News in June 2005

Bank of America is acquiring MBNA. The acquisition combines the countrys largest domestic bank with one of the largest providers of credit card and payment products. MBNA had become a takeover target in recent months. Profits plunged as consumer dissatisfaction with its rising interest rates, fees and charges drove many cardholders to pay off their accounts and take their business elsewhere.

With the acquisition, Bank of America, the nation's third-largest bank, becomes its largest credit-card issuer, with $143 billion in managed outstanding balances and 40 million active accounts. Bank of America said it will add more than 20 million new customer accounts as well as affinity relationships with more than 5,000 partner organizations and financial institutions.

Bank of America said it expects to eliminate 6,000 jobs from the merged companies.

In May MBNA reported financial results in which actual earnings fell to $31.7 million, or 2 cents a share, far short of its projection of $519.7 million, or 4 cents a share.

Bank of America Chairman and Chief Executive Officer Kenneth D. Lewis said the acquisition will create "the countrys top retailer of financial services with the size and scale to drive distribution and marketing efficiencies."

The deal confirms that the concept of "one-stop shopping" is still alive and well in the financial services industry. Earlier this month, Washington Mutual bought Providian, a large credit-card issuer with a checkered past.

Bruce L. Hammonds, CEO and president of MBNA Corporation, will become CEO and president of Bank of America Card Services and report to Liam E. McGee, president, Bank of America Global Consumer and Small Business Banking. Hammonds will remain in Wilmington, Del., and be part of Bank of Americas Risk & Capital Committee, which guides the companys strategic direction.

Hammonds and other MBNA executives narrowly escaped death when their helicopter crashed in New York City earlier this month.

The U.S. Agriculture Department says it has tracked the latest confirmed case of "mad cow" disease to a 12-year-old animal born in Texas. The agency said the cow was slaughtered last November for use in pet food and did not enter the human food supply.

It is the second confirmed case of the devastating disease in the U.S., the first involving a domestically-bred cow. The first case, discovered in Washington state in December 2003, involved a cow imported from Canada.

"The source herd is now under a hold order as we identify animals of interest within that herd," said USDA chief veterinarian Dr. John Clifford.

"Animals of interest would include any animals that were born the same year as this animal, as well as any born the year before or the year after," he said.

In a statement on the USDA Website, Clifford said the safety of the human food supply was never in doubt. Given the age of the animal, Clifford said it is reasonable to believe it became infected before the 1997 ban against the use of cattle parts in animal feed.

The disease is not spread through contact. Only by consuming infected issue from other cattle do animals contract the disease. Clifford said the safety of Texas beef is not in question, but he said the agency could remain "vigilant."

USDA failed to diagnose the infection the first two times tissue from the infected animal was studied. It was only after the department's Inspector General intervened that the tissue was tested a third time and found positive for the disease.

Mad cow disease -- or bovine spongiform encephalopathy (BSE) -- is an invariably-fatal degenerative brain disease spread through infected meat. Cattle can be infected by eating protein supplements made with the ground-up remains of other animals, a practice now outlawed in most countries.

June 30, 2005
A class action lawsuit has been filed by California credit card holders and merchants against Cardsystems Solutions, Inc. and others alleging a failure to maintain adequate data security which led to a security breach exposing over 40 million credit card holders to potential fraud.

The suit, filed in San Francisco Superior Court, alleges that Cardsystems Solutions was negligent for failing to adequately secure consumers' credit card data, and for breaking Visa and MasterCard "Data Security Standards" which prohibit storing certain kinds of confidential consumer information.

The lawsuit alleges that Cardsystems Solutions, Merrick Bank, Visa and MasterCard have violated their duty to timely and properly inform consumers of the nature and degree of the alleged security breach. The suit claims that these violations constitute "unfair, unlawful and deceptive business practices" under California's Unfair Competition Law.

The lawsuit seeks a declaration from the Court that Cardsystems violated the standard of care in its data security methods and that card holders are entitled to notice of the nature and extent their private credit card data was compromised and on-going credit monitoring to prevent fraud.

"There are strong privacy laws and public policies in California protecting consumers' confidential financial information -- consumers, in our view, have the right to be immediately informed if the privacy and security of their credit card information have been violated so they can make an informed decision on whether to change account numbers or take some other prompt remedial action," said Ira Rothken, counsel for the consumer and merchant class plaintiffs.

Rodney Kenney, 72, died at a Chicago hospital where he was treated for burns. Inspectors say the Alzheimers patient was severely burned May 26 when his clothing caught fire as he sat in a wheel chair. Authorities say they found a cigarette lighter near Kenney, but that he was not a smoker. In fact, state law prohibits smoking in nursing homes and patients are not allowed to possess smoking materials.

In their report, inspectors concluded that the staff at Regency Place failed to properly supervise Kenney. In addition, they said they found numerous other problems:

• A nursing home staff member designated as a medication aide mixed up two residents medications one day, leaving one woman sick and dizzy for two days;
• Regency Place didnt adequately screen two new employees;
• the nursing home wasnt adequately staffed.

In fact, the report said that when inspectors arrived the morning of May 28, they were told there was no one in charge. Inspectors also said residents asking for help from staff members were ignored.

A state health department spokeswoman said Regency Place faces possible denial of Medicare and Medicaid payment for new admissions after Aug. 19, along with a fine.

A spokesman for the nursing home said the company has filed a plan of correction with the state is confident we will resolve these matters to the states satisfaction in the near future.

A Gartner survey of 5,000 U.S. adults showed that phishing attacks grew at double-digit rates last year in the United States. In the twelve months ending in May 2005, an estimated 73 million U.S. adults who use the Internet said they definitely, or think, they received an average of more than 50 phishing e-mails in the past year.

The number of consumers receiving phishing attack e-mails increased 28 percent in the 12 months ended in May 2005 compared with 12 months ended in April 2004, according to the Gartner data.

In last year's survey, an estimated 57 million U.S. adults reported that they definitely, or think, they received a phishing attack email. In both surveys, 5,000 participants were selected to match demographic characteristics of the U.S. online population.

2.4 million online consumers report losing money directly because of the phishing attacks. Of these, approximately 1.2 million consumers lost $929 million during the year preceding the survey. Survey participants indicated most of the money stolen was repaid by banks and credit cards.

Impact on Consumer Trust

Gartner analysts said most online consumers do not open e-mail from companies or individuals they do not know from prior experience. Three of every four online shoppers said they are more cautious about where they buy goods online, and one of three reports buying fewer items than they otherwise would because of security concerns.

"Companies need to take steps quickly to beef up online security," said Avivah Litan, vice president and research director at Gartner. "We are seeing unprecedented levels in consumer transactions online. Yet businesses cannot rely on the Internet to lower costs and improve marketing efforts indefinitely if consumer trust continues to decline."

More than 80 percent of U.S. online consumers said their concerns about online attacks have affected their trust in e-mail from companies or individuals they don't know personally. Of these consumers, more than 85 percent delete suspect e-mail without opening it.

"This figure has serious implications for banks and other companies that want to use the e-mail channel to communicate more cost-effectively with their customer base," Litan said. "For example, a bill sent electronically costs about half of what a bill costs when sent through regular mail."

Phishing attacks are not slowing down. More than 40 percent of the adults who received phishing attack e-mails received them in the two weeks preceding the survey; another 23 percent of respondents said they received these e-mails two weeks before that - so more than 63 percent of consumers who received one of these e-mails did so in the month prior to the survey.

"In general, consumers expect companies they do business with to provide secure online communications and to protect consumer data from thieves at no additional cost to consumers," Litan said. "They want guarantees - authentication - from merchants and other businesses that their Web sites are genuine. Consumers want this reaffirmed every time they go online."

Implications for Online Banking

Approximately 77 percent of online Americans shopped online in the 12 months ended in May 2005, according to Gartner. An estimated 73 percent of respondents regularly logged on to banking accounts and 63 percent paid bills online.

"While online banking customers continue to access bank accounts over the Internet, they are changing their usage patterns," Litan said. "Nearly 30 percent of the online bankers say that online attacks have influenced their online banking activities. Over three-quarters of this group log in less frequently, and nearly 14 percent of them have stopped paying bills via online banking."

In the survey, nearly twice as many consumers said they worry more about thieves getting undetected access to private credit reports and other sensitive financial data than defending against phishing attacks.

Consumer Response to Government Action

The U.S. government recently mandated that consumers be given unlimited free access to their credit reports by September. The goal is to make it easier for consumers to monitor any unauthorized requests for credit.

Yet few consumers believe the step will be "extremely effective" in shielding them from identity-theft schemes, according to the survey. In contrast, nearly one third are "extremely concerned" that they will suffer some type of identity theft fraud due to unauthorized access to their data.

Phishing occurs when a cyber thief sends e-mail with a link to a false Web site. The false sites typically are disguised to look like sites of banks or well-known e-commerce merchants. Recipients of these e-mail attacks are asked to provide personal account information.

June 27, 2005
Los Galleguito, a Union City, N.J., firm, is voluntarily recalling approximately 720 pounds of Spanish sausage that may be contaminated with Listeria monocytogenes, the U.S. Department of Agriculture's Food Safety and Inspection Service (FSIS) announced.

Subject to recall are 8-ounce packages of "Los galleguitos PRIMERA CHORIZOS SPANISH BRAND SAUSAGE."

Each package contains four sausages and bears the code "021606." The establishment code, "EST. 5447" is printed inside the USDA mark of inspection. The sausages were packaged on June 16, 2005 and were distributed through retail stores in Florida.

The problem was discovered through routine FSIS microbial sampling. FSIS has received no reports of illnesses associated with consumption of these products.

Consumption of food contaminated with Listeria monocytogenes can cause listeriosis, an uncommon but potentially fatal disease. Healthy people rarely contract listeriosis. However, listeriosis can cause high fever, severe headache, neck stiffness and nausea.

Listeriosis can lead to miscarriages and stillbirths, as well as serious and sometimes fatal infections in infants, the elderly and persons with compromised immune systems.

Media and consumers with questions about the recall should contact company owner Frank Torres at (201) 865-7232.

Consumers with food safety questions can phone the toll-free USDA Meat and Poultry Hotline at 1-888-MPHotline (1-888-674-6854). The hotline is available in English and Spanish and can be reached from l0 a.m. to 4 p.m. (Eastern Time) Monday through Friday. Recorded food safety messages are available 24 hours a day.

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

A class action lawsuit filed by several small businesses accuses Citigroup, Bank of America and other large banks of illegally fixing the price of credit card transaction fees.

"Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees, and these fees are a hidden tax that raise prices paid by consumers for almost every product they buy," says attorney K. Craig Wildfang, representing the plaintiffs. "Visa, MasterCard and the banks now have the burden of proving that they have set the interchange fees at the correct competitive level. Even Visas own economists admit that they cannot satisfy this burden."

"For the average consumer, you have to pay $200 to $300 per year in additional costs for merchandise, whether you pay with plastic or in cash," Wildfang said. "It's like an invisible 2 percent sales tax on everything you buy."

"Interchange fees are just a way that credit card companies squeeze merchants to enhance their revenue stream," said Mitch Goldstone, President and CEO of 30 Minute Photos Etc. and 30minphotos.com, a national online boutique photo service.

"There is absolutely no need for these fees to be so high, and without anything to control them, the banks and the credit card companies continue to find ways to escalate the fees. We hope this lawsuit leads to significant changes," he said. Goldstone and co-owner Carl Berman write The Credit Card Interchange Blog, at www.waytoohigh.com.

"Due to Visa and MasterCards market power, the United States has the highest credit card interchange fees among industrialized countries," Wildfang said. "Regulatory authorities in many other countries, from the European Union to Australia, have recently adopted measures to reduce interchange fees, but in the United States, it will take action by the courts to accomplish this."

The suit concerns the fees charged by banks to merchants each time a customer makes a purchase using a MasterCard or Visa card, and charges that there is no limit on the banks' ability to set the "exorbitant" fees.

Paul Cohen, a vice president at Visa USA, said the company plans to defend the fees as a business practice that has been both successful in the marketplace and found to be legal in federal court.

The antitrust class action suit was filed in the U.S. District Court for the District of Connecticut against Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, JPMorgan Chase, Fleet Bank, Capital One and other major banks.

Named plaintiffs include, Photos Etc. Corporation, doing business as 30 Minute Photos Etc., of Irvine, CA; Traditions Classic Home Furnishings of St. Paul, MN; CHS Inc. of St. Paul, MN; A Dash Of Salt, L.L.C. of Bridgeport, CT; and KSARRA, L.L.C. of Newtown, CT.

They represent a class of merchants that operate millions of commercial businesses throughout the United States that accept Visa and MasterCard as a form of payment. At issue are the alleged practices by the defendants that cause merchants to pay allegedly excessive fees each time they accept a credit card as payment.

"The U.S. credit card system is seriously broken and mismanaged, and millions of merchants and consumers are unnecessarily paying for it through credit card interchange fees that are increasing at an alarming rate," said Michael Schumann, co-owner of Traditions Classic Home Furnishings, which operates retail furniture stores in St. Paul and Minneapolis, MN and Naples, FL. "This lawsuit will hopefully result in a much-needed major reform of the credit card industry."

In 2003, Wal-Mart negotiated a multibillion-dollar settlement with Visa and MasterCard over the use of the fees. Other large retailers are attempting to do the same but Wildfang's lawsuit says small businesses are helpless to negotiate on their own and must turn to the courts for relief.

New federal rules that become effective July 1 require banks to more clearly disclose the charges they impose for "bounced-check protection" and "courtesy overdraft protection" services.

The rules adopted by the Board of Governors of the Federal Reserve System require banks to disclose information about overdraft fees on periodic statements and account-opening disclosures, and to include certain disclosures in advertisements for overdraft services. The principal changes made by the amendments include:

However, the new rules apply only to national banks, which tend to be smaller local and regional banks. A recent study by the Consumer Federation of America (CFA) found that 80 percent of the nation's large banks also charge consumers high overdraft fees without their knowledge or consent.

While the new federal rule singles out smaller banks that promote "courtesy" overdraft loans, the nation's largest banks have also included identical provisions in their checking accounts but do not advertise them, the CFA said.

Meanwhile, the acting Comptroller of the Currency, Julie L. Williams, testified before a Congressional committee that efforts to streamline massive consumer disclosure requirements present an opportunity both to reduce the "regulatory burden" on banks and improve the quality of information provided to consumers.

Today our system imposes massive disclosure requirements -- and massive costs -- on financial institutions, Ms. Williams said. But do these requirements effectively inform consumers?

Williams, who is responsible for supervising national banks, said her agency has "broken new ground" by employing consumer testing as part of its effort to simplify privacy notices.

Details of the new disclosure rule:

Advertisements

Previous rules "advertisement" in a manner that generally excluded communications with existing customers about existing accounts. The new rule expands this definition, in certain cases, to include communications with existing customers.

Under the new rule, "advertisements" include communications that are misleading or inaccurate, or misrepresent the deposit contract. Second, "advertisements" include any communications about overdraft services.

Advertisements that promote the payment of overdrafts must include certain disclosures about the service. In particular, banks must clearly and conspicuously disclose:

• the applicable fees for the payment of overdrafts,
• the categories of transactions for which an overdraft fee may be imposed,
• the time period consumers have to repay or cover an overdraft, and
• the circumstances under which the bank will not pay an overdraft.

However, banks do not need to provide these additional disclosures, in certain educational materials; on an ATM receipt; on television, radio, or billboard advertisements; or in response to a consumer-initiated inquiry.

Periodic Statement Disclosures

Banking regulations generally require that if an institution mails or delivers a periodic statement, the institution must disclose fees imposed in connection with the account during the statement period.

Under the new rule, if a bank promotes the payment of overdrafts in an advertisement, the bank must separately disclose on each periodic statement the total dollar amount of fees imposed:

• On the deposit account for paying overdrafts and
• For returning items unpaid.

These disclosures must be provided both for the statement period and for the calendar year to date. Banks that do not promote the payment of overdraft services would not be required to provide the new periodic statement disclosures.

Account Opening Disclosures

Banking regulations generally require that banks disclose the amount of any fee that may be imposed in connection with the account and the conditions under which a fee may be imposed.

The new rule states that banks must specify the categories of transactions for which an overdraft fee may be imposed. An exhaustive list of such transactions is not required. It is sufficient for an institution to disclose that a fee may be imposed for covering overdrafts "created by check, in-person withdrawal, ATM withdrawal, or other electronic means," as applicable.

Simply disclosing a fee "for overdraft items would not be sufficient." This account-opening disclosure requirement applies to all banks, including those that do not promote overdraft services in an advertisement.

The new rules apply to national banks supervised by the Office of the Comptroller of the Currency.

U.S. Auto Management Corporation of Phoenix and a spin-off company, Auto Payment Solutions, are being sued by the state of Arizona on charges the companies engaged in a vehicle sublease rescue scheme that often harmed car owners and lessees financially and damaged their credit.

The complaint, filed June 16 in Maricopa County Superior Court by Attorney General Terry Goddard, alleges that between 2000 and 2004, U.S. Auto Management (USAM) and Auto Payment Solutions offered owners and lessees of vehicles subject to retail installment loans or lease contracts the opportunity to be relieved of their existing loan or lease obligations.

USAM and Auto Payment Solutions located a sub-lessee to assume the owner's remaining monthly payments until the vehicle was paid off or the lease term concluded and take possession of the vehicle.

"Victims who could not afford to make their car payments sought help, but these companies often only made things worse. Instead of helping consumers as they promised, these companies often took advantage of them with deceptive claims," Goddard said. "Consumers need to be wary of these types of quick-fix offers."

Court documents allege that USAM and Auto Payment Solutions' various Web sites represented that the companies:

• Could provide vehicle owners with a means of removing themselves from loan or lease payments without dealership or lender penalties;
• Guaranteed that all vehicle monthly loan or lease payments, as well as insurance premiums, would be made on time;
• Verified and monitored required auto insurance premiums; and
• Created a worry free-arrangement to protect the owner's investment and credit.

The companies varied their promises, but used the same basic business model to entice customers into turning over their vehicles. USAM offices in Cave Creek and Scottsdale also purchased print advertisements and ran commercials on the radio.

The lawsuit states that USAM and Auto Payment Solutions did not deliver on their promises and violated the Arizona Consumer Fraud Act by falsely representing their vehicle sublease rescue services. Specifically:

• USAM and Auto Payment Solutions told vehicle owners that they could find a user to assume the lease or loan payments, when in fact, the owner's lease or loan documents likely prohibited such a practice;
• USAM and Auto Payment Solutions concealed from vehicle owners the fact that vehicle subleases are prohibited by Arizona law;
• USAM and Auto Payment Solutions concealed the owner's financial lender often prohibited the sublease of vehicles without lender approval;
• USAM and Auto Payment Solutions assured owners that vehicle users would maintain full insurance coverage on vehicles in their possession, when in fact, numerous users did not maintain such insurance;
• USAM and Auto Payment Solutions told customers that a person "using" the owner's vehicle would maintain and repair any damage to vehicles in their possession, when in fact the companies often lost contact with the vehicle user and could not monitor maintenance or repair records.

The Attorney General's Office is asking the Maricopa County Superior Court to:

• Permanently restrain the Defendants from further conduct;
• Provide restitution to the victims in this case;
• Require the Defendants to return to all the victims any money or property acquired through deceptive practices;
• Impose a penalty of up to $10,000 for each violation of the Arizona Consumer Fraud Act;
• Require the Defendants to reimburse the Attorney General for costs of the investigation and reasonable attorney's fees.

Ford Motor Co. has agreed to settle customer lawsuits over alleged defects in the intake manifoldsof as many as two million vehicles.

The settlement was filed in federal court in Oakland, Calif. Ford will pay owners of some Mercury Grand Marquis, Lincoln Town Cars and Ford Crown Victorias at least $735 to reimburse them for repairs made because of faulty manifolds, which route air to an engine's cylinders.

Car owners claimed in a class action that Ford installed plastic intake manifolds that were prone to cracking and causing coolant leaks on some 1996 to 2001 models. The settlement could cost Ford as much as $375 million if every customer files a claim.

Ford doesn't admit liability by settling the lawsuit.

Under the agreement, Ford will reimburse consumers with receipts for repairs related to the intake manifold. The Dearborn-based company will also pay $735 to anyone without receipts who verifies with a company dealership that the repair was made, the agreement said.

Ford will also extend the life of warranties of customers who haven't had manifold failures, according to the agreement. This could cost Ford additional money to replace manifolds in the future. Ford will also pay for notifying car owners about the settlement. The settlement is subject to court approval.

The settlement covers 1996 through 2001 models of the Mercury Grand Marquis, Lincoln Town Car and Ford Crown Victoria, as well as certain Mercury Cougars, Ford Thunderbirds and Mustangs built before 2002.

June 21, 2005
Toyota Motor Corp. is recalling several models of the Scion tC because of consumer complaints that the glass wind deflector, located near the moonroof, might shatter when struck by road debris.

The Toyota recall involves about 71,000 Scion tC coupes in the U.S. from the 2005-06 model years.

The Scion wind deflector tilts up when the moonroof is opened and could shatter and separate from the frame at highway speeds. Pieces of the wind deflector could fall inside the vehicle, causing injuries or distractions.

The recall will begin later this month. Toyota says its customers can reduce the likelihood of the deflector shattering by not opening the moonroof until the vehicle is repaired.

Dealers will repair the vehicles at no charge to the owners.

All fireworks are dangerous, especially to children. In 2003, the last year for which numbers are available, 9,300 people were treated in U.S. emergency departments for fireworks-related injuries. Five percent required hospitalization. Four of those people died. Typically, about two-thirds of all fireworks injuries occur in the days around the July 4th holiday.

"Firecrackers, rockets and sparklers account for most of the injuries we see during that period," says Bo Kennedy, M.D., associate professor of pediatrics and associate director of the Emergency Department at St. Louis Children's Hospital.

"Sparklers actually cause the highest number of injuries in children under 5. Sparklers burn at more than 1,000 degrees, and when a sparkler is burning, what it's releasing is essentially molten metal. That can cause some very serious burns."

According to figures from the Centers for Disease Control and Prevention, 63 percent of fireworks injuries involve burns. About 45 percent of fireworks injuries occur in children 14 or younger, and boys make up 72 percent of the kids who require some form of treatment at the hospital.

About a quarter of all injuries involve the hands and fingers. Some 21 percent are eye injuries. The head and face are involved 18 percent of the time, and most of the injuries occur at homes.

"Backyard fireworks displays are a bad idea on a couple of levels," Kennedy says. "There's not only the potential for injury, but the fireworks also can go astray and start fires."

In 1999, there were 24,200 reported fires started by fireworks, causing $17.2 million in property damage. Most fires were outdoor brush or refuse fires, but most of the losses occurred in fires that involved buildings like houses, garages and barns. Those fires tend to start when something such as a bottle rocket lands on a roof, or another hard-to-reach location, where it can ignite combustibles before anyone can retrieve it.

Kennedy notes that bystanders at backyard displays can be injured, too. But fires and fireworks injuries aren't the only problems associated with July 4th.

"We tend to see a lot of children that come in with burns who get them from the grills where people have been barbecuing," he says. "Bruises and scrapes also are common on Independence Day, and occasionally serious injuries result from excited children who run out in front of cars and get hit."

If a child or an adult is burned, Kennedy reminds us that proper first aid for a burn is to keep it covered. He says butter or other greasy ointments should be avoided, as should prolonged or excessive application of ice, which can cause further injury by freezing the tissue. For serious burns, he says it's important to get to a hospital as soon as possible.

Although he recommends that families avoid backyard fireworks, Kennedy realizes that some people will ignore warnings. In those cases, he advises that only adults be allowed to set off fireworks. Even then, he says many of the injuries seen in emergency departments involve children standing by watching others ignite the fireworks.

"Children simply should not be allowed to ignite or be close to the fireworks," he says. "It's just too dangerous. The injuries can be permanent and severe."

Leon County Circuit Judge Jonathan Sjostrom entered a final judgment against Global Healings Society and owner Joseph Michael Gardinier, requiring the defendants to pay restitution as well as fines of $1,000 per victim, a total of more than $550,000.

"This judgment marks a victory for Florida consumers and sends a clear message that fraud of this type has no place in our state," said Crist. "Floridians depend on insurance offered by reputable agents to protect them from significant financial liability, and those offering phony alternatives face serious legal consequences."

An investigation conducted by the Attorney General's Economic Crimes Division revealed that Global Healings Society was selling what it claimed were "financial bonds" over the Internet.

Gardinier, owner and caretaker of the organization, directed its activities and was responsible for the various bond programs sponsored by Global Healings. The bonds purported to protect the bearers from financial responsibility in the event of any incident that would warrant an insurance claim. Not only were the bonds fraudulent, but there was no money available for the injured party in the event that a claim was filed against a bearer of the bonds.

Types of bonds offered by Global Healings included an auto bond, a health bond, a home equity bond, a student bond, a "Benefit for Life" bond and a community financial bond. The organization was not licensed to do business in Florida, nor was it an authorized insurer in the state.

The Florida Department of Highway Safety and Motor Vehicles determined that the organization's auto bond card was not valid to prove insurance coverage as required by law. In response, Gardinier conducted a series of conference calls to members of the organization soliciting donations to cover the cost of suing the State of Florida. Similar solicitations were made in Montana and Washington, where Global Healings has already been prohibited from conducting business.

In a statement, MasterCard said the breach was traced to CardSystems Solutions Inc., a third-party processor of payment card data. It said the compromised data included names, banks and account numbers -- not addresses or Social Security numbers -- and said such data could be used to steal funds but not identities.

Consumers Protected

Consumers should watch their statements carefully and promptly reported any unauthorized charges to their card issuer. Under federal law, credit card holders are liable for no more than $50 of unauthorized charges, and many card issuers will waive the $50 in circumstances such as these.

"Consumers have strong protection if unauthorized charges are made on their MasterCard cards," MasterCard said. "In the U.S., MasterCard cardholders are protected by MasterCard's Zero Liability policy for unauthorized transactions on their accounts. If MasterCard cardholders have any reason to believe that their cards were used fraudulently, they should contact their issuing bank."

MasterCard said it has begun notifying its member banks of specific card accounts that may be vulnerable, so that those banks can take steps to prevent against fraud.

Visa USA did not immediately comment on the situation. American Express said that less than 0.5% of its domestic transactions are handled by CardSystems. Discover said it was "aware of" the situation but did not say whether any of its cardholders were affected.

"Single Individual" Blamed

MasterCard blames a single individual for the massive security breach. "(V)ulnerabilities allowed an unauthorized individual to infiltrate their network and access the cardholder data," MasterCard said.

The company said the perpetrator used "a virus-like computer script that captured customer data" but would not elaborate further. The FBI said it was investigating.

CardSystems officials said they first noticed a potential security breach on May 22 and contacted the FBI a day later. Visa, MasterCard, and other companies were notified as CardSystems brought in third-party security experts to review their systems.

"We understand and fully appreciate the seriousness of the situation," CardSystems said in a statement. "Our customers and their customers are our lifeblood. We are sparing no effort to get to the bottom of this."

Latest Incident

It's the latest in an embarrassing series of security breaches involving both consumer identity data. It appears to be the largest yet involving financial data, said David Sobel, general counsel at the Electronic Privacy Information Center.

"The steady stream of these disclosures shows the pressing need for regulation of the industry both in terms of limitation in the amount of personal information that companies collect and also liability when these kinds of disclosures occur," Sobel told the Wall Street Journal.

Congressional Action Urged

MasterCard urged Congress to enact wider application of Gramm-Leach-Bliley, the act that includes provisions to protect consumers' personal financial information held by financial institutions.

"Currently, GLBA only applies to financial institutions providing services to consumers, including MasterCard. MasterCard urges Congress to extend that application to also include any entity, such as third party processors, that stores consumer financial information, regardless of whether or not they interact directly with consumers," MasterCard said.

Sen. Charles Schumer (D-NY) said the incident is a reminder that Congress needs to move quickly to help consumers, who can face years of credit problems once their digital identities are stolen.

"Consumers personal and financial data has become the gold of the 21st century and we need to protect it accordingly," said Schumer, who has co-authored a bill that would require companies to take additional steps to curb data theft. The bill would also create standards for companies handling sensitive personal data.

Attorneys in Houston have filed suit on behalf of an Iowa woman who died in a fire at her home last month. The lawsuit says the fire started in the family's Ford F-150 pickup truck.

Darletta Mohlis of Westgate, Iowa, died on May 2. Her husband of 34 years, Earl Mohlis, was injured in the fire, but survived.

An investigation showed the fire started in the F-150, then spread through the garage and the rest of the home. Further study has narrowed the list of potential causes to a cruise control deactivation switch.

Such switches already are the subject of a Ford recall, and an investigation by the National Highway Traffic Safety Administration, NHTSA. In January, Ford recalled 740,000 Ford Expeditions, Lincoln Navigators and F-150 pickups that contained the switch. NHTSA is investigating reports of approximately 200 fires that have occurred in those vehicles.

Although Ford recalled only vehicles it manufactured in 2000, the automaker used the same switch on those it made from 1995-2002. The lawsuit alleges Ford deliberately limited the recall to save money. The Mohlis' F-150 was a 1996 model.

"If the company knows about the problem with the 2000 models, then it must also know the same trouble exists with the 1996 truck and the others," says Rob Ammons of the Ammons Law Firm in Houston, who represents the Mohlis family. "They made a decision based on cost. And in May, Darletta Mohlis paid the price."

The National Highway Traffic Safety Administration is investigating more than 3.7 million Ford pickups and sport utility vehicles because of a defect in the cruise control switch. The probe includes Ford F-150 pickups from the 1995-1999 and 2001-2002 model years, and Ford Expeditions and Lincoln Navigators from the 1997-1999 and 2001-2002 model years.

NHTSA said in March it had received 218 complaints of engine fires from the cruise control switch.

Ford spokeswoman Kathleen Vokes said in a statement on Thursday that an inspection at the Mohlis' house "demonstrates conclusively that the fire did not originate from the 1996 Ford F-150, and specifically not from its speed control deactivation switch."

She said evidence suggests that the fire started elsewhere in the garage, spreading to the truck and the home.

"Ford continues to work and cooperate with NHTSA on its investigation of this tragic incident," Vokes said.

The lawsuit was filed in the 157th Judicial District Court in Harris County, Texas. It also names as defendants Texas Instruments, the maker of the switches, and DuPont manufactured Kapton and Teflon coatings used in the switch.

Passengers boarding aircraft at a most U.S. airports will soon get another layer of security scrutiny. The Transportation Security Administration will soon be installing exposive detection devices at major airports.

The TSA says it has completed the pilot phase of the passenger screening program, conducted at 14 airports. Starting in July, TSA will begin the first round of deployment by adding 44 additional machines and 10 additional airports to the program.

"The explosives detection trace portal technology is a proven and valuable asset in our layered approach to aviation security, improving our ability to identify explosives," said Kenneth Kasprisin, acting assistant secretary for Homeland Security for TSA.

"TSA continues to seek out new technology that both enhances security and improves customer service. This technology meets those goals."

Airports in the following cities were included in the pilot program and are already using the new technology: Baltimore; Boston; Gulfport, Miss.; Jacksonville, Fla.; Las Vegas; Los Angeles; Miami; New York (JFK); Phoenix; Providence, R.I.; Rochester, N.Y.; San Francisco; San Diego; and Tampa, Fla.

By the end of September, TSA said it would complete the first wave of deployment of this new technology to airports in the following cities: Charlotte, N.C.; Dallas (DFW); Fort Lauderdale, Fla.; Newark, N.J.; New York (LaGuardia); Palm Beach, Fla.; Pittsburgh; San Juan, P.R.; and Washington, D.C. (both Dulles and Reagan National).

TSA said it would continue to conduct site surveys and would announce the next round of airports to receive the new technology by the end of the summer. TSA said it anticipates deploying 100 additional machines targeting the nation's largest airports by January 2006.

At airports with the new technology, some passengers will be directed by TSA screeners to step into a portal at the checkpoint. Passengers will stand still for a few seconds while several "puffs" of air are released. The portal then collects and analyzes the air for traces of explosives and a computerized voice indicates when a passenger may exit.