Current Events in September 2004

An investigation by Spitzer's office found that the company had engaged in potentially misleading or false advertising with sales prices that involved little or no discounting of merchandise.

"Retailers have a fundamental obligation to be truthful and accurate with their advertising," Spitzer said. "A sales price' or a discount price' should mean that the item costs less than it usually does."

Jos. A. Bank uses direct mail, email, internet, print, radio and television advertising and in-store promotions to market its men's clothing line. In promotional material, Jos. A. Bank claimed that its merchandise was being offered for sale at a discounted price that was lower than its regular price. In addition, the company said that items would be on sale for a short period, thus creating the false impression that prices would soon revert to a higher price.

In fact, many items were almost continually on sale during the last 18 months. For example, the company's Signature, Executive and Trio suit lines were on sale for all but a few days during the period. Less than one percent of these suits were sold at the so-called regular price.

In settling the case, Jos. A. Bank has agreed not to promote any item at a discount from a regular price unless the item has previously been offered at a higher price for a reasonably substantial period of time. Spitzer said that this provision would help guard against misrepresentation of regular prices as sales prices.

Jos. A. Bank also agreed to pay $425,000 in civil penalties and $50,000 in costs to the State of New York.

The Hampsted, Maryland-based retailer operates 12 stores in New York and more than 200 stores nationwide.

The Attorney General's office will continue to monitor the company's advertising and is conducting a broader review of advertising practices in the retail industry.

September 13, 2004
A suit making its way through the court system seeks to overturn a California law that provides strong privacy rights to consumers. Banks and other financial services companies are suing to invalidate a 2003 law, the California Financial Information Privacy Act, commonly known as "SB1."

The bankers' association argues that the federal Fair Credit Reporting Act supercedes the California protections. However, a coalition of consumer and civil liberties groups representing 41 million individuals, has filed a brief in support of the law, saying it protects against identity theft and fraud.

SB1 is considered by many to provide the strongest financial privacy protection in the U.S. It allows customers to "opt-out" of information-sharing practices between affiliated institutions, companies that have common ownership. SB 1 also bars financial institutions from sharing information about consumers with nonaffiliated third parties unless an individual gives his or her express "opt in" consent.

In April 2004, the American Bankers Association, the Financial Services Roundtable and the Consumer Bankers Association filed suit arguing that SB 1 conflicts with the federal Fair Credit Reporting Act (FCRA). As interpreted by the banking industry, the FCRA imposes a preemptive ceiling on state privacy statutes, thereby preventing any state or local regulation concerning affiliate sharing of consumer information.

A judge has already ruled otherwise, saying federal legislation expressly allows states to erect stronger financial privacy protections. In late July the banking institutions appealed, with the case now before the Ninth Circuit Court of Appeals.

US Airways filed for bankruptcy today after talks with its labor unions broke down. It is the second time the troubled East Coast carrier has entered bankruptcy and many analysts think it will be the last.

US Airways emerged from the first bankruptcy courtesy of a $1 billion loan funded in part by U.S. taxpayers. This time around the carrier may have more trouble arranging financing.

In the near term, the filing should have no effect on travelers. The airline will continue to fly its normal routes and honor its reservations while it tries to come up with a reorganization plan. Long-term, US Air faces liquidation if it can't devise a realistic business plan.

For now, there's no reason for fliers to avoid US Airways. Anyone who already has a reservation should honor it, since normal cancellation fees will continue to apply.

Even if the airline is forced to liquidate, other carriers will be required by law to honor its tickets, so travelers would not be stranded though they might encounter delays and disruptions in their planned itinerary.

It's important to pay for tickets with credit cards, since the Fair Credit Billing Act calls for consumers to get their money back if the ticket isn't honored. Consumers must submit their dispute within 60 days of their ticket purchase.

Frequent-flier awards will continue to be honored during the Chapter 11 bankruptcy. However, if the airline liquidates it's not clear whether other airlines would be obligated to honor free tickets issued to frequent fliers.

While frequent-flier miles will continue to accumulate during the bankruptcy, it's not clear what will happen to the miles if US Airways goes out of business. Competing airlines might choose to honor them but there are no guarantees.

Sprint will pay $1.125 million and AT&T; $365,000 to settle federal charges that they failed to tell applicants they had been denied telephone service because of poor credit reports.

The Federal Trade Commission charged that Sprint used consumers credit reports to deny them telephone service, and that both AT&T; and Sprint placed conditions or restrictions on consumers service, without telling the customers why they were doing so, contrary to federal law.

The Fair Credit Reporting Act (FCRA) requires that consumers be told when an adverse credit report has affected the service they receive and they must be told how they can obtain a free copy of the credit report so that they can dispute any errors in it.

According to the FTC, Sprint and AT&T; obtain consumers credit reports to determine their eligibility for telephone service. In some cases, the companies deny service, require consumers to make an advance payment or deposit, or limit the charges they may incur if the credit review shows the consumer to be a credit risk.

The FTC complaint alleges that all of these are adverse actions under the FCRA, triggering the companies obligation to provide the consumers with a notice disclosing the adverse action taken and providing the name, address, and phone number of the credit bureau from which the consumers credit report was obtained.

The FTC alleges that AT&T; and Sprint in many instances took adverse action, but failed to provide complete notices (or, in the case of Sprint, in some cases failed to provide any notice) in violation of the FCRA. The incomplete notices allegedly failed to tell consumers, among other things, of their rights to a free credit report and to dispute the accuracy of information in it.

The FTC also alleges that Sprint violated the Equal Credit Opportunity Act (ECOA) by failing to provide the notices mandated by that statute or by omitting certain required information in their notices.

The consent decrees order Sprint to pay $1,125,000 in civil penalties and AT&T; to pay $365,000. The decrees bar the companies from future violations of the adverse action notice requirements of the FCRA and, in the Sprint decree, the ECOA. Both consent decrees contain standard recordkeeping procedures to assist the FTC in monitoring the companies compliance.

Both companies denied that they had violated the law but said they agreed to settle the case to avoid the cost of litigation.

While insurance payments will probably help most Florida and Virginia storm victims, government grants and low interest loans will be available to help pay for the costs insurance policies don't always cover. Advertisement

The federal government is making $2 billion available to the Federal Emergency Management Agency (FEMA) to help rebuild Florida properties damaged by Hurricanes Charley and Frances in Florida and Tropical Depression Gaston in the Richmond, Virginia, area.

FEMA will provide homeowners in 27 Florida counties with grants averaging $3,500 per claim, based exclusively on the amount of out-of-pocket expenses of documented damages on individual and family residents, focused on temporary repairs and emergency assistance to get the residents back on their feet, Eager said. The grants typically cover temporary housing and the final cost for home repairs in addition to the amount covered by homeowners insurance.

To apply for assistance, call 1-800-621-FEMA (3362). The speech or hearing impaired may call (TTY) 1-800-462-7585. 

"The double whammy of Charley and Frances has devastated Florida homeowners with a combination of wind damage as well as flooding," said John Eager, senior director of claims for the Property Casualty Insurers Association of America (PCI). "A FEMA grant can be invaluable, especially for those whose homes have suffered damages from both storms."

However, Eager noted that FEMA is "not likely to hand out grants to people with adequate insurance coverage just to defray their deductible."

"These grants are for hard-hit Floridians who sustained heavy damage from both storms and have the paperwork to prove it," he said.

Individuals applying for a FEMA grant should get a written estimate from their insurance adjuster, itemizing repairs needed, coverage limits for contents, and the deductible. This written estimate provides FEMA with the final cost of the damages, which is needed to determine entitlement.

Although FEMA only makes grants available to homeowners, small business owners hit by the hurricanes can apply to the U.S. Small Business Administration (SBA) for a loan to repair their businesses. And in some cases, individuals operating their own home-based small businesses may even be able to qualify for a SBA loan to cover what FEMA does not, Eager added.

September 9, 2004
Suzuki is recalling the Eiger QuadRunner ATV because of mislocated welds securing the upper front suspension arm mounting brackets to the frame.

The mounting bracket could break off during riding, reducing rider control and resulting in loss of control of the ATV. Loss of control could result in a crash and severe personal injury or death.

The 2004 model year four-wheel drive Eiger ATVs are affected by this recall. The model numbers are LT-A400FK4 (for automatic transmission) and LT-F400FK4 (for manual transmission). The ATVs with mislocated welds were produced from May 19 through May 25, 2004. The ATVs are red, yellow, or green.

The units were sold at Suzuki dealers nationwide from May 28 through August 16 for $5149 (manual transmission) or $5299 (automatic transmission).

Remedy: Free inspection and repair at dealership. Call your Suzuki dealer for an appointment to have your Eiger ATV inspected and, if necessary, repaired.

Consumer Contact: Call 800-444-5077 to find the nearest Suzuki dealer.

The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

The state of Iowa has taken action to shut down what it says is a bogus sweepstakes operation that deceives elderly residents into thinking they had won a big prize while setting them up for future scams.

Attorney General Tom Miller said his office obtained a court order to impound or seize mail coming to a commercial mail-drop in Des Moines, effectively interrupting the scheme.

"Last week a Brooklyn, Iowa, consumer provided us with two mass-mailing prize solicitations we allege are illegal," Miller said. "But what really caught our eye was that both mailings ask the consumer to send $29.95 to a mail-box business in Beaverdale. It turns out that the mail actually was then shipped to businesses based in Vancouver, Canada."

Miller said the mailings could deceive some consumers into believing they had won huge sweepstakes prizes.

"Even worse, anyone who replies and sends in $29.95 essentially identifies himself or herself as likely to be vulnerable to other prize schemes. Mail coming to this box would make a very hot list for telemarketing fraud or other scams," Miller said.

An Iowa Judge issued an "Order to Impound" certain mail coming to a commercial mail business, "The UPS Store" at 2643 Beaver Ave. Mail subject to the impound is addressed to "Provincial Prize Reporting Associates" (PPRA) or "Gold Coast Publishing" (GCP). Both are entities of MCA Marketing Concepts of America L.L.C., with a business address of 205-636 West Broadway, Vancouver, B.C., Canada.

The President and secretary of MCA is Peter DiCarlo, believed to be a resident of Vancouver. The U.S. Postal Inspection Service informed the Attorney General's Consumer Protection Division last week that in May 2003 DiCarlo had arranged to receive mail at Mail Boxes Etc. in Beaverdale (now The UPS Store). The UPS Store is a subject of the consumer fraud investigation.

Miller said mail coming to the Des Moines commercial mail box site is from consumers around the country in response to prize-oriented mail solicitations sent to them by MCA. "We speculate that using an Iowa address just might be to give the solicitations more credibility in the eyes of some consumers," he said.

The recent mailing from "Provincial Prize Reporting Associates" touts a prize of $1,225,000. It asks recipients to return an "Identification and Processing Verification Certificate" - with a required "Authorization Fee" of $29.95. The "Gold Coast Publishing" mailing touts a prize of $800,000 and also requires a $29.95 payment be sent to the Des Moines address.

"We allege the mailings are illegal -- and that they are used to identify elderly consumers who are vulnerable to big-ticket telephone scams from Canada and the U.S," Miller said.

"The mailings violate our consumer fraud laws and especially our Prize Promotions law, which has many specific requirements aimed at protecting people from deceptive prize solicitations by mail," he said.

"If people respond to a mailing, we believe their names go on lists of consumers who are vulnerable to larger-scale fraud," he said. "We believe all these schemes tend to target older consumers."

Miller said most "boiler-room" big-ticket phony prize schemes now operate from outside the U.S., especially from Canada. The "undercover telephone sting" pioneered by the Iowa Attorney General's Office during the 1990s, and then employed by U.S. agencies and other states all over the country, largely has driven large, organized, big-loss telemarketing operations out of the U.S.

"Unfortunately, they are flourishing in Canada - and calling our people in the U.S.," he said.

A typical big-ticket telemarketing scam from Canada would involve a call to a vulnerable older Iowan, a pitch that the Iowan had won millions of dollars in a lottery or sweepstakes or prize promotion - and a requirement that the Iowan pay $1,000, $3,000, $5,000 or even more to collect the prize. (The scammers use many ruses to justify the payment the victim must make to get the millions in prize money - paying taxes in advance, customs fees, etc.)

Last December, the Attorney General's Consumer Protection Division obtained a similar impound order for mail going to a commercial mail drop in Clive. That action ultimately involved seizing about 22,000 pieces of mail that were headed to the defendant in a consumer fraud lawsuit, Richard Panas of Rock Hill, SC. In April, Panas was completely banned from doing direct mail or telemarketing in Iowa. Panas also was ordered to immediately remove all Iowa names and addresses from the "lead" or "prospect" lists he sells.

The fatty acids are typically contained in oily fish, such as salmon, lake trout, tuna and herring. While omega-3 acids are not essential to the diet, scientific evidence indicates they may be beneficial in reducing coronary heart disease.

"Coronary heart disease is a significant health problem that causes 500,000 deaths annually in the United States," said Dr. Lester M. Crawford, Acting FDA Commissioner. "This new qualified health claim for omega-3 fatty acids should help consumers as they work to improve their health by identifying foods that contain these important compounds."

While ongoing research is not conclusive, the FDA has decided to allow the following "qualified," meaning limited, health claim on foods containing omega-3 acids:

"Supportive but not conclusive research shows that consumption of EPA and DHA omega-3 fatty acids may reduce the risk of coronary heart disease. One serving of [name of food] provides [x] grams of EPA and DHA omega-3 fatty acids. [See nutrition information for total fat, saturated fat and cholesterol content.]

FDA recommends that consumers not exceed more than a total of 3 grams per day of omega-3 fatty acids, with no more than 2 grams per day from a dietary supplement.

Consumers will receive $7.9 million from a recent class action settlement with Equifax Check Services, a company that collects dishonored checks.

A major class action lawsuit alleged Equifax charged consumers $20 "bad check fees" that were not authorized by law. The case, which lasted more than seven years, resulted in a $7.9 million settlement that compensated thousands of consumers for illegitimate fees charged by the check processing company.

Debt collectors often take advantage of consumers by levying unauthorized charges, said O. Randolph Bragg, a consumer class action attorney with Horwitz, Horwitz & Associates of Chicago, who handled the case. Corporations may rely on the fact that individual consumers are unaware of the illegal charges and often cannot afford to attain legal help, Bragg said.

"Equifax Check Services fought tooth and nail trying to prove it was okay to bilk millions of dollars from hundreds of thousands of consumers," Bragg said. "But the legal system and the Fair Debt Collection Practices Act worked in favor of consumers. I'm glad I could help bring this problem to light."

The plaintiff filed suit under the Fair Debt Practices Act, or FDCPA, a federal law that protects consumers from debt collection companies. The FDCPA sets limits on what tactics debt collectors can use and establishes procedures to consumers from illegal debt collection practices.

Equifax alleged the $20 "bad check fees" were legitimate and allowed by the Uniform Commercial Code, or UCC. However, the court held that California law did not allow the fees.

Class action lawsuits enable an individual consumer to represent the interests of many people in the same situation. Without class action lawsuits, it would be often be impractical for consumers to protect themselves. For instance, it would not be feasible for a single consumer to hire an attorney to sue over a $20 charge.

Bragg said consumers who feel they are being ripped-off by debt collectors or financial transaction companies should contact an attorney who specializes in that area. If filing a lawsuit is not feasible, consumers can take other steps. For instance, consumers can contact the Federal Trade Commission, their state's Attorney General or the Consumer Protection Division of their local District Attorney's Office.

Cold weather comes soon in much of the country, and Connecticut Attorney General Richard Blumenthal is warning homeowners to be wary before contracting for home heating services. There are tricks to interpreting the fine print in home heating service contracts and shopping for the best buys.

Prices for natural gas, heating oil and electricity are rising, sending consumers on shopping missions for the best bargains, but what might appear to be a good deal, could be a cleverly-disguised trap. Blumenthal said consumers should exercise severe scrutiny and caution before entering into longtime contracts and other arrangements that seem too good to be true.

When the deal seems first-rate, look for the fine-print catch, Blumenthal said. There's a reason for the clich: If it sounds too good to be true, then it probably is. Keeping families warm for the winter is a necessity not a luxury making the market fertile for opportunists ready to pounce and exploit unsuspecting bargain shoppers that sign on the dotted line without asking critical questions.

My office will rigorously and aggressively pursue any company that deliberately deceives consumers with improper or illegal contracts, he said.

Blumenthal recommends these precautions:

READ THE FINE PRINT: Consumers should vigilantly read contracts before signing them, being sure they understand each and every fine-print point. Don't be afraid to ask for clarification if any part of the contract appears confusing.

PRE-PAY CONTRACTS: When paying in advance, consumers should scrupulously scan the fine print to determine whether pre-pay contracts will allow the company to charge the market rate after a certain number of months into the contract period. Consumers should be wary of such contracts, as they give the company freedom to set their own price for an extended period of time. In addition, consumers should ask home heating oil contractors about the company's own oil supply source during the course of the contract to confirm that the contractor will be capable of supplying the oil.

CHECK THE REFUND POLICY: Sometimes consumers pay for more oil than they actually use by the end of the season or contract period. Consumers should determine before signing a contract whether the company is willing to refund excess payment for oil or credit it toward the next contract.

LOCKED VS. CAPPED PRICES: Some companies offer contracts with a locked price, where consumers are locked into a single rate throughout the contract. Others offer a capped price, where the price could waver, but never exceed a certain amount. Either is acceptable, but consumers should be aware of their options.

SHOP AROUND: Don't let a company coerce you into signing a contract immediately, sending a false sense of urgency. Invest reasonable time to research for the best prices and ask trustworthy acquaintances what companies they use and trust.

BACKGROUND CHECKS: Before locking into a contract, consumers should ask the home heating oil dealer if it is registered with the Department of Consumer Protection (DCP) and obtain the company's registration number to confirm it's validly registered with DCP. In addition, the consumer should contact the Better Business Bureau and Attorney General's office to determine whether complaints have been made against the company.