Current Events in May 2008

Federal Reserve Chairman Ben Bernanke says more needs to be done to reduce the rising rate of home foreclosures, and breaking with the Bush Administration, he says the government needs to take a more active role.

In a speech to the Columbia Business School, Bernanke signaled approval of a proposal for the Federal Housing Administration to begin refinancing mortgages in danger of default. Democrats in Congress have proposed legislation that would include that step.

He also reiterated his call for lenders to write down a portion of troubled loans, to help homeowners avoid foreclosure.

"In some cases, when the source of the problem is a decline of the value of the home well below the mortgage's principal balance, the best solution may be a write-down of principal or other permanent modification of the loan by the servicer, perhaps combined with a refinancing by the Federal Housing Administration or another lender," Bernanke said.

"To be effective, such programs must be tightly targeted to borrowers at the highest risk of foreclosure, as measured, for example, by debt-to-income ratio or by the extent to which the mortgage is underwater," he said. "Finding the right balance -- particularly the need to avoid programs that give borrowers who can make their payments an incentive to default -- is difficult. But realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment."

Bernanke said many foreclosures are not preventable. He said investors, for example, are unlikely to want to hold onto a property whose value has depreciated significantly, and some borrowers -- perhaps because they were put into an inappropriate loan or because personal circumstances have changed--cannot realistically sustain homeownership.

"However, if a foreclosure is preventable, and the borrower wants to stay in the home, the economic case for trying to avoid foreclosure is strong," Bernanke said.

Because foreclosures impose high costs, including legal and administrative costs as well as the costs of leaving the property vacant for a possibly extended period, he said both the borrower and the lender usually are better off avoiding foreclosure.

Clusters of foreclosures can destabilize communities, reducing the property values of nearby homes, and lower municipal tax revenues. At both the local and national levels, foreclosures add to the stock of homes for sale, increasing downward pressure on home prices in general.

Bernanke's concern is that an escalation in downward pressure on home prices could have an adverse impact on the broader economy and, through their effects on the valuation of mortgage-related assets, on the stability of the entire U.S. financial system.

"Thus, finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy," Bernanke said.

Consumers who have a prescription drug benefit might not care what their medication actually costs, since they only pay a very low flat co-pay. And a new survey shows drug companies and drug retailers may be trying to exploit that fact.

A survey conducted by Consumer Reports found that not only do prices vary from store to store for the same drug, but the fluctuations can be dramatic -- sometimes more than $100 for the same prescription even with the same chain, depending on whether consumers are filling their prescriptions in, say, Omaha, Nebraska, or Billings, Montana.

Consumer Reports said it placed more than 500 calls to 163 pharmacies nationwide to gauge price differences among four prescription drugs, three name brand medicines and one generic.

For a three-month supply of pills for the urinary incontinence drug Detrol, for example, the price ranged from $365 to $551.

CR also found significant price disparities for the two other name-brand drugs it studied: for Plavix (which prevents blood clots), the spread was $382-$541, and for Levoxyl (for treating hypothyroidism), prices ran from $29 to $85. And for the generic alendronate (for osteoporosis) the price range was $124 to $306.

In the small scale market-basket study, Costco was the cheapest for the four drugs CR sought quotes for, followed by AARP.com and Wal-Mart. Walgreens and Rite-Aid were among the priciest for the four drugs.

Besides calling different stores and comparison shopping, the magazine offered other cost-saving tips:

• Don't rule out independents: Though they're not the cheapest overall, many mom-and-pop pharmacies are highly competitive and offer top notch service.

• Talk to your employer: Benefits administrators can provide details about pharmacy benefit managers, also known as PBMs.

• Buy generics: They can cost 20 to 50 percent less than their brand name equivalents.

• See if there's a discount program: Some stores have programs for those 50 and older; other programs are open to anyone without insurance.

The Consumer Reports National Research Center surveyed 40,133 readers to find out about their experiences at drugstores. One striking finding: readers sought pharmacists' advice about prescription drugs at just 38 percent of walk-in visits during the course of a year. That's down from 50 percent since CR's last survey in 2002.

"That's a pretty significant shift in the consumer-pharmacist relationship," said Tod Marks, senior editor at Consumer Reports.

The survey also found that only 33 percent of prescription drug buys were mostly or entirely covered by insurance coverage. In 2002, the last time CR surveyed readers about their drugstore experiences, 65% of prescription drug buys were covered. "More people are digging deeper and paying a larger share of out-of-pocket costs for prescriptions drugs," Marks said.

In a letter to the president of Kingpin Concepts, Inc., Madigan demanded that the company immediately cease all marketing and sales of the energy drink called Blow in Illinois.

This is blatant promotion of drug culture and addiction, Madigan said. I am deeply concerned that the design and marketing of Blow will have a detrimental effect on children in Illinois.

The product, which is currently sold online, is packaged in bricks and vials that can be purchased in combination with a fake VIP Blow credit card. The Web site fails to enforce age restrictions or take other precautions to prevent children from purchasing this product, and the company promotes the mix on MySpace, a social networking site popular with children and teens.

The attorney general also expressed serious concern about the harmful health effects of the energy drink mix, which contains extremely high levels of caffeine. Earlier this year, the U.S. Food and Drug Administration (FDA) announced its view that Blow is an unapproved new drug and does not meet the requirements of the Federal Food, Drug, and Cosmetic Act.

As an advocate for the health and safety of consumers, I share the FDA's concern that this product may have a harmful impact on the health of its users, Madigan stated. A vial of Blow contains more than three times the caffeine in other non-alcoholic energy drinks on the market. As a result, this product should be subject to proper testing, review and approval by the FDA.

Madigan said the product also violates the Illinois Food, Drug and Cosmetic Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. She warned that if Kingpin Concepts, Inc. does not comply with her demand, her office will promptly seek injunctive relief and civil penalties available under Illinois law.

As gasoline prices continue to rise across the country, consumers are scrambling for ways to save money at the pumps.

Figures released today by The American Automobile Association (AAA) reveal the average price of regular unleaded gasoline jumped 30 cents a gallon in the past month.

AAA estimates the average national price for unleaded gasoline is now $3.61 a gallon. That's up 30 cents a gallon in the past 30 days -- and 60 cents in the past year.

National average prices as of May 5,
as calculated by AAA .

The average national prices for premium and diesel gasoline have also skyrocketed.

Premium gas now averages $3.97 a gallon that's a 33-cent-a-gallon jump in the past month, up 64 cents a gallon in the past year.

Diesel fuel has also risen sharply. It now averages a staggering $4.23 a gallon up 21 cents in the past month. The price of diesel has soared $1.31 a gallon in the past year.

How to save

But there are simple ways consumers can increase their cars' mileage and ultimately save money at the pumps.

The Consumer Federation of America (CFA) recommends the following ten steps consumers can take to save an average of 35 cents a gallon:

• Slow down: CFA says consumers can cut their cars' fuel consumption by 7 percent simply by driving 5 mph slower on the highway. Consumers, for example, who drive 70 mph on the highway could save 25 cents a gallon by reducing their speed to 65 mph;

• Check the oil filter: CFA says a clean oil filter can improve gas mileage by 10 percent. The group says changing a dirty oil filter can save 34 cents a gallon or keep you on the road for 23 more miles on a tank of gas;

• Fix the alignment: CFA says poor alignment forces a car's engine to work harder. That can reduce its mileage by as much as 10 percent. The group says fixing a car's alignment could save 35 cents a gallon;

• Get a tune up: CFA says a properly tuned engine can improve gas mileage by 4 percent or 14 cents a gallon;

• Pump up your tires: CFA says more than one-fourth of vehicles don't have properly inflated tires. Tires that are properly inflated can cut your fuel costs by 10 cents a gallon;

• Check the gas cap: CFA estimates that nearly 17 percent of cars on the road today have broken or missing gas caps. This reduces gas mileage and could harm the environment. Fixing or replacing a faulty gas cap can save consumers 3 cents a gallon;

• Reduce the weight in your car: CFA says that every extra 100 pounds in a vehicle cuts its fuel efficiency by 1 to 2 percent. Every 100 pounds you unload will save 4 cents a gallon;

• Drive more smoothly: CFA says consumers who accelerate and decelerate more smoothly can potentially save 33 percent on their fuel costs on the highway -- and 5 percent around town. Erratic drivers can save as much as 62 cents per gallon if they drive more smoothly;

• Don't ride the brakes: CFA says driving with your foot on the brake can decrease your car's fuel efficiency by 35 percent. It also wears out your brakes. Consumers who stop driving with their feet on the brakes can save as much as $1.19 per gallon;

• Stop idling:For every two minutes that you don't let your car idle, you will save nearly 1 cent a gallon, according to CFA. The organization recommends consumers turn off their cars' engines if they're stopped off the road for more than 30 seconds;

13% solution

Jack Gillis, CFA's director of public affairs, says consumers will see real savings in their pocketbooks if they follow these recommendations.

"We estimate that if Americans practiced these tips, gas mileage could be improved in total by about 13 percent," he says.

Automotive experts also recommend that consumers buy gasoline during the coolest parts of the day early morning or late evening -- because fuel expands when it is hot. Consumers should also avoid over-filling their gas tanks, experts say. That can waste fuel because it may slosh out of the tank.

The Federal Trade Commission (FTC) also warns consumers to steer clear of "gas-saving" gadgets.

Some of these products claim they can improve a car's fuel efficiency by 20 percent.

But the Environmental Protection Agency (EPA) has tested more than 100 gas-saving products and "has not found any product that significantly improves gas mileage," according to the FTC.

Some of the gadgets may even damage a car's engine or increase exhaust emissions, the EPA found.

FTC officials also warn that some companies may claim their gas-saving devices are approved by the Federal government.

"No government agency endorses gas-saving products for cars," the FTC says.

Consumers can track the fluctuating gasoline prices in their state on the AAA Web site.

Such a deal

And here's some good news to keep in mind the next time you fill up your tank.

Gasoline prices in the United States are still a deal compared to those overseas.

Consider these recent figures compiled by the McClatchy Newspaper group:

• Gasoline in Germany is $8.52 a gallon;

• Gasoline in Italy is $7.94 a gallon;

• Gasoline in France is $7.82 a gallon

Wal-Mart says it is adding more generic drugs to its discount sales promotion, in which the commonly prescribed medication is sold from $4 for a 30-day supply to $10 for a 90-day supply.

The retailer says "Phase 3" of its plan, which began in 2006, will also include some over the counter medication.

"More and more people find health care, and particularly prescribed medicines, difficult to afford. This is one of the reasons we continually work to take our $4 Prescription Program to the next level," said Dr. John Agwunobi, Wal-Mart senior vice president and president, health and wellness.

The company says its 90-day option gives more choices to customers and physicians who may have been limited to mail order prescriptions in the past. Included in the latest offering:

• Enhanced $4 Prescription Program Beginning today, Wal-Mart, Neighborhood Market and Sam's Club pharmacies will fill prescriptions for up to 350 generic medications at $10 for a 90-day supply. Wal-Mart says this option will give customers an additional choice and save them time and money without the hassle of purchasing or signing-up for a pharmacy discount card.

• Additional women's health medicines Expanding on the women's medicines added to Wal-Mart's prescription program in September 2007, Alendronate, the recently introduced generic version of Fosamax used to treat osteoporosis, is now available at Wal-Mart, Neighborhood Market and Sam's Club pharmacies for $9 for up to a 30-day supply or $24 for a 90-day supply. Wal-Mart says it previously sold the drug for $54 for the same generic supply or $102 for the same branded supply.

• New $4 OTC offering Wal-Mart Stores and Neighborhood Markets today began a new $4 OTC program, offering customers more than 1,000 OTC items priced at $4 or less without a prescription. Wal-Mart has rolled back prices on key OTC items to ensure that almost one-third of its OTC medicines are now $4 or lower. OTC drugs in the program include the Equate-brand versions of popular drugs like Zantac, Pepcid and Claritin are priced, which are now priced at $4.

Wal-Mart said up to 95 percent of the prescriptions written in the majority of therapeutic categories are included in the $4 Prescription Program available at Wal-Mart, Neighborhood Market and Sam's Club pharmacies nationwide. The new prices for these prescriptions are available for commonly prescribed dosages for up to 30-days or 90-days.

Launched in Tampa, Florida in September 2006, Wal-Mart's $4 Prescription Program has expanded to 49 states. Wal-Mart does not operate in-store pharmacies in its North Dakota stores. Here is a complete list of the drugs in Wal-Mart's plan (pdf file).

Q. Im very careful to avoid anything that might give me bursitis, which seems to run in my family. However, Ive been suffering more lately in spite of my best efforts. Is this age-related?

A. Yes. Bursitis occurs more often as we age. As you are probably aware, repetitive motions are the worst things for people who tend to get bursitis. Other causes include joint trauma, rheumatoid arthritis, gout and infection.

Bursitis is inflammation of a bursa, which is a small sac filled with fluid. We each have about 160 of these bursae, which act as shock absorbers and grease for our joints. They are buffers between bones and overlapping muscles or between bones and tendons/skin. When bursae become inflamed, they can ache.

If you have bursitis, you may feel pain or stiffness in the elbow, hip, knee, shoulder, heel, big toe or other joints; stronger pain with movement or pressure; swelling, warmth and redness.

While repetitive motions are the usual culprits in bursitis, simple pressure can cause inflammation, too. A couple of examples: Pushing a vacuum cleaner can give you bursitis in your elbow. But sitting on a hard surface for a long time can inflame the bursa over a bone in your buttocks.

You can usually take care of bursitis yourself.

Rest the affected joint. An ice pack will reduce swelling. To reduce pain and inflammation, take a nonsteroidal anti-inflammatory (NSAID) such as ibuprofen or aspirin. It usually takes a week or so for bursitis to go away.

You should go to your doctor if the symptoms dont subside after 10 days; you have a fever; theres excessive swelling, redness, bruising or a rash in the affected area; pain is sharp, shooting or disabling; you have a medical condition or you take drugs that may increase your risk of an infection.

If you need professional care, your doctor may recommend physical therapy or a cortisone injection into the bursa to relieve inflammation.

Ultrasound treatment is often used by physical therapists and many other healthcare providers to treat bursitis. Ultrasound relieves pain and inflammation, speeds healing, reduces muscle spasms and increases range of motion.

Ultrasound makes high-frequency sound waves. The sound waves vibrate tissues deep inside the injured area. This creates heat that draws more blood into the tissues. The tissues then respond to healing nutrients brought in by the blood.

Treatment is given with a soundhead that is moved gently in strokes or circles over the injured area. The procedure may be performed with the soundhead alone or with a topical anti-inflammatory drug or gel.

(Personal note: My wife, Gale, swears by ultrasound for treating her occasional bouts of bursitis.)

However, if the bursitis is caused by a bacterial infection of the bursa, it will have to be drained and you will need antibiotic treatment.

Here are some tips to help prevent bursitis:

• If you must undertake a job that requires repetitive movements, take many breaks.

• Avoid sustained pressure on a bursa. For example, dont sit on hard chairs for long periods. If you have to do a job on your hands and knees, use knee cushions. Dont rest your elbows on hard surfaces. Dont wear ill-fitting shoes.

• Exercise the muscles in the joints that tend to get bursitis. You can protect these joints by strengthening the muscles around them. Of course, dont exercise until all bursitis symptoms are gone.

• Prior to exercising you should always warm up and stretch your muscles.

All Rights Reserved © 2008 by Fred Cicetti

The seat belt webbing in the third row is not adequately secured by the automatic locking retractor allowing the seat belt webbing to spool out during normal driving, according to the National Highway Traffic Safety Administration (NHTSA).

The loose belt could affect the stability of a child restraint, NHTSA reported. In the event of a crash, the child many not be adequately protected possibly resulting in an injury, the agency warned.

Toyota dealers will install a newly-designed seat belt free of charge when the recall gets underway.

2008 Highlander and Highlander hybrid owners can contact Toyota at 1-800-331-4331 or NHTSA at 1-800-327-4236.

Consumers with Whirlpool water heaters sold at Lowe's have about two months to file claims in the settlement of a class action lawsuit that alleged the water heaters were defective.

More than 1,000 consumers have filed reports with ConsumerAffairs.com saying the thermocouple in their Flame Lock or Flame Guard Whirlpool water heaters continuously breaks down leaving them without hot water -- sometimes for days.

"Less than two years ago I purchased a Whirlpool Flame Lock water heater at Lowe's, paid to have it installed and thought my problems were solved," Chris of Hammond, Ind. wrote "However, I have had to change the thermocouple at least six times, on average about once every three to four months.

"Whirlpool reimbursed me for the part the first time, but that is it," Chris continued. "While I am not a professional mechanic or technician, I am mechanically inclined and replacing this thing is a real hassle. The part is only about $14 but the labor and repeated inconvenience is really aggravating."

Safety device

The thermocouple is a safety device that cuts off the flow of gas should the pilot light go out thereby preventing gas from leaking out, said Richard Doherty, one of the lawyers who defended consumers in the class action lawsuit.

These water heaters, which Whirlpool started selling in 2000, incorporated a new safety standard, the flammable vapors-ignition-resistance standard, which gas water heater manufacturers voluntarily implemented in conjunction with the Consumer Product Safety Commission February 2000.

"This was a new technology," Doherty said. "The old style with the open flame at the bottom has been done away with because there was the possibility of gas leaks. Now you have a sealed combustion chamber."

But the combustion chamber in these Whirlpool-branded water heaters, which were actually manufactured by the American Water Heater Company, collected a considerable amount of dust and lint which eventually restricted oxygen to the flame.

"Things would get clogged underneath the hot water heater and fire needs oxygen and the flame is reaching to get oxygen basically away from where the flame is designed to be because it's not getting enough oxygen," Doherty said. "As it gets over toward the thermocouple it trips it."

Design updated

ConsumerAffairs.com first reported on this apparent defect almost two years ago and soon after, Whirlpool and the American Water Heater Company updated their design, Doherty said.

They "upgraded the manifold door assembly with a resettable thermal cutoff switch," Doherty said. "The original ones were called single-use so if that thing went you had to get a new one. The new one is resettable like a fuse in a fusebox."

While consumers who have purchased Flame Lock and Flame Guards since 2007 have not shared the frustrations of older customers, anyone who purchased one of the models between 2000 and 2006 is eligible for the upgraded parts, according to the settlement's website, www.waterheatersettlement.com.

Those consumers are entitled to the upgraded manifold door assembly shipped free to them or receive reimbursement for any previously upgraded manifold door assembly and shipping costs previously incurred.

The settlement does not cover installation costs.

Consumers who paid for replacement thermocouples can be reimbursed up to $15 per thermocouple up to $30. Consumers who experienced more than three thermocouple failures and then replaced their water heater are eligible for $150.

Class members must postmark their claims by June 28, 2008. Claim forms can be downloaded at www.waterheatersettlement.com.

The defendants in the case, Whirlpool, Lowe's and A.O. Smith, which purchased American Water Heater Company, have never admitted the water heaters were defective, Doherty said.

The defendants did not return multiple calls for comment.

Egged on by competitors, a federal appeals court has given Tyson Foods 14 days to remove advertising that claims its chickens are safer to eat because they are "raised without antibiotics."

The appeals court in Richmond, Va., denied Tyson's appeal of a Baltimore judge's ruling last April and ordered the company to start removing its ads from stores and the media.

Tyson's competitors, Sanderson and Perdue, had filed suit claiming that Tyson's ads were misleading because none of the companies use the types of antiobiotics that can lead to drug resistance in humans. Sanderson said it lost $4 million in sales since last year as a result of the Tyson campaign, while Perdue contended it lost $11 million.

"We're disappointed the motion for a stay has been denied and are evaluating our legal options," Gary Mickelson, a spokesman for Tyson Foods, Springdale, Ark., said in a statement. "We continue to believe we have acted responsibly in the way we have labeled and marketed our products and intend to stand our ground." The company said it has already contacted stores about removing POP advertising.

Tyson, the world's largest meat processor, spent an estimated $70 million on the "raised without antibiotics" campaign.

USDA admits error

The U.S. Department of Agriculture (USDA) said it made a mistake in May 2007 when it approved the Tyson labeling. The decision is a big blow to Tyson, which has staked its brand's reputation on the no-antibiotics claim.

The controversy revolves around medications added to poultry feed to keep chickens from getting intestinal infections that can cause weight loss and death in poultry.

The medication -- ionophores -- is not technically an antibiotic, Tyson said, insisting it's really an antimicrobial.

But in a letter to Tyson, USDA said its longstanding policy is that "ionophores are antibiotics," The Wall Street Journal reported.

Tyson claims the USDA has known all along that it was using ionophores but senior government officials said they only learned of it recently.

Consumers have long complained about credit card policies that usually result in extra fees. Now, federal regulators are beginning to listen.

The U.S. Office of Thrift supervision has endorsed a plan that would limit many of these "unfair and deceptive" billing practices that consumers are complaining about. The changes are significant.

They would make it much harder for a credit card company to increase a card holder's percentage rate on an outstanding balance. It would also ban "double-cycle billing," the practice of calculating interest charges from the start of the previous billing cycle.

For debit card holders, there's relief from overdraft fees. Under the proposed rule, consumers could opt out of a thrift's "overdraft protection" program. Under current rules, banks allow debit card transactions to go through when a customer has overdrawn their account, but tacks on a hefty fee. Many consumers have said it would be better if the sale were denied than to have to pay an overdraft fee.

While the rules would apply only to thrift institutions, it's widely believed that the federal agencies that regulate banks and credit unions will adopt the same rules. The Federal Reserve, which regulates banks, and the National Credit Union Administration, which oversees federal credit unions, are expected to join the OTS in finalizing the rule changes by the end of this year.

Specifically, the proposal makes the following changes:

For Credit Cards:

1. Reasonable Time to Make Payments Institutions would be prohibited from treating a payment as late unless consumers have been provided with a reasonable amount of time to make payment. The proposed rule would create a safe harbor for institutions that adopt reasonable procedures to ensure that periodic statements are mailed or delivered at least 21 days before the payment due date.

2. Payment Allocation When different annual percentage rates apply to different balances, institutions would be prohibited from allocating any amounts paid in excess of the minimum payment in a manner that is less beneficial to consumers than one of three methods. For example, institutions could apply the entire amount first to the balance with the highest annual percentage rate or split the amount equally among the balances. When an account has a discounted promotional rate balance or a balance on which interest is deferred, institutions would be required to use payment allocation practices that give consumers the full benefit of the discounted rate or deferred interest plan.

3. Interest Rate Increases on Outstanding Balances Institutions would be prohibited from increasing the annual percentage rate on an outstanding balance unless certain exceptions apply. For example, an institution could increase the variable rate if a promotional rate has expired or if the cardholder's payment is delinquent (e.g., the minimum payment has not been received within 30 days of the due date).

4. Fees from Credit Holds Institutions would be prohibited from assessing a fee if a consumer exceeds the credit limit on an account solely due to a hold placed on the available credit unless the amount of the transaction would also have exceeded the credit limit.

5. Balance Computation Methods ("Double Cycle Billing") Institutions would be prohibited from computing finance charges on outstanding balances based on balances in billing cycles preceding the most recent billing cycle. The proposed rule would prohibit institutions from reaching back to prior billing cycles when calculating the amount of interest charged in the current cycle, a practice that is sometimes referred to as two- or double-cycle billing.

6. Fees/Deposits Charged to the Account for the Issuance of Credit Institutions would be prohibited from charging to the credit card account fees or security deposits for the issuance or availability of credit (such as account-opening fees or membership fees) if those fees or deposits utilize the majority of the available credit on the account.

In addition, the proposal would require that fees or deposits that exceed 25% of the credit limit be spread over the first year, rather than charged as a lump sum at account opening. Institutions would not be prohibited from issuing credit cards that require a consumer to pay a security deposit if that deposit is not charged to the account. Such an approach can be a means of repairing or building credit.

7. Firm Offers of Credit Institutions making firm offers of credit that advertise multiple annual percentage rates or credit limit ranges would be required to disclose in the solicitation the factors that determine whether a consumer will qualify for the lowest annual percentage rate and highest credit limit advertised.

For Overdraft Programs:

1. Opt Out Institutions would be prohibited from assessing a fee for paying an overdraft unless they provide a consumer with: the right to opt out of payment of overdrafts; a reasonable opportunity to exercise the opt-out; and the consumer does not opt out. The proposed opt-out right would apply to all transactions that overdraw an account regardless of the whether the transaction is, for example, a check, an automated clearinghouse (ACH) transaction, an ATM withdrawal, a recurring payment, or a debit card purchase at a point of sale.

2. Fees from Debit Holds Institutions would be prohibited from assessing an overdraft fee if the overdraft is caused solely by a hold on funds that exceeds the actual purchase amount of the transaction, unless this purchase amount would have also caused the overdraft.

Legislation considered

Many of the proposed rules are similar to measures contained in the "Credit Cardholders' Bill of Rights," being sponsored in Congress by Rep. Carolyn Maloney (D-NY).

"The playing field between card companies and cardholders has become very one-sided in recent years. Yet, more and more Americans are turning to their credit cards to help pay bills, buy groceries, and make ends meet in this troubled economy," said Maloney, who serves as chairwoman of the Subcommitee on Financial Institutions and Consumer Credit.

"Instead of looking the other way while Americans fall deeper into debt, Congress can and should take swift action to reform major credit card industry abuses and improve consumer protections for cardholders," she said.

The committee last month heard testimony from both representatives of the financial services industry and citizens sharing their stories of credit card problems, as well as Sen. Carl Levin (D-MI), who has held several hearings on credit card lending and billing practices and pushed similar legislation in the Senate.

"Credit card issuers like to say that they are engaged in a risky business, lending unsecured debt to millions of consumers, but it is clear that they have learned to price credit card products in ways that produce enormous profit," Levin said.

"Credit card issuers make such a hefty profit that they sent out 5 billion pieces of mail last year soliciting people to sign up. With profits like those, credit card issuers can afford to give up abusive practices that treat consumers unfairly."

Moving the goalposts

Among the provisions in Maloney's bill would be the prohibition of interest rate hikes for credit card holders in good standing -- those who pay their bills on time and do not incur late fees.

Such was the case for Steven Autrey of Fredericksburg, VA, who testified that in 2007, his Capital One Visa card's interest rate skyrocketed from 9.9 percent to 15.9 percent, with no explanation and despite only one late charge in his payment history -- a complaint shared by many other Capital One cardholders.

Autrey contacted Capitol One, who told him that changes in the financial environment would necessitate the rate hike, even for accounts in good standing like his. He testified that the lender would let him keep his current interest rate, but only if he closed his account, a move which could harm his FICO credit score and make new purchases more difficult.

"The NFL does not allow one team, in the midst of the fourth quarter, to unilaterally move their end zone 20 yards just because they don't like the point spread. The rules are laid out before the kickoff, and the umpires enforce the same rules for both home and visiting teams for the whole contest," Autrey said. "It's time for legislation at the federal level that tells the credit card industry, 'Game Over' to unilateral, one-sided, contract changes."

Regulatory baby steps

John Carey, chief operating officer for Citigroup's CitiCards division, agreed that the industry had not done enough to minimize penalties as a result of lending unsecured credit. Carey referenced Citigroup's decisions to abandon "universal default" rate hikes, where the lender raised interest rates if the borrower was late paying other bills, and "any time any reason" rate hikes.

"We hoped and expected that these points of differentiation would lead customers to vote with their feet...[but] we have been disappointed with the results we have seen so far," Carey said. "The problem is that customers cannot recognize the difference between us and our competitors."

Carey advocated adoption of the Federal Reserve's proposed changes to credit card disclosure agreements, which simplify the language and terms and extend the time between an announced rate hike and its implementation from 15 days to 45.

But consumer advocates at the hearing testified that even better disclosure agreements did not go far enough in remedying the role credit cards play in America's multibillion-dollar consumer debt.

Consumer Federation of America's Travis Plunkett said that delinquencies in credit card payments were steadily increasing due to high gas prices, the erosion of home equity as a payment method, and other increased utility costs, and that credit card companies continued to reap strong profits even in the face of general economic loss.

"Borrowers who pay off their balances in full and on time each month do not earn as much profit for the industry," Plunkett said. "With revolving debt nearly quadrupling since 1990, credit card companies' profitability should remain strong."

With recall after recall in the food industry, it might seem that government's system for ensuring the safety of the food supply has broken down somewhere. A new report says that perception is actually reality.

The report, by Trust for America's Health, a health advocacy organization, identifies major gaps in the nation's food safety system, including obsolete laws, mis-allocation of resources, and inconsistencies among major food safety agencies.

The findings echo a report last month by the Centers For Disease Control, which found that recent efforts to curtail incidents of foodborne illnesses have yet to produce much in the way of results.

"Our goal should be reducing the number of Americans who get sick from foodborne illness. But we can't adequately protect people from contaminated foods if we continue to use 100 year-old practices," said Jeff Levi, Executive Director of TFAH. "We need to bring food safety into the 21st century. We have the technology. We're way past due for a smart and strategic upgrade."

Some problems outlined in the report, Fixing Food Safety: Protecting America's Food from Farm-to-Fork, include the way the government allocates its resources. TFAH says the bulk of federal food safety funds are spent on outdated practices of inspecting every poultry, beef and pork carcass, even though changing threats and modern agriculture practices and technology make this an unproductive use of government resources.

The report says inadequate resources are spent on fighting modern bacteria threats, such as trying to reduce Salmonella or dangerous strains of E. coli.

"An estimated 85 percent of known foodborne illness outbreaks are associated with foods regulated by the U.S. Food and Drug Administration, but the agency receives less than half of the federal funding for food safety," the report says.

The group also takes issue with bureaucratic quirks in the inspection code. For instance, the FDA regulates frozen pizza, but if the pizza is topped with 2 percent or more of cooked meat or poultry, then the Food Safety and Inspection Service at the U.S. Department of Agriculture becomes the regulatory agency.

Other issues highlighted in the report include:

• In the past 3 years, the main food safety function at FDA has lost 20 percent of its science staff and 600 inspectors;

• Gaps in current inspection practices mean acts of agroterrorism -- such as contamination of wheat gluten or botulism -- could go undetected until they are widespread;

• While 15 federal agencies are involved in food safety, the efforts are fragmented and no one agency has ultimate authority or responsibility for food safety;

• Only one percent of imported foods are inspected. Approximately 60 percent of fresh fruits and vegetables and 75 percent of seafood consumed in the U.S. is imported; and

• States and localities are not required to meet uniform national standards for food safety.

Approximately 76 million Americans -- 1 in 4 -- are sickened by foodborne diseases each year, the group says. Of these, an estimated 325,000 are hospitalized and 5,000 die. Medical costs and lost productivity due to foodborne illnesses in the U.S. are estimated to cost $44 billion annually.

A 2007 public opinion poll conducted by TFAH found that 67 percent of Americans are worried about food safety, and that public concerns about food safety rank higher than Americans' concerns about a biological or chemical attack and natural disasters like Hurricane Katrina.

The TFAH report follows a series of studies by experts raising concerns about America's food safety, including a 2007 review by the U.S. Food and Drug Administration's Science Board that concluded that the U.S. food supply "grows riskier each year" and a Government Accountability Office report that found federal oversight of food safety to be one of the government's "high risk" programs.

CDC's findings

Last month, the Centers For Disease Control reported that recent efforts to curtail incidents of foodborne illnesses have yet to produce much in the way of results.

The findings are from 2007 data reported to the CDC as part of the agency's Foodborne Diseases Active Surveillance Network, FoodNet. FoodNet monitors foodborne disease and conducts studies to help health officials better understand the nature of the problem.

FoodNet monitors foodborne disease and conducts studies to help health officials better understand the nature of the problem.

Campylobacter, Listeria, Salmonella, Shigella, E.coli O157, Vibrio, and Yersinia did not decline significantly, and the estimated incidence of Cryptosporidium increased when compared with the previous three years, 2004-2006.

Although there have been significant declines in the incidence of some foodborne infections since surveillance began in 1996, these declines all occurred before 2004.

"The results show that prevention efforts have been partly successful, but there has been little further progress in the most recent years," said Dr. Robert Tauxe, deputy director of CDCs Division of Foodborne, Bacterial and Mycotic Diseases. "More needs to be done to make our food safer."

Consumers can reduce their risk for foodborne illness by following safe food-handling recommendations and by avoiding the consumption of unpasteurized milk, raw or undercooked oysters, raw or undercooked eggs, raw or undercooked ground beef, and undercooked poultry," the CDC said.

The risk for foodborne illness can also be decreased by choosing in-shell pasteurized eggs, irradiated ground meat, and high-pressure-treated oysters.

According to the latest Internet Crime Complaint Center data, nearly $240 million of individual losses from Internet fraud were reported to the FBI in 2007, an all-time high and a 20 percent increase since 2006.

Management Information Systems Professor Randal Vaughn of the Hankamer School of Business has focused his attention on trying to eradicate so-called botnets, a collection of compromised machines that do the bidding of their robot masters.

Vaughn says botnets are used to distribute the SPAM that frequently fills inboxes worldwide, as well as phishing, a scam that involves an Internet perpetrator posing as a legitimate company to defraud an online account holder of financial information. He says the battle has become global in scope, with criminal elements around the world taking part.

These guys are pretty slick," Vaughn said. "They make a lot of money."

Many of the profits are swindled from citizens who have the least to lose. Vaughn acknowledged that educated Internet users are less likely to fall prey to scams than say, their grandmothers, or other users unaware of potential online risks.

"It's important to protect people who can't protect themselves," Vaughn said.

Vaughn is a member of the APWG, a coalition of industry, law enforcement and government associates committed to wiping out Internet scams and fraud. The APWG focuses on eliminating the identity theft and fraud caused by the growing problems of phishing, email spoofing, and crimeware. The organization is comprised of over 3,000 members and 1,700 companies and organizations worldwide.

"The global criminal plexus that has emerged on the Internet requires technical and policy coordination across national frontiers and technological domains," said APWG Secretary General Peter Cassidy.

While Vaughn now works with organizations and professionals across the globe, his initial interest in content filtering was sparked at home eight years ago, when his then 9-year-old daughter began using the Internet.

"I've always had an interest in security, because you have to if you ever do anything in computing," Vaughn said. "You're always worried about people misusing the resources."

More Scam Alerts ...

Almost 1 million consumers have signed up for LifeLock, which promises to protect their credit and identity. But in the midst of three lawsuits against the company, consumer advocates say LifeLock customers are wasting their money while the company's founder insists it is the best way for consumers to protect themselves.

LifeLock's co-founder and chief executive officer, Todd Davis, is so confident in the product that he shares his own Social Security number in the company's many TV, radio and print ads.

But consumer advocates and two class action lawsuits claim that LifeLock actually provides very little protection. LifeLock, based in Tempe, Arizona, works by renewing an individual's fraud alert with one of the nation's three large credit bureaus, a service which federal laws mandate any individual can do for free, usually within a few minutes over the phone or Internet.

What the fraud alert does is it basically puts a red flag on your credit report and it tells any potential creditor that if they receive an application for credit, they should take additional measures to determine that the person is the person that they're claiming to be. Typically that would be a phone call, said Paul Stephens, director of public policy at the Privacy Rights Clearinghouse, a nonprofit consumer advocacy organization.

Fraud alerts last 90 days and then must be renewed. LifeLock charges $10 a month to make sure its customers' fraud alerts never expire a service most consumer advocates are baffled anyone would pay money for.

No one needs to pay a third party firm to assert their federal rights, Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, a nonprofit consumer advocacy organization, wrote in an e-mail. And for one hundred bucks plus each year, it is certainly not cheap to do so.

Concierge service?

I like to think of LifeLock as being a concierge service, Stephens said Are you the kind of person who would pay somebody, for example, to do your shopping for you?

I would point out that to do the sorts of things that LifeLock does for you, you don't even need to leave your house, Stephens continued. You can get on the phone or get on your computer and do it in a couple of minutes. So I don't really see that they bring a lot of value to the consumer.

Davis didn't argue the concierge analogy in a phone interview with ConsumerAffairs.com, but said the company offers much more than the renewal service.

There are certainly steps beyond just convenience that we're doing, but one of the things that people love are those convenient steps: us renewing the fraud alerts, us being there if you have a question in a retail store when you're applying for credit, us being available 24/7, us being there in case you lose your wallet; (we will) assist canceling and renewing credit cards and helping to get a new driver's license, Davis said.

We're also doing other things like scouring the (Internet) looking for your personal information being bought or sold on the black market, Davis said. We're authenticating when someone puts in a change of address to confirm it's you.

In advertisements, the company also promises to stop junk mail, including pre-approved credit offers and provide a credit report services that again, a consumer can do for free over the phone or Internet.

$1 million 'guarantee'

The most controversial aspect of LifeLock is its $1 million guarantee.

LifeLock's $1 million guarantee is our intent to go support any member of LifeLock who might become a victim of identity theft while subscribed to our service so we that can go out and (fill) our intent to do everything the law allows us to do to help that person recover their good name, Davis said. So whether that's hiring third person personnel, whether that's covering any losses or expenses, whether it's getting accounts closed and getting new ones issued, that's what we'll do.

But two pending class action lawsuits claim that the company's $1 million guarantee is not a guarantee at all, but just a promise that the company is not actually obligated to fulfill.

There is no $1 million guarantee, said Leonard Aragon, one of the attorneys who filed a class action lawsuit against the company. If you look at the terms of the contract it very clearly says 'we won't pay consequential damages. We won't pay you directly' so there's really no way to get up into the million dollars.

Our understanding is that it basically covers any defect in their product, said Aragon of Hagens Berman Sobol Shapiro in Seattle. What that means is the failure to place the fraud alert or maybe they accidentally spell your name wrong.

Davis said the reason LifeLock does not make any actual guarantees is because he doesn't want it to become an insurance company.

Insurance by design is not built to mitigate risk. Davis said. They spread actuarial risk over a group of people. LifeLock is so dramatically more than that. We want to be the most comprehensive solution out there to actually prevent this crime to mitigate the risk on the front end. We don't want to limit what we can do for consumers. We don't want to limit where they can acquire this protection by only going through licensed insurance agents. We want you to be able to go get this at Office Depot or CVS Pharmacy or through AAA.

85 claims

Of LifeLock's 940,000 customers 85 have filed claims against the company's $1 million guarantee and all have been pleased with the results, Davis said.

Those are some of our greatest advocates, he said.

But Aragon warned that although the company is fulfilling its promise now, if there is ever a serious data breach and many of its customers are defrauded, the company may not fulfill its promise. He compared it to the insurance companies who failed to honor their flood clause for consumers whose homes were destroyed in New Orleans from a breached levy rather than flood waters.

When everyone's all happy and it really isn't that big of a deal and there really aren't that many claims, well insurance companies say 'sure, we'll pay that. We don't want to cause trouble because we want people to come to our insurance company. But when it hits the fan and there are a lot of claims well that's when we start going into the contracts,' Aragon said.

You can't promise one thing and have your contract say one thing because eventually that's going to come around and it's going to be bad news for the consumers who thought they were buying protection when in actuality they weren't buying anything, Aragon said. They were buying some good customer service. Big deal.

Davis said no matter what, the company will honor its promise and that its terms are only written that way to avoid becoming an insurance company, and thus subject to regulation in each state where it does business.

If we didn't (honor our guarantee), it would be catastrophic for the company, Davis said. It wouldn't behoove us in the business we're in when our sole purpose is protecting consumers and taking care of consumers if we elected to say we choose not to keep our promises then it's going to be catastrophic to the company.

Despite the language of the $1 million guarantee, Aragon and consumer advocates say LifeLock is no guarantee to ward off fraud or identity theft.

They're telling everyone this is LifeLock so we're going lock your credit and we're going to protect you from identity theft when the reality is all they do is put a fraud alert and all that does is protect you from having instant credit taken out under your Social Security number, Aragon said.

Let's say you get your wallet stolen and your checkbook stolen and someone goes to a checks cashed store. It does nothing to protect against that. Aragon continued. It also does nothing to protect against your credit card (being) stolen.

Fraud alerts do not stop the issuance of credit, Mierzwinski wrote. They do condition the issuance of credit by making the creditor liable if the consumer can prove damages, but they dont stop it.

Davis said if a LifeLock customer is defrauded in any way, even outside the limited protection of a fraud alert, the customer can invoke the $1 million guarantee and the company will honor it.

Experian suit

The third case against the company was filed by Experian, one of the credit bureaus LifeLock uses to issue its customers' fraud alerts.

Experian contends that under the Fair Credit Reporting Act, only an individual consumer or an individual acting on behalf of the consumer can place fraud alerts.

Davis disagreed.

The spirit of the laws are very clear to us to be there to protect consumers and we feel very strongly that we're doing exactly in the spirit of the laws' intent which is helping consumers take advantage of those protections offered by those laws, Davis said.

If Experian wins its case it could be the end of LifeLock and its many clones. But Davis said he believes the company will continue to protect consumers if that happens.

If all of a sudden they took away those protections from those consumers, we're still going to have the most comprehensive (service), He said. We're still going to do things to mitigate the risk.

Mierzwinski agreed that a precedent could be bad for consumers.

I dont recommend Lifelock, but I dont want Experian winning case law that makes it harder for consumers to use third parties to help assert their rights, which I guess could be a result if Experian prevails, Mierzwinski wrote.

Glowing 'reviews'

Despite the company's recent legal troubles, LifeLock has continued to expand its customer base and part of that could be the result of a questionable affiliate reseller program.

A search for LifeLock on any search engine yields thousands of results, many of which are supposed independent review, blog or news Web sites that unanimously give glowing reviews of LifeLock in juxtaposition with its competitors. Almost every page of these websites are followed by enthusiastic user comments from consumers who can't wait to buy LifeLock and links to purchase it.

One website, CredibleReviews.Com, retells the identity theft story of one of LifeLock's paid endorsers followed by links on where to purchase LifeLock.

While none of the sites ConsumerAffairs.com queried returned our phone calls or e-mails, Davis said he doesn't believe they are owned by LifeLock and assumed they are the result of an affiliate program in which anyone can resell LifeLock and make a 30 percent commission.

Although his picture is on the LifeLock affiliate website, Davis said he knows little about the program and said he thinks there may be some disclaimer to try and prevent that sort of misleading sales behavior.

Despite its critics, consumers seem to be pleased with Lifelock's product. ConsumerAffairs.com has received only one complaint and the Better Business Bureau has processed 25 in the past 36 months.

What to do

Consumers who wish to sign up for the 90-day fraud alert or a credit report, can do so for free at any of the three major credit bureaus' websites or by calling them. Once one of the credit bureaus has been notified of the fraud alert, it will immediately notify the other two.

• TransUnion: (800) 680-7289
• Equifax: (800) 525-6285
• Experian: (888) 397-3742

Consumers who wish to opt out of credit offers can do so by calling the Consumer Credit Reporting Industry at (888) 567-8688 or by visiting its website.