the service, and more recently began deducting this fee ($4-6 a month), as well as the customers monthly loan payment from the consumers account. In addition, the consumers may only withdraw money from their accounts using automated teller machines, where they incur additional charges.

The FTC complaint also charges that Stewart Finance typically requires that borrowers pledge personal property telephones, microwave ovens and sewing machines, for example as security for their loans. According to the FTC, Stewart Finance agents threaten to take possession of the personal property if consumers are delinquent on their loan payments. This practice violates the FTCs Credit Practices Rule.

Finally, the FTC alleges that when Stewart Finance rejects a loan application based on a consumers credit report, its notice to consumers does not comply with the Fair Credit Reporting Act, which requires that the consumer be notified, among other things, that the creditor, and not the consumer reporting agency denied the loan.