1. Home
  2. News
  3. 2009
  4. May

News in May 2009

Browse by year


Browse by month

Get trending consumer news and recalls

    By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

    Thank you, you have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

    Texas Charges Conn's Failed to Honor Warranties

    Suit charges appliance chain deceived customers, engaged in false advertising

    Texas Attorney General Greg Abbott has charged appliance retailer Conns, Inc. with failing to honor product warranties, misleading customers about the nature of its products, false advertising and other violations of the Texas Deceptive Trade Practices Act. According to the states enforcement action -- and information contained in more than 2,000 customer complaints-- the company unlawfully relied on aggressive and deceptive sales tactics to increase its extended service warranty sales for consumer appliances, electronics and other products.

    Conn's, based in Beaumont, Texas, operates 75 stores in Texas, Louisiana and Oklahoma. Besides Abbott's suit, Conn's has also lost its long-time A+ rating from the Better Business Bureau. The BBB said Conn's now has "no rating."

    The defendants are charged with using high-pressure sales tactics to deceive customers about their extended service warranties, Abbott said. Texas law contains important protections to prevent vendors from misleading customers about their goods and services. Todays enforcement action reflects a concerted effort to ensure the defendant is held accountable for violating the law."

    Conns brochures obtained by state investigators claimed that the replacement warranties protected purchasers for a two full years from the date [they] purchased the product. However, customers did not actually receive two-year warranties. In fact, the replacement warranty agreements stated that they did not apply to any period covered by the manufacturers warranty, which typically covered one year after purchase. Thus the two-year extended warranty does not begin at the time of purchase as represented by Conn's.

    Further, in the event a product had to be replaced, the replacement was not covered by the warranty. Thus, if a replacement product failed within the two-year period, it was not covered, despite the defendants promise to provide replacement coverage for a full two years.

    The states enforcement action indicates that Conns failed to provide customers with a copy of the warranty agreement at the time of sale. As a result, purchasers were not adequately informed about exclusions, limitations, cancellation penalties and other provisions governing their warranty agreements.

    Court documents indicate that, at the time of sale, Conns sales personnel told warranty purchasers that replacement products would be new, unused items. However, the actual terms of the warranty contract provide that the replacement products could be refurbished or rebuilt, rather than the new items customers were promised by Conns salesmen.

    High-pressure sales

    In an effort to increase warranty sales, Conns instructed sales personnel to rely on high-pressure tactics to overcome objections voiced by customers who declined to purchase extended warranties, the suit charges.

    A Conns sales manual obtained by state investigators, which was marked not to be distributed to customers, said salesmen should create a sense of urgency and make [customers] live the service call [t]his is done by painting a picture in the customers [sic] mind, calling up that sickly feeling we all get in the pit of our stomachs when something goes wrong. The sales manual also provided a series of scripted responses to customer objections and reminds salesmen that selling more warranties would maximize their personal incomes.

    The enforcement action also charges Conns with failing to fulfill its warranty obligations. According to customer complaints obtained by the Office of the Attorney General, Conns delayed repair appointments for weeks or even months, failed to repair the item to working condition, ignored calls, and ultimately, refused to give refunds or replace the defective products. Instead, customers received refurbished goods, not new products, as promised.

    Depending on the product, the extended warranties cost anywhere from $100 to $1,000. The commissions from the sale of these warranties accounted for about 5 percent of Conns $900 million in annual sales revenue.

    The states enforcement action seeks civil penalties and a court order prohibiting the Beaumont-based defendant from continuing its unlawful conduct. Conns is a major consumer products and electronics retailer with locations throughout Texas, Louisiana and Oklahoma. It is publicly traded on the NASDAQ. The Office of the Attorney General has received more than 2,000 complaints about Conns conduct.

    The Attorney General seeks civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act, as well as a $250,000 penalty if the defendants conduct financially harmed persons aged 65 or older.

    The defendants are charged with using high-pressure sales tactics to deceive customers about their extended service warranties, Abbott said....
    Read lessRead more

    Kaiser Class Action Filed in California

    Alleges failure to refund copayments after collecting reimbursement

    A California resident has filed suit against insurance provider Kaiser Permanente, alleging that the corporation failed to refund her copayment after collecting under a personal injury award. Although the plaintiff's individual damages are negligible, the issue could affect hundreds or even thousands of Kaiser customers.

    Nicole Glaus of Concord, CA incurred $517.20 in medical expenses after being rear-ended in a traffic accident. Glaus was subsequently awarded $4,250 in damages in a suit filed against the individual who rear-ended her. Kaiser's policy provides that, when a customer collects damages in a lawsuit, the insurance company can seek reimbursement of costs. Kaiser did this, but failed to credit Glaus for the $20 copayment that she initially forked over.

    The suit is brought on behalf of all Kaiser members whose plans are part of a private employer group medical plan — as Glaus's was — and who reimbursed Kaiser after a successful lawsuit but never received their co-payment back afterwards.

    Kaiser's own "Evidence of Coverage," or EOC, requires that Kaiser refund a consumer's copayment when collecting expenses after a lawsuit settlement. The suit says that Glaus and all other class members have an "equitable lien" against Kaiser, since the company wrongfully withheld money from them.

    Glaus is being represented by the law firm of Lewis Feinberg Lee Renaker Jackson PC, based in Oakland, CA. Attorney Daniel Feinberg conceded that $20 is a small amount of money, but said enough customers have been affected that the aggregate amount of money at issue is likely substantial. "If you steal a million dollars from one person, you're gonna have a lawsuit," Feinberg told the San Francisco Weekly. "But if you steal it by small cuts, you can get away with it until someone files a class action to stop you."

    The suit seeks reimbursement of unrefunded copayments and an injunction prohibiting Kaiser from continuing the practice in the future.

    The action was brought under the Employee Retirement Income Reimbursement Act (ERISA), which protects individuals who might suffer discrimination from health insurance companies. The ERISA provisions at issue require Kaiser to act as a customer's fiduciary, and to administer the plan in the best interests of the consumer. The suit alleges that Kaiser breached that duty, stating that the "defendant has enriched itself at the expense of Ms. Glaus in violation of the fiduciary duty of loyalty."

    This isn't the first time that co-payments have been at the center of a class-action lawsuit. In April, a settlement was reached in Massachusetts case where the manufacturer and a publisher of drug data colluded to inflate co-payments on name-brand drugs. Additionally, according to its website, the St. Louis law firm of Carey & Danis is investigation claims that several HMO's have charged excessive copayments over the last five to ten years.

    A California resident has filed suit against Kaiser Permanente, alleging that the corporation failed to refund her copayment after collecting under a perso...
    Read lessRead more

    Obama Promises Support for Cybersecurity, Net Neutrality

    Advocates appointment of "cyber czar," increased funding and education

    President Obama on Friday promised a stronger emphasis on protecting and improving the nation's cyber-infrastructure, including the appointment of a "cybersecurity czar" to oversee and coordinate strategies, and increased funding for security and education in both the public and private sector.

    In his speech, accompanying the release of a 76-page White House report on the government's cybersecurity policy, Obama framed the need for better defenses against hackers, data thieves, and foreign cyberattacks as both a political and economic imperative.

    "Every day we see waves of cyber thieves trolling for sensitive information — the disgruntled employee on the inside, the lone hacker a thousand miles away, organized crime, the industrial spy and, increasingly, foreign intelligence services," Obama said. "America's economic prosperity in the 21st century will depend on cybersecurity."

    Obama also stated that "Our pursuit of cyber security will not — I repeat, will not include — monitoring private sector networks or Internet traffic. We will preserve and protect the personal privacy and civil liberties that we cherish as Americans."

    "Indeed, I remain firmly committed to Net Neutrality so we can keep the Internet as it should be — open and free," Obama added.

    National Security Council (NSC) cybersecurity chief Melissa Hathaway, widely speculated to be a candidate for Obama's cybersecurity czar position, said that "Protecting cyberspace requires strong vision and leadership and will require changes in policy, technology, education, and perhaps law."

    Among the recommendations in Obama's cybersecurity plan:

    •  Appoint a cybersecurity policy official or "czar" to coordinate national cybersecurity strategies responsible
    •  Prepare a cybersecurity incident response plan and work with the private sector to smooth partnerships and information sharing on cybersecurity efforts
    •  Designate a privacy and civil liberties official to the NSC cybersecurity directorate.
    •  Initiate a national public awareness and education campaign to promote cybersecurity.

    Response to the plan was generally positive, though some criticized the White House for lacking specific recommendations. Bruce Schneier, chief technology officer of BT Counterpane and noted security expert, said that "I am optimistic about President Obama's new cybersecurity policy and the appointment of a new 'cybersecurity coordinator,' though much depends on the details."

    Obama's renewed support for net neutrality, the principle that all Internet content should be accessed equally, also won praise. "President Obama's speech today makes it clear that he considers Net Neutrality an essential component of his administration's sweeping Internet agenda," said Craig Aaron, senior program director of Free Press.

    Obama Promises Support for Cybersecurity, Net Neutrality...
    Read lessRead more

    Get trending consumer news and recalls

      By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

      Thank you, you have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

      Lawmakers Target Bank Overdraft Fees

      Democrats want Fed to restrict "courtesy" program

      Now that Congress has passed legislation cracking down on credit card abuses, three Congressional Democrats are asking the Fed to to strengthen its proposed regulation of bank overdraft fees.

      Reps. Carolyn B. Maloney (D-NY), Barney Frank (D-MA), and Luis Gutierrez (D-IL) want consumers to opt-in to overdraft programs, rather than have banks sign them up automatically. They also want rules that would prohibit the posting of transactions in a sequence which maximizes overdraft fees.

      "Overdraft fees...often take consumers completely by surprise...and {are} usually vastly disproportionate to the amount of the overdraft itself," the lawmakers said in a letter to Federal Reserve Chair Ben S. Bernanke. "It is only fair, then, that institutions be required to obtain consumers' affirmative consent before enrolling them in fee-based overdraft programs."

      In releasing the letter, Maloney praised the Fed's effort to explore overdraft remedies but said, consumers simply shouldn't be enrolled in overdraft programs without their consent.

      "Since Congress just required an affirmative opt-in to over-the-limit fees in my credit card reform law, regulations should similarly require an opt-in to overdraft fees," she said. "Whenever banks step over the line of reasonable business practices into abuse of consumers' trust and understanding, government needs to act."

      Consumer have long complained about overdraft fees, saying they would prefer to have their purchase declined by the merchant if it would overdraw their account. Instead, the bank covers the overdraft but charges a fee.

      "When overdraft fees are $30 or more, a $5 treat at Starbucks becomes a $35 shock after the overdraft fee is applied," Maloney said. "And when multiple purchases in a day are posted in a sequence that only benefits the bankincurring multiple feesthen something is broken in the system and must be fixed."

      Lawmakers Target Bank Overdraft Fees...
      Read lessRead more

      Court Rules Lawsuit Against AT&T/Cingular Can Proceed

      Customers allege poor service during buyout

      Fans of "American Idol's" Adam Lambert who believe that AT&T may have influenced his rival Kris Allen to win can take heart — a lawsuit against AT&T; for allegedly mistreating customers has been cleared to proceed.

      A U.S. District Court judge in Washington ruled that a class action suit filed by former Cingular customers against the company is valid. The suit was brought over charges that as Cingular bought AT&T Wireless in 2004, it immediately dismantled the network, forcing customers to pay to switch over to the new network.

      The plaintiffs alleged that in order to leave Cingular (which later rebranded itself as AT&T), they had to pay a steep termination fee of $175, and that they had to pay "upgrade" fees for new phones that functioned on the AT&T network.

      The class is being led by MaryGrace Coneff of California. Thirteen other lead plaintiffs hail from Washington, Arizona, Florida, Virginia, Alabama, and New Jersey. The plaintiffs have all either paid transfer fees and bought new phones, paid early termination fees, or suffered poor cell service as a result of AT&T's conduct. The suit seeks reimbursement of charges and additional damages.

      AT&T had pushed to dismiss the suit on grounds that their service contracts mandated that all disagreements with the company be handled in private arbitration. But Judge Ricardo Martinez disagreed, striking down that clause as "unconscionable" and a violation of consumer rights under Washington state law.

      "[T]he actual award to the individuals that comprise a class is only one of the principal aims of a class action lawsuit," Judge Martinez wrote. "Class action lawsuits are necessary and effective avenues for consumers whose economic positions vis--vis their corporate opponents would not allow them to proceed on a case-by-case basis."

      AT&T claimed its contracts were built to be friendly to customers, citing its willingness to pay for all arbitration costs and a potential award of $5,000 if any arbitration is found in the customer's favor. But Judge Martinez cited testimony from consumer lawyers who said the sheer cost and time involved in pursuing individual claims against a company the size of AT&T's would be unethical and unfair to the customer.

      Martinez insisted that "the Court will not condone such a broad and exculpatory practice."

      "This is a major victory for AT&T customers all over the nation, said Harvey Rosenfield, founder of California-based Consumer Watchdog. The company broke its promise to its customers, making them pay millions of dollars more than they should have. Now we can move forward to get people their money back."

      AT&T spokesman Fletcher Cook said the company disagreed with the court's decision, and was planning its response.

      Although corporations claim arbitration is a fair way to avoid the costs of settling disputes in court, a number of consumer organizations oppose the "forced arbitration" clauses hidden in a variety of business contracts. The clauses are anything but consumer-friendly: they are usually shoved into the middle of dozens of paragraphs of fine print, and force the consumer to take the contract as it is or abandon it altogether.

      Additionally, a recent study by Public Citizen found that an arbitration tribunal hearing credit card claims ruled against consumers 94 percent of the time. The study also revealed the close relationship that corporations and tribunal associations share: one arbitrator heard 68 cases in one day, and ruled in favor of the corporation every time.

      Court Rules Lawsuit Against AT&T/Cingular Can Proceed...
      Read lessRead more

      Systemax Buys Circuit City Name, Web Site

      No retail locations planned but name will survive online

      Circuit City is back, sort of. The bankrupt consumer electronics retailer has sold its name and Web site to Systemax, a company that sells consumer electronics online.

      Circuit City liquidated and closed all of its stores earlier this year, a victim of the recession that fatally worsened its already weakened competitive position.

      Systemax may not be a household name among consumers, but it has a following among online electronics consumers, who are familiar with its TigerDirect brand. The company sells computers and other gear through its Web site and catalogs.

      It also has a history of trying to breathe new life into dead brands. It acquired CompUSA two years ago after it declared bankruptcy and now sells products using the well-known brand.

      Systemax relaunched CircuitCity.com May 23, designing the front page to look similar to the old Circuit City Web site. However, some visitors to the site report that once you navigate past the home page, the other pages look more like Tigerdirect.com and CompUSA.com pages.

      Consumers who had accounts at Circuit City, or did business with the retailer, can expect to be the recipient of marketing by the newly reconstituted brand. As part of the deal with Circuit Citys liquidators, Systemax also received the former companys mailing lists.

      There have been no announced plans to open actual retail locations, and the Web site notes that the new Circuit City does not honor warranties issued by the old Circuit City.

      Systemax is by no means a newcomer to the consumer electronics business. It was founded in 1949 and reported sales in excess of $3 billion last year. Shares of the company are traded on the New York Stock Exchange.

      Systemax Buys Circuit City Name, Web Site...
      Read lessRead more

      Advanta Closes Customers' Credit Card Accounts

      Analysts: company under severe financial stress

      May 26, 2009
      Advanta is freezing the accounts of nearly one million credit-card holders, most of them small businesses and self-employed professionals, effective next Saturday. The company said it is trying to cut its losses and preserve capital.

      An email sent to Advanta clients said:

      Your Advanta Business Card account is funded by an independent trust which owns the balances you owe on your account and provides funding for new transactions. We expect the trust to stop funding activity on our accounts. The trust also restricts our flexibility to fund activity on your account. Unfortunately, as a result, effective May 30th all Advanta Business Credit Card accounts, including your account, will be closed.

      The email said customers would not be required to immediately pay off their balance and could continue making payments under the terms of their agreement.

      Industry analysts called the move unprecedented and said it indicates the company is under severe financial stress.

      The move was described by industry analysts as unprecedented and indicative of severe financial stress. Earlier this year, the Philadelphia-area company eliminated 300 jobs, or a third of its workforce, and cut its dividend 88 percent. It lost $75 million in the first quarter of this year, compared with a profit of $18 million in the same quarter last year.

      Advanta said its customers defaulted last month at a rate of 20.15 percent, compared with 17.31 percent in March. Outstanding credit-card balances at the end of April were $4.5 billion. The company hopes customers will pay off their balances, but it is not clear what business Advanta will have left after that.

      The disclosures came in a regulatory filing by the Advanta Business Card Master Trust, which bundles Advanta's small-business loans for sale to investors.

      Customers have been complaining for months that Advanta has raised their interest rates without warning and, in some cases, closed their accounts or reduced their credit lines.

      "Advanta raised my annual percentage rate from 19% to 38% after I had used the card and would not provide any detailed explanation for why they took this action," said Matt of O'Fallon, Mo. "They have lowered my credit line now to $2800 and I'm sure once I submit the payment in full they will cancel the card."

      "I have had perfect credit and Advanta still managed to raise the interest rate to 37.99% and it was impossible to talk to anyone who spoke good English," said Dick of Appleton, Wis. "I made offers to pay them off, took bank loans to pay them off, was still overcharged and the rate jacked up for no reason."

      Advanta Closes Customers' Credit Card Accounts...
      Read lessRead more

      California Files 79 Criminal Charges in $200 Million Ponzi Scheme

      Defendants accused of bilking investors out of retirement savings

      May 26, 2009
      California Attorney General Edmund G. Brown has filed 79 criminal charges against three men who he says "callously swindled" thousands of individuals, including many retirees who lost their life savings, in a $200 million Ponzi scheme.

      The defendants — James Stanley Koenig, 57, of Redding; Gary T. Armitage, 59, of Healdsburg; and Jeffery A. Guidi, 54, of Santa Rosa — were arrested and are now in custody. Bail has been set at $5 million each.

      The three — James Stanley Koenig, 57, of Redding; Gary T. Armitage, 59, of Healdsburg; and Jeffery A. Guidi, 54, of Santa Rosa — "callously swindled thousands of individuals out of $200 million to bankroll their extravagant lifestyles," said Brown. "They took investors money and used it to pay for an 80-acre castle estate, a Lear jet, luxury homes and fancy cars. The Ponzi scheme ultimately collapsed under its own weight, causing hardship to thousands, many of whom were retirees who lost their life savings."

      The charges mark the culmination of a year-long investigation, which found that Koenig, Armitage and Guidi created a network of more than 55 business ventures over a period of 10 years to enrich themselves and keep their Ponzi scheme afloat.

      Brown's investigation revealed that in 1997, the three men began peddling construction and real estate projects across California. This included: "Quail Hollow," a residential subdivision in Susanville; Lake College, a for-profit vocational school in Redding; Mountain House Golf Course near Tracy; a light industrial distribution center in Brentwood; and dozens of other so-called "investment opportunities."

      Victims were promised that these were safe, secure, low risk investments with double-digit returns, averaging 12 percent.

      In recruiting their victims, Armitage organized "investment planning seminars," many of which targeted retirees, in the Bay Area and throughout California. Based on advice from these seminars, Californians invested sums ranging from $50,000 to more than $1 million. Some turned over their entire retirement portfolios and savings accounts.

      Many of the construction and real estate projects, however, were poorly managed and were not financially viable, resulting in huge losses. Some projects were left unfinished or ended up in foreclosure.

      Rather than inform investors about the failures, the complaint says Koenig, Armitage and Guidi sought to attract new investors, whose funds could be used to offset losses and pay returns to earlier investors. In doing so, the defendants withheld vital information that impacted investment decisions, including past business failures and Koenig's 1986 federal fraud conviction.

      With double-digit returns and no knowledge of the investment failures, most investors kept their money in place and many invested in new projects. This Ponzi scheme continued for more than 10 years.

      Under this scheme, the defendants' company would purchase an assisted living facility and sell it to one of their affiliate companies. The affiliate would then sell ownership shares in the property as an "investment opportunity" at an even higher price to new investors. Meanwhile, an additional affiliated company would manage the property to maximize revenue.

      Revenues, however, were not reinvested into the facilities, but were pooled and used to pay interest to investors and keep investors at bay.

      In April 2007, the Ponzi scheme began to collapse under a mountain of debt, and the defendants were unable to pay interest to investors. Nevertheless, they continued to solicit new investors in the vain hope that they could keep the operation alive, raising $23 million from 91 new investors.

      The defendant's businesses finally went closed their doors in June 2008.

      During the course of its investigation, Brown's office identified more than 1,000 victims with losses totaling $200 million.

      Over the 10 years, Koenig, Armitage and Guidi siphoned fees, revenues and profits from their business ventures for their personal benefit, using the funds to purchase an 80-acre castle estate, a Lear jet, luxury vehicles, lavish vacations and expensive wine and art.

      The three were charged with selling securities by means of false statements or material omissions in violation of Corporations Code Section 25401/25540 and residential burglary in violation of Section 459 of the Penal Code:

      • Koenig was charged with 40 counts of securities fraud and 37 counts of residential burglary.

      • Armitage was charged with 42 counts of securities fraud and 37 counts of residential burglary.

      • Guidi was charged with 39 counts of securities fraud and 33 counts of residential burglary.

      If convicted on all counts, each could face more than 100 years in prison.

      More Scam Alerts ...

      Defendants accused of bilking investors out of retirement savings...
      Read lessRead more

      Prevention Needed to Curb Foreclosure Rescue Scams

      Consumer group warns that more enforcement and education are necessary

      With home foreclosures at an unprecedented and historic high, the National Consumers League (NCL), which has long tracked illegal scams through its Fraud Center, warns millions of consumers are more vulnerable than ever to mortgage fraud and bogus foreclosure rescue schemes.

      As federal and state governments undertake a much-needed crackdown, NCL urges a renewed focus on consumer education to help consumers avoid falling victim to these criminals in the first place.

      Mortgage fraud costs the lending industry an estimated $4-6 billion annually, according to the Prieston Group. At a time when consumer's pocketbooks are stretched thinner each day due the tight economy, homeowners are increasingly vulnerable to fraudsters offering them a way to avoid losing their homes.

      Unfortunately, for tens of thousands of Americans, these schemes almost always end up with consumers losing money, having their credit further damaged, and losing their biggest investment: their homes.

      "We welcome the recent actions by the federal and state governments to tackle the growing threat of mortgage fraud," said Sally Greenberg, NCL Executive Director. "However, vigorous enforcement actions — while a critical component of fighting fraud — must be combined with education to help consumers recognize and avoid these scams in the first place."

      Mortgage modification and foreclosure rescue scams come in a variety of guises, but some of the common ones include:

      • Upfront Fee Scam. Fraudster promises, for an upfront fee, to negotiate with homeowners bank to pay down back-payments, but scammer ultimately takes the money and disappears.

      • Lease-back or repurchase scams. Con artists promise to pay a mortgage and lease it back to their victims if the consumer signs over the deed. The scammer then raises the rent, sells the house, steals equity, or even evicts the tenant.

      • Refinance fraud. Victims sign over ownership of the house, thinking they are signing documents for a new loan at a lower payment level.

      • Bankruptcy schemes. The scammer encourages the victims to stop paying their mortgage and offers to file bankruptcy for the consumer, for a fee.

      • Appraisal fraud. An appraiser — in cahoots with a bank — overvalues the home, then secures an unnecessarily large loan at high interest rates for the homebuyer. Another scenario is that the appraiser undervalues the home in order to justify a short sale and subsequent re-sale at market value for profit.

      "Recent multi-agency federal and state actions to tackle the threat of mortgage fraud are a positive step in helping to protect consumers," said Greenberg. "Fraudsters should be apprehended and brought to justice. All too often, however, victims of these schemes have already been ruined financially by the time mortgage fraud rings are broken up by law enforcement. Now, more than ever, enforcement should be tied to prevention by devoting more resources to educating consumers through churches, community centers, senior centers, schools, and libraries. This is needed particularly in vulnerable low-income, elderly, and immigrant communities, whose members are frequent targets for mortgage fraud."

      Prevention Needed to Curb Foreclosure Rescue Scams...
      Read lessRead more

      Two Hydroxycut Class Actions Filed

      Suits follow recall of liver-damaging dietary supplement

      Two class action lawsuits have been filed in the wake of the recall of Hydroxycut, a popular weight-loss supplement that has been linked to liver damage and other life-threatening side effects.

      The suits, filed in Canada and Tennessee, accuse Iovate Health Sciences, which manufactures Hydroxycut, of failing to warn of the drug's dangers or take proper precautions to protect its users.

      Hydroxycut was voluntarily recalled on May 1 after the Food and Drug Administration (FDA) identified numerous health risks posed by the drug. The Administration received 23 complaints of liver damage resulting from use of the product, ranging from jaundice to the need for a transplant. A 19-year-old man died in March 2007 from liver failure apparently caused by Hydroxycut; amazingly, the death was not reported to the FDA until March of this year.

      The drug poses other serious risks, including heart failure, seizures, and rhabdomyolysis, a muscle condition where muscle fibers break down to the point that they are released into the bloodstream. In some serious cases, this condition can lead to kidney failure.

      The Canadian suit, filed on May 4, defines a class of any Canadian who purchased Hydroxycut after May 1, 2003. The suit alleges that Iovate failed to warn on the label of Hydroxycut's possibly serious side effects. The suit seeks $20 million plus punitive damages.

      The Tennessee suit, filed on May 20 in the United States District Court for the Middle District of Tennessee, defines a class of anyone who purchased a Hydroxycut product. The lead plaintiffs, all from Tennessee, spent varying amounts of money on Hydroxycut products before the recall was announced. The suit alleges counts under negligence, breach of express and implied warranties, fraud, failure to warn, unjust enrichment and violations of the Tennessee Food, Drug and Cosmetic Act, among others.

      The plaintiffs in the Tennessee action experienced a number of symptoms as a result of taking the drug, including nausea, vomiting, abdominal pain, headaches, and extreme fatigue.

      Very popular

      The extremely popular drug currently accounts for 90% of weight-loss supplement sales. In 2008, Iovate sold more than 9 million units of the drug.

      The FDA's advisory states that, Although the liver damage appears to be relatively rare, FDA believes consumers should not be exposed to unnecessary risk. Shortly after the statement was released, Iovate voluntarily recalled the drug from the market.

      The FDA said that, while liver damage is rare, those affected did not exceed the recommended dosage of the drug. The Administration has yet to determine why the drug causes such damage.

      The Los Angeles Times reported this week that an Army radio operator had to be medically discharged after suffering from a serious case of rhabdomyolysis, most likely as a result of using Hydroxycut during a three-month period in 2007. Robert Tropea suffered from serious muscle aches and had black urine. Moreover, tests showed extremely serious organ and muscle damage.

      Tropea conceded to the Times that he didn't recognize a lot of the ingredients listed on the supplement's label. But they were selling it as something safe, and I took what they said and ran with it, he said.

      The recall points to the serious problems with oversight of over-the-counter dietary supplements. Under the Dietary Supplement Health and Education Act (DSHEA), which took effect in 1994, it is the manufacturer's responsibility to ensure that a given drug is safe for consumer consumption. While the company is technically required to rely on adequate evidence in reaching this conclusion, they do not have to provide this evidence to the FDA unless the drug contains an entirely new dietary ingredient. Whether the Hydroxycut controversy will change this shoddy procedure remains to be seen.

      A statement on the website hydroxycutinformation.com explains that, While this is a small number of reports relative to the many millions of people who have used Hydroxycut products over the years, out of an abundance of caution and because consumer safety is our top priority, we are voluntarily recalling these Hydroxycut-branded products.

      Recalled products

      The list of products being recalled by Iovate currently includes:

      • Hydroxycut Regular Rapid Release Caplets
      • Hydroxycut Caffeine-Free Rapid Release Caplets
      • Hydroxycut Hardcore Liquid Caplets
      • Hydroxycut Max Liquid Caplets
      • Hydroxycut Regular Drink Packets
      • Hydroxycut Caffeine-Free Drink Packets
      • Hydroxycut Hardcore Drink Packets (Ignition Stix)
      • Hydroxycut Max Drink Packets
      • Hydroxycut Liquid Shots
      • Hydroxycut Hardcore RTDs (Ready-to-Drink)
      • Hydroxycut Max Aqua Shed
      • Hydroxycut 24
      • Hydroxycut Carb Control
      • Hydroxycut Natural

      The FDA has not yet determined which ingredients, dosages, or other health-related factors may be associated with risks related to these Hydroxycut products. The products contain a variety of ingredients and herbal extracts.

      Lawsuits have been filed in the wake of the recall of Hydroxycut, a popular weight-loss supplement that has been linked to liver damage and other life-thre...
      Read lessRead more

      Obama Signs Credit Card Bill

      Measure bans some of issuers' least popular tactics

      By Truman Lewis

      May 24, 2009
      It's a victory some say is largely symbolic, but American consumers got a Memorial Day present from Congress and the Obama Administration: the Credit Card Accountability, Responsibility and Disclosure Act (CARD), signed into law by President Obama Friday afternoon.

      Obama called the measure "common-sense reforms designed to protect consumers." It bans unfair rate increases, prevents unfair fee traps, requires plain language in plain sight for disclosures, increases accountability all around, and institutes protections for students and young people. The Federal Reserve had already ordered similar protections but its decree will not become effective until mid-2010.

      President Obama and lawmakers applaud following his signing of the Credit Card Accountability, Responsibility and Disclosure Act. (White House photo)

      Under the new law:

      • credit card issuers will be required to tell card holders how long it will take to pay off a balance and what it will cost in interest if they only make the minimum monthly payments;

      • retroactive rate hikes that appear on a bill "suddenly with no rhyme or reason" will be barred, Obama said;

      • companies will have to post their agreements online;

      • consumers will have to mail statements 21 days before payment is due, instead of 14;

      • shifting payment dates will be prohibited; and

      • 45 days' notice will be required for changes in terms and conditions.

      More details are available on the White House Web site.

      It's estimated that the average household debt by credit cardholders who carry a balance is around $17,000. The White House said that every year, Americans pay around $15 billion in penalty fees. Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards.

      Obama said the changes were not intended to encourage reckless spending.

      "We're not going to give people a free pass; we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives," he said at the Rose Garden signing ceremony.


      Consumer activists generally applauded the measure while bankers said it would restrict credit available to consumers and slow the economic recovery.

      "While even consumers who usually pay off their cards monthly are hit by unfair rate hikes and lowered credit limits, industry employs predatory tactics aimed at 'revolvers,'" the Center for Responsible Lending said in a statement.

      Gun provision

      Sen. Tom Coburn (R-Okla.) tacked on an unrelated provision that allows visitors to national parks and wildlife refuges to carry loaded weapons if they are already licensed to carry firearms. Congressional leaders decided not to contest the measure in order to meet Obama's request that the measure be ready for signing before Memorial Day.

      Obama Signs Credit Card Bill: It's a victory some say is largely symbolic, but American consumers got a Memorial Day present from Congress and the Obama Ad...
      Read lessRead more

      Another Chinese Drywall Suit Filed

      Senate ponders what to do next

      Another class action has been filed in the ongoing Chinese drywall saga, this one on behalf of three North Carolina homeowners who complained of illness and damage to their homes as a result of the wallboard.

      Around 550 millions pounds of Chinese drywall was imported into the United States during the period between 2004 and 2006. This was in part due to a domestic shortage because of the housing boom, but construction in the wake of Hurricane Katrina also played a significant role.

      The most commonly-cited culprit is Chinese manufacturer Knauf Plasterboard Tianjin Co., Ltd. (KPT), although other companies may also have imported defective drywall.

      A number of other suits have already been filed in Florida, Virginia, Mississippi, Louisiana, and North Carolina. All in all, consumers in at least 16 states are affected. Florida and Louisiana appear to be the hardest-hit.

      Lennar Homes, based in Miami, has already confirmed that some of its homes contain KPT drywall and has promised to take action. Lennar is the nation's second-largest homebuilder by volume.

      The North Carolina suit alleges that the drywall caused several medical conditions, including nausea, sore throat, fatigue, and respiratory problems. The homeowners also say that metal products including wiring, appliances, and utensils were damaged by the noxious emissions from the drywall. These claims are similar to those that other homeowners have experienced.

      The affected drywall tends to emit an egg-like sulfuric odor, which not only corrodes metal and leads to wheezing but which can also cause serious health problems like asthma and even pneumonia.

      The suit asks the company to buy back the affected houses or pay to replace the drywall. Houses built with the defective drywall have become essentially worthless due to the hazards associated with them.

      Meanwhile, the Senate Subcommittee on Consumer Protection, Product Safety and Insurance is seeking $2 million in emergency funds to expedite research relating to the problem. Additionally, an Environmental Protection Agency (EPA) study showed that Chinese drywall contains sulfur and other chemicals including two associated with acrylic paint not found in drywall manufactured in the United States. The EPA is now going to test both domestic and Chinese drywall under conditions similar to those in the pertinent states.

      On Thursday, the Senate held hearings on the matter, hearing testimony from both federal officials and homeowners affected by the problem. While the hearing allowed senators the opportunity to understand the consequences of the epidemic, some were clearly concerned with the lack of consensus on what the next step will be.

      Weve got to figure out what in the world these people are gonna do, said Sen. Bill Nelson (D-FL), who has taken a leading role since the story broke earlier this year. They cant afford rent and paying the mortgage if they are still living in the house.

      Meanwhile, communities are taking preemptive action to ensure that homeowners in their area are not affected by the problem. The Nofolk, Virginia city council unanimously approved a measure banning the use of Chinese drywall in the city. This is the first ban approved in the United States, although more are almost certain to follow. The measure requires builders to provide proof that they are not using Chinese-made drywall; failure to do so will result in a denial of their building permit.

      Another Chinese Drywall Suit Filed...
      Read lessRead more

      Craigslist CEO Sues South Carolina Attorney General

      Henry McMaster's threats violated federal law and the Constitution, suit argues

      Craigslist CEO Jim Buckmaster has fired back at South Carolina Attorney General Henry McMaster, who has been threatening to prosecute Buckmaster on criminal charges of soliticting prostitution. In an unusual turnabout, Buckmaster has filed suit against McMaster, seeking an injunction that would bar him from filing charges.

      McMaster and other state Attorneys General have been hounding Craiglist because of postings by men and women that solicit sex, entertain invitations to amorous encounters and otherwise enable citizens to communicate with each other.

      Buckmaster's suit argues that his site's activities are protected by the First Amendment and, more specifically, by the Communications Decency Act, enacted by Congress in 1996 to protect Web sites, telecommunications providers and other interactive communications media from being held responsible for the content of messages posted by their users.

      McMaster's threats are "unwarranted by the facts" and "represent an unconstitutional prior restraint on free speech," Buckmaster wrote in his blog.

      Last week, Craiglist agreed to shut down its "erotic services" section and open a new "adult services" section, which will be reviewed by human editors. Explicit prostitution advertisements and pornographic material will not be allowed, Craigslist said. That didn't stop McMaster, though. He continued to threaten legal action if ads implicated in prostitution continued to appear on the site.

      The Wall Street Journal quoted a University of South Carolina law professor, Ann Bartow, as saying McMaster, who is running for re-election, was either "grandstanding" or simply did not understand the Communications Decent Act.

      In New York, Attorney General Andrew Cuomo on Wednesday indicted seven people accused of promoting a prostitution ring in New York City via Craigslist but did not name the site as an accessory.

      Press reports in major cities said the number of obvious prostitution ads on Craiglist had dropped since the site changed its policy.

      Craigslist CEO Sues South Carolina Attorney General...
      Read lessRead more

      Nutro Recalls Dry Cat Food Products

      Incorrect levels of zinc, potassium

      May 21, 2009
      Nutro Products has announced a voluntary recall of select varieties of NUTRO NATURAL CHOICE COMPLETE CARE Dry Cat Foods and NUTRO MAX Cat Dry Foods with Best If Used By Dates between May 12, 2010 and August 22, 2010. The cat food is being voluntarily recalled in the United States and ten additional countries. This recall is due to incorrect levels of zinc and potassium in our finished product resulting from a production error by a US-based premix supplier.

      Two mineral premixes were affected. One premix contained excessive levels of zinc and under-supplemented potassium. The second premix under-supplemented potassium. Both zinc and potassium are essential nutrients for cats and are added as nutritional supplements to NUTRO dry cat food.

      The company said the probelm was identified during an audit of the documentation from the supplier. A company spokesman said an "extensive review confirmed that only these two premixes were affected." The recall does not affect any NUTRO dog food products, wet dog or cat food, or dog and cat treats.

      Affected product was distributed to retail customers in all 50 states, as well as to customers in Canada, Mexico, Japan, Korea, Thailand, Malaysia, Singapore, Indonesia, New Zealand, and Israel. The company said it is working with all of its distributors and retail customers, in both the US and internationally, to ensure that the recalled products are not on store shelves. These products should not be sold or distributed further.

      Consumers who have purchased affected product should immediately discontinue feeding the product to their cats, and switch to another product with a balanced nutritional profile. While the company said it has received no consumer complaints related to this issue, cat owners should monitor their cat for symptoms, including a reduction in appetite or refusal of food, weight loss, vomiting or diarrhea. If your cat is experiencing health issues or is pregnant, consumers should contact their veterinarian.

      Consumers who have purchased product affected by this recall should return it to their retailer for a full refund or exchange for another NUTRO dry cat food product. Cat owners who have questions about the recall should call 1-800-833-5330 between the hours 8:00 AM to 4:30 PM CST, or visit www.nutroproducts.com.

      Recalled Pet Food

      The varieties of NUTRO NATURAL CHOICE COMPLETE CARE Dry Cat Foods and NUTRO MAX Cat Dry Foods listed below with Best If Used By Dates between May 12, 2010 and August 22, 2010 are affected by this recall.

      U.S. Product Name

      Bag Size


      NUTRO® NATURAL CHOICE® COMPLETE CARE® Kitten Food4 lbs0 79105 20607 5
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Kitten Food8 lbs.0 79105 20608 2
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Kitten Food (Bonus Bag)9.2 lbs. 0 79105 20695 2
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Kitten Food20 lbs0 79105 20609 9
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Kitten Food (Sample Bag)1.5 oznone
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Adult4 lbs0 79105 20610 5
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Adult8 lbs.0 79105 20611 2
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Adult (Bonus Bag)9.2 lbs0 79105 20694 5
      NUTRO® NATURAL CHOICE® COMPLETE CARE® Adult20 lbs0 79105 20612 9
      NUTRO® NATURAL CHOICE® COMPLETE CARE® Adult (Sample Bag)1.5 oznone
      NUTRO® NATURAL CHOICE® COMPLETE CARE®  Adult Oceanfish Flavor4 lbs0 79105 20622 8
      NUTRO® NATURAL CHOICE® COMPLETE CARE® Adult Oceanfish Flavor8 lbs0 79105 20623 5
      NUTRO® NATURAL CHOICE® COMPLETE CARE® Adult Oceanfish Flavor (Bonus Bag)9.2 lbs. 0 79105 20698 3
      NUTRO® NATURAL CHOICE® COMPLETE CARE® Adult Oceanfish Flavor20 lbs0 79105 20624 2
      NUTRO® MAX® Cat Adult Roasted Chicken Flavor3 lbs0 79105 10228 5
      NUTRO® MAX® Cat Adult Roasted Chicken Flavor6 lbs0 79105 10229 2
      NUTRO® MAX® Cat Adult Roasted Chicken Flavor16 lbs0 79105 10230 8
      NUTRO® MAX® Cat Adult Roasted Chicken Flavor (Sample Bag)1.5 oznone
      NUTRO® MAX® Cat Indoor Adult Roasted Chicken Flavor3 lbs0 79105 10243 8
      NUTRO® MAX® Cat Indoor Adult Roasted Chicken Flavor6 lbs0 79105 10244 5
      NUTRO® MAX® Cat Indoor Adult Roasted Chicken Flavor16 lbs0 79105 10245 2
      NUTRO® MAX® Cat Indoor Adult Roasted Chicken Flavor (Sample Bag)1.5 oznone
      NUTRO® MAX® Cat Indoor Adult Salmon Flavor3 lbs0 79105 10246 9
      NUTRO® MAX® Cat Indoor Adult Salmon Flavor6 lbs0 79105 10247 6
      NUTRO® MAX® Cat Indoor Adult Salmon Flavor16 lbs0 79105 10248 3
      NUTRO® MAX® Cat Indoor Weight Control3 lbs0 79105 10249 0
      NUTRO® MAX® Cat Indoor Weight Control6 lbs0 79105 10250 6
      NUTRO® MAX® Cat Indoor Weight Control16 lbs0 79105 10251 3

      Read verbatim complaints and comments from consumers.

      Nutro Products has announced a voluntary recall of select varieties of NUTRO NATURAL CHOICE COMPLETE CARE Dry Cat Foods and NUTRO MAX Cat Dry Foods....
      Read lessRead more

      Feds, States Target Charity Scams

      Bogus telemarketers claim to help police, firefighters, veterans

      The Federal Trade Commission is joining with a number of states to crack down on fraudulent telemarketers claiming to help police, firefighters, and veterans.

      The FTC, along with 61 Attorneys General, Secretaries of State, and other law enforcers of 48 states and the District of Columbia, have launched Operation False Charity, taking enforcement actions against 32 fundraising companies, 22 non-profits or purported non-profits on whose behalf funds were solicited, and 31 individuals.

      The FTC and state agencies also released new education materials, in both English and Spanish, to help consumers recognize and avoid charitable solicitation fraud.

      In these difficult economic times, Americans want to make every contribution count, said FTC Chairman Jon Leibowitz. The good news is theyre still being generous and donating to charitable organizations, including those that support our police officers, firefighters, military families, and veterans.

      "The bad news is that some unscrupulous operators have seized on this goodwill to make a quick buck. The actions were announcing today demonstrate that federal and state partners will find charity scammers and we will stop them, Leibowitz said.

      All of us share a deep trust and respect for our law enforcement officers, firefighters, and military service members, said Attorney General Chris Koster of Missouri. The attorneys general across the country will not stand idly by while greedy telemarketers take advantage of that trust and respect.

      In Massachusetts this week, Attorney General Martha Coakley filed two separate actions this week against four professional solicitors and the two charities they fundraised for.

      The first action alleges that Our American Veterans, a Georgia-based organization; its president, Sydney Young; and its professional fundraiser, Golden State Marketing, Inc., a Delaware corporation with offices located in New Bedford, engaged in deceptive solicitation practices in violation of state Consumer Protection laws.

      The complaint alleges that the defendants misled donors into believing that fundraisers were calling on behalf of veterans groups based in Hingham and Hull and that their donations would benefit veterans in those communities.

      The complaint further alleges that the defendants failed to disclose their status as professional fundraisers, and failed to honor requests to discontinue its solicitation campaign to raise funds for disabled and indigent veterans. A preliminary injunction hearing has been scheduled in this case for June 9, 2009.

      In the second action filed in court, the Attorney Generals Office alleges that Disabled Police Officers Counseling Center, Inc., a Florida-based charity; its president, Terry Morrison; and its professional fundraisers, Patrick Kane, doing business as the Kane Marketing Group, Mark Hemphill, doing business as Infiniti Marketing Firm, and James Vincent, doing business as Northeast Advertising, misled potential donors into believing that fundraisers were volunteers calling on behalf of local disabled police officers.

      The complaint also alleges that the defendants in this lawsuit did not disclose their status as professional fundraisers, did not disclose the charitys Florida address, and did not file fundraising reports for their fundraising campaigns, all of which are required by law. A preliminary injunction hearing has been scheduled in this case for June 19, 2009.

      Given todays economic climate, charitable organizations are already struggling to secure funding for their missions through donations, Coakley said. Fraudulent solicitors not only take money away from legitimate organizations, but they also undermine the public's confidence in legitimate charitable fundraising. Fortunately, through some simple research and good common sense, donors can prevent much of this fraud, and ensure that donated funds go to support the worthy causes, rather than unscrupulous individuals.

      Feds, States Target Charity Scams...
      Read lessRead more

      TicketsNow Once Again in Hot Water

      Site sold Springsteen tickets that didn't exist

      Less than three months after Ticketmaster settled a suit accusing it of redirecting consumers to its partner TicketsNow.com in an effort to drive up prices, TicketsNow is again being accused of ripping off loyal customers.

      In the February settlement, thousands of consumers who tried to buy tickets to a show at the New Jersey Meadowlands by either Bruce Springsteen or the E Street Band were redirected to TicketsNow.com, where they were charged prices as high as four times the actual face value of the tickets. This in spite of the fact that original tickets were still available on Ticketmaster's own site.

      The suit should probably not have come as a surprise; the relationship between the two companies provides ample incentive for such shady practices. Ticketmaster bought TicketsNow in January 2008 for $265 million. The purchase was designed to move Ticketmaster, already an industry giant, into the vaunted secondary ticket market. Companies like Ticketmaster are primary ticket sellers, meaning that they sell the original ticket.

      Secondary ticket companies essentially act as online scalpers, where people who bought tickets on Ticketmaster can go and resell them for more than their actual worth. Depending on the event's popularity, ticketholders can make a handsome sum; a recent Garth Brooks event allowed some to turn an eight-fold profit. At the time of the acquisition, TicketsNow was the second largest secondary ticketer, behind only StubHub!, and Ticketmaster was already the number one primary ticketing company.

      The settlement in the February case, negotiated by New Jersey Attorney General Anne Milgram, placed a wall between Ticketmaster and TicketsNow. Ticketmaster promised not to link to the subsidiary for at least a year for all shows and entertainment events. Ticketmaster agreed to pay New Jersey $350,000, and to set up a random drawing for 1,000 consumers who filed complaints against Ticketmaster with the Division of Consumer Affairs. The winners of the drawing received tickets to one of two concerts scheduled for May 21 and May 23 at the Meadowlands.

      Those not selected in the drawing were given a $100 Ticketmaster gift certificate and the chance to purchase two tickets to a future Springsteen show before sales opened to the general public.

      In the current scandal, TicketsNow told over 300 consumers who bought tickets for a Springsteen show on May 18 in Washington that the tickets wouldn't be available. The website essentially oversold the show, collecting money for tickets that didn't exist in the first place.

      TicketsNow has acted quickly to try to right the problem, no doubt cognizant of the fact that they are being eyed closely by regulators and the public at large. The company offered the wronged consumers a full refund and a TicketsNow gift card equal to what they paid for their ticket. Customers who balk at the offer were also given the choice of better seats to an earlier show, along with $75 for gas and $150 for a hotel room.

      This chivalrous offer has done nothing to assuage New Jersey Rep. Bill Pascrell (D) from vowing to introduce legislation mandating the FTC to create a framework of rules for the secondary ticket market. According to Pascrell, Right now there is no transparency, no checks and balances. No one knows what the hell is going on. He went one step further by calling the secondary ticket market legalized scalping.

      Looking at Ticketmasters's website, one would think that the partnership between the two companies is a roaring success and great news for consumers. The site proclaims that, The partnership between Ticketmaster and TicketsNow allows fans the greatest choice and access to live entertainment while ensuring reliability of service, convenience, and security.

      The online ticket market has proved problematic several times over the past year.

      In March, Pennsylvania Attorney General Tom Corbett announced a settlement with the fan website of child star Miley Cyrus, which offered $30 memberships in a fan club with the incentive of early access to ticket sales. The website, however, failed to inform fan club members that sales went public within fifteen minutes of first being offered to members. The site also offered pre-sale codes for early access to tickets, when in fact all tickets were already sold out. Under the settlement, 996 consumers got their membership extended by four months.

      Additionally, Ticketmaster faces yet another suit regarding the bait-and-switch implicated in the February case. Phish fan John O'Hurley filed suit in federal court in Massachusetts. The suit says that consumers who log onto Ticketmaster are told that tickets are sold out and immediately rerouted to TicketsNow O'Hurley's confirmation e-mail said he had purchased nine tickets for a total of $2,064; the face value of the tickets, however, was $60.

      TicketsNow Once Again in Hot Water...
      Read lessRead more