Current Events in September 2009

Nissan has agreed to replace the so-called launch control on its high-end GT-R sports coupe, bringing to an end a saga that started with one owner's truly horrifying story.

In October 2008, Autoblog reported that a GT-R owner took his car to the dealership after hearing loud noises in the rear end. The verdict? His transmission was finished, which Nissan said was the direct result of turning off the car's vehicle dynamic control, or VDC.

The owner had apparently disengaged the system several times in order to activate the Nissan's launch control, which allows the car to shoot from zero to 60 miles per hour in 3.3 seconds (versus a flat 4.0 with launch control turned off).

Nissan informed the owner he was out of luck, as GT-R's owner's manuals warn consumers to never turn off VDC unless trying to extract their car from the snow or mud. He would have to pay the repair costs himself, at a grand total of $20,000.

Much was made of launch control when the GT-R debuted in the States last year, and for good reason. Sixty miles an hour in four seconds would be more than satisfactory for most people, but the GT-R is an enthusiast's car; 3.3 seconds puts it ahead of the Tiptronic version of Porsche's 911 Turbo (which reaches 60 in 3.4 seconds) and even a good number of motorcycles.

Under the settlement, consumers are eligible to upgrade to a new-and-improved launch control (appropriately named LC2), which provides safeguards to reduce the likelihood of any more five-digit mechanic bills. Once GT-R owners upgrade, their warranties will be extended to five years or 60,000 miles, whichever comes first.

In spite of the new system's improved technology, however, consumers whose transmissions fail as a direct result of VDC being turned off will still not be covered.

If a consumer turns VDC off, then back on, and subsequently experiences a failure, the burden is on Nissan to prove that the VDC's disengagement was the cause of the problem. And it's not necessarily easy to game the system; Nissan has previously used black box data to determine whether problems were caused by the owner turning VDC off. 2009 GT-R owners will also get a service coupon worth $75.

The GT-R was launched in Japan in late 2007 and burst onto the American scene the following year. While Nissan has had some hits with enthusiasts before including its 350Z coupe the GT-R was the company's first American offering designed to compete with European supercars.

At a starting price of $80,790, the GT-R is not cheap by conventional standards, but pitted against, say, a Maserati GranTurino at $117,500 it's a downright steal. It also competes favorably with the 911 Carrera, which starts at a similar $76,300, and, in base form, is nearly a full second slower to 60 miles per hour. Time is money, after all.

Under pressure from Capitol Hill and consumers, Bank of America and JPMorgan Chase are easing up on overdaft charges and other fees.

Banks make billions of dollars per year in revenue from overdraft charges, in many cases levying them on customers who didn't even know they had -- and had never asked for -- overdraft protection. But with Congress considering proposals to impose reforms, banks are trying to get in front of the problem with reduced fees and more lenient terms.

BofA

Bank of America said that, beginning Oct. 19, it will:

• Not charge Overdraft item fees when a customer's account is overdrawn by a total amount less than $10 for one day
• Not charge overdraft fees on more than four items per day;
• Improve the process for customers to opt out of overdraft capability;
• Offer customers a "Clarity Commitment" that spells out in clear, unambiguous terms what customers can expect from their deposit relationship with Bank of America.

Effective June 2010, the bank will:

• Introduce an annual limit on the number of times customers can overdraw their accounts at the point-of-sale when they do not have sufficient funds to cover their transactions
• Contact customers who are nearing the annual limit to provide education and tools to help them better manage their finances
• Limit overdraft capability, and therefore fees, for customers who reach the annual limit
• Provide new customers the choice to opt into overdraft capability at account opening.

Chase

Chase said its new policies, when fully effective, mean that customers "won't pay big fees for small mistakes." The changes will apply to all current and new customers and will include:

• Eliminating overdrafts for debit cards unless the customer opts in to overdraft services;
• Modifying posting order to recognize debit-card transactions and ATM withdrawals as they occur;
• Eliminating overdraft fees if a customer's account is $5 or less overdrawn'
• Reducing the maximum number of overdraft fees per day to 3 from 6.

"Customers will be given the opportunity to decide whether they want to participate in Chase's debit-card overdraft services," said Charlie Scharf, head of Retail Financial Services at JPMorgan Chase. "We believe it's important to give all 25 million existing debit card customers, as well as new customers, the ability to decide whether to opt in. We expect many of our customers will continue to find these services very useful."

Chase will continue its current policy of not allowing customers to withdraw more cash from an ATM than they have available in their account.

Chase will update customer accounts and balances for debit-card purchases and ATM withdrawals as they occur. "The new posting order will be more logical for customers, and they will incur fewer fees," Scharf said.

In addition, Chase said it will continue to offer overdraft protection for customers who link their checking account to a savings account, credit card or home equity line of credit. Millions of customers use this for peace of mind in case they forget to record a transaction, make a subtraction error in their checkbook or lose track of the dates of direct deposits or automatic debits.

Chase said it expects to implement these changes in the first quarter of 2010.

Angry bankers

Not all bankers are taking consumer restlessness to heart. Dan D. Graham, president of Flora Bank & Trust, Flora, Ill., responded angrily to an earlier story, Bulls Eye on Bank Overdraft Charges.

"I find it amusing that no banker, or bank association, was contacted for information, and certainly not a community banker. Your article was misleading on many fronts, and down right (sic) biased and disingenuous for the most part. Here are the facts as they relate to our bank, and for the most part the industry as a whole," Graham wrote.

Graham listed these "facts:"

1. You assert that banks let customers overdraw their accounts without their knowledge. BULL! First and foremost it is the customers responsibility to manage their checking account. Who else is going to know if they have money in their account besides them when they write a check? Once again though we are taking personal responsibility out of the individuals hands, blaming someone else, and asking the government to control our lives. Can you get Senator Dodd to remind me to go to the bathroom; Im not smart enough to do it myself?

2. There is a cost involved to the bank, and a charge will apply even if the check is returned. In a lot of cases if the check is returned the merchant charges a fee that is often higher than the banks. When are you going to go after them? By paying the item and charging a fee, we in a lot of cases end up saving the consumer money.

3. I guess its ok for the Check Cashers, who would replace this service to charge enormous amounts of interest.

4. We notify our customers before they get the service, and give them the opportunity to opt out; in fact, they can opt out at any time. The fees associated with an overdraft are also disclosed to customers at account opening and again annually. We have had very few customers opt out, or complain. In fact we have a far greater number of customers thank us for the service.

5. You make it sound like American families are getting deeper into debt due to overdraft fees. Fact is, our overdraft fees are down considerably this year as people tighten their belts, and manage their finances better. Point: People can manage their finances and avoid fees, they simply choose not to.

Clock is ticking

Graham's assertions aside, Congress is hardly known for its antipathy towards the banking industry, but lawmakers have been getting an earful from constituents and fear for their political lives if they are seen as not doing anything to protect consumers. Senate Banking Committee Chairman Christopher Dodd (D-CT) has already announced that he is working on legislation.

"Overdraft protection programs" let customers overdraw their accounts, without their knowledge, when they use checks, electronic transfers, debit card purchases, and ATM withdrawals. Account holders are often enrolled in the programs without their consent and many banks will slap customers with fees of upwards of $30 for this "courtesy" even if their account is only overdrawn by a few cents.

It is a service most customers do not know they have and may not want. According the Center for Responsible Lending (CRL), 80 percent of consumers would rather have their transaction denied than have it covered in exchange for a fee.

A recent survey released by the Consumer Federation of America found the median overdraft fee is $35. The highest is $39, charged by Citizens Bank for the third overdraft in a year. Fourteen of the sixteen largest banks charge $35 or more per overdraft, either initially or after a few overdrafts in a year.

Nine of the largest banks surveyed charge tiered overdraft fees, escalating the cost of more than one or two overdrafts over a year. For example, Regions Bank charges $25 for the first overdraft, $33 each for the second and third, and $35 each for four or more.

The Financial Times reported that banks stand to collect a record $38.5 billion in fees for customer overdrafts this year. The most cash-strapped customers are the hardest hit, with 90 per cent of overdraft fees coming from ten percent of checking account holders. According to CRL, banks collect nearly $1 billion per year in overdraft fees from young adults and $4.5 billion from senior citizens.

ConsumerAffairs.com has received thousands of complaints about overdraft charges. Among them:

• Vesta of Sacramento, California, who writes, "Provident extended me $500.00 courtesy pay on my checking account for being a long time customer. So, if I have an overdraft, the courtesy pay will cover it. But, the problem is, every time I have an overdraft and courtesy pay pays it, they charge me $23.00 fee. If I'm one cent overdraft, courtesy pay will pay it and charge me $23.00 fee."

• Reginald of Washington, DC, tells ConsumerAffairs.com that he has been charged two overdraft fees of $35.00 each by Chevy Chase Bank. "The two charges," he says, "were for amounts of $3.08, and for $1.05. These charges were made prior to a $4.94 purchase at McDonalds. If there was an overdraft, it should have been only one and that should have been for the $4.94 purchase since it was the last purchase." Reginald says a representative of the bank with whom he spoke, "was of absolutely no help whatsoever."

"Excessive, automatic overdraft fees are forcing many American families deeper into debt at a time when they are already struggling to make ends meet," said Dodd. "I am working on a bill to protect consumers from these fees."

Dodd's bill will require customers to "opt-in" to these programs, prohibiting banks from charging consumers overdraft fees without their consent.

CRL President Michael Calhoun expressed his organization's support for President Obama's call for the creation of a new agency to bring oversight to the financial services industry.

"The regulators responsible for making our financial system work have failed," said Calhoun. "We urge Congress to act quickly to create the Consumer Financial Protection Agency so that individual Americans, who account for nearly $7 out of every $10 spent in the economy, can put the money that financial institutions unfairly siphon off to more productive purposes, like buying beneficial goods and services and saving for the future."

Big Lots Stores, Inc. is recalling about 20,000 wooden bunk beds. The mattress support slats and side support railings can break, posing a risk of the bunk bed collapsing.

Big Lots has received 14 reports of the recalled bunk beds support slats cracking or breaking, including four reports of minor injuries.

This recall includes wooden bunk beds with a three step ladder. Model numbers WP-9108-1 and WP-9108-2 are included in this recall. The model number is located on a sticker on the bunk beds interior panel of the headboard or the footboard.

The beds were sold exclusively at Big Lots stores nationwide from May 2008 through February 2009 for about $300. They were made in Vietnam.

Consumers should immediately stop using recalled bunk beds and contact Big Lots to return the defective parts and to receive a free repair kit.

For more information, contact Big Lots toll-free at (866) 244-5687 between 9 a.m. and 5 p.m. ET Monday through Friday, or visit the firms Web site at www.biglots.com.

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

The agency says it is aware of at least six reports between 1998 and 2009 of serious injury or death, including three deaths in the United States and one in Canada, from choking after the cord on the Philips Lifeline Personal Help Button became entangled on other objects worn around the neck.

More than 750,000 people use these devices in the United States and Canada. By pushing the "help" button on the device when in distress, users can call for emergency assistance to their home. Philips Lifeline says the device is used primarily by seniors living independently, who feel they are at risk for falls or other medical emergencies.

The Lifeline pendant button is intentionally designed to not break away when tugged, which prevents the button from accidentally falling off. However, because it does not break away, there is a risk of choking, including the possibility of serious injury or death.

Risks are greater for those with mobility limitations or for those who use wheelchairs, walkers, beds with guard rails, or other objects that could entangle with a neck cord.

Philips Lifeline is currently sending letters to its 750,000 customers and has changed the labeling of this product to include a warning against the potential choking hazard.

The FDA recommends users consult their health care providers to determine which style of emergency button, including those that are worn on the wrist, is most beneficial for them.

The widely used devices provide critical and immediate access to emergency care for those at risk of falls or who may be more likely to need outside assistance. While the number of adverse events reported is small compared to the number of people who use this device, the severity of these events is of concern.

It is important that users, along with their health care providers, assess the options provided by each style of button, and choose the option that best fits their condition.

Bernie Madoff is behind bars but the repercusions from his multi-billion dollar Ponzi scheme continue. In California, Attorney General Jerry. Brown has filed suit against Stanley Chais, who Brown says directed hundreds of millions of dollars of his clients' investments to Madoff, while actively concealing the link between the two.

This suit seeks at least $25 million in civil penalties, restitution for victims, repayment of profits and compensation and an injunction prohibiting future violations of California law.

"For decades, Stanley Chais posed as an investment wizard, but in truth, he was nothing more than a Madoff middleman, channeling hundreds of millions of dollars in investor funds to his friend's Ponzi scheme," Brown said. "Chais intentionally concealed his close ties to Madoff, while collecting nearly $270 million in fees."

From the early 1970s until December 2008, Brown charges Chais directed hundreds of millions of dollars to Madoff through three funds -- the Brighton, Lambeth and Popham companies -- collectively known as the Chais Funds.

Chais, who operated out of Beverly Hills, attracted hundreds of investors to these funds by producing annual returns of 20 to 25 percent.

Chais claimed that he generated these high returns through superior skill and experience, use of advanced technology and connections to sophisticated brokers in New York. Brown says investors were discouraged from asking about his investment strategy and were led to believe that he utilized a complex and diversified approach involving arbitrage, derivates, stock, currency and futures trading.

In reality, the suit claims Chais turned over all of the Chais Funds' investments to Madoff, who relied on such feeder funds and middlemen to attract the cash flow needed to prop up his Ponzi scheme. In return, Madoff produced made-to-order returns.

Between 1999 and 2008, despite supposedly executing thousands of trades on behalf of the Chais Funds, Madoff did not report a loss on a single equities trade. The Chais Funds received improbably high and consistent returns of between 20 and 25 percent, with only three months of negative returns between 1996 and 2007.

For his services, Chais charged investors an annual fee of 25 percent on all profits. Over the past decade, Chais collected almost $270 million in fees, the complaint says.

Although Chais turned over all the Chais Funds' assets to Madoff, most investors had never heard of Madoff and were completely unaware of the connection between the two men until after the Ponzi scheme collapsed and their investments were lost.

Brown said the suit is the result of a seven-month investigation.

On March 12, 2009, Madoff pleaded guilty to 11 felony counts and admitted to defrauding thousands of investors of billions of dollars. Federal prosecutors estimated client losses, which included fabricated gains, of almost $65 billion. On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed.

On June 22, 2009, the SEC filed a complaint against Chais in U.S. District Court for the Southern District of New York alleging that he committed fraud by misrepresenting his role in managing the funds' assets and for distributing account statements that he should have known were false.

By Mark Huffman
ConsumerAffairs.com

September 22, 2009
Scammers have figured out a new way to steal credit card numbers and other sensitive financial information. They target military veterans, pretending to be working for the U.S. Department of Veterans Affairs.

In the scheme, the caller tells the veteran that the VA is updating its prescription information and asks for the victim's credit card information.

"Americas Veterans have become targets in an inexcusable scam that dishonors their service and misrepresents the Department built for them," said Dr. Gerald Cross, VAs Under Secretary for Health. "VA simply does not call Veterans and ask them to disclose personal financial information over the phone."

The scam was brought to the VA's attention earlier this month by several veteran service organizations, which heard from their members about the suspicious calls. The VA says veterans should not be fooled by a caller who claims the VA is updating is procedures for dispensing prescriptions.

"VA has not changed its processes for dispensing prescription medicines," Cross said. "Nor has VA changed its long-standing commitment to protect the personal information of this nations Veterans."

At the state level, law enforcement officials say they are stepping up their anti-scam efforts and have added the veterans scam to the growing list of known schemes they talk about. Ohio Attorney General Cordray reminds all Ohioans to be wary of any call soliciting personal information such as credit card or social security numbers.

"I strongly recommend never giving out personal information over the phone when someone calls you," said Cordray. "Scammers thrive on their ability to catch us off-guard. The best defense in these situations is to play offense. Take control of the conversation and ask the caller if you can call them back. Take the time to research the legitimacy of the call."

Cordray says that if someone tells you to "act now" or to keep the transaction a secret, its a good reason to be skeptical. Veterans shouldn't be pressured into making a rash decision, he says. Talk to trusted family members and friends for advice.

By Mark Huffman
ConsumerAffairs.com

September 22, 2009
As the baby boom generation ages, many will do so at home, rather than an institution. But that requires someone to be on hand to provide needed care, and the way things are going, we could soon face a labor shortage.

For one thing, it doesn't pay all that well. Also, it's dangerous. That's right, dangerous.

"It's more dangerous to be a home health aide than it is to be a coal miner," said Howard Gleckman, senior research associate at the Urban Institute.

Gleckman cited Bureau of Labor Statistics figures that show the injury rate for coal miners is 3.6 per 100 workers. The official injury rate is 4.1 for home health aides.

Gleckman and others spoke Monday at a long term care symposium in Washington. They warn that aging baby boomers will put unprecedented demands on the nation's long term care resources and policy makers should act now to prepare for what appears to be an uncertain future.

Stress mounts

As most people who require long term care services prefer to be taken care of at home rather than in a nursing or assisted living facility, Gleckman said that it is becoming critical that society acknowledge and address the stresses being placed on caregivers, most of whom have no formal training in providing care. He noted that 80 percent of the long term care giving taking place in the U.S. is done by informal caregivers, often family members or close friends who receive no financial compensation.

Part of the emotional strain facing many home care givers results from low wages paid for providing these services. According to a 2008 white paper, 19 percent of home care aides and 16 percent of nursing home aides are compensated at a level insufficient for them to rise above the poverty line. The report adds that the typical working family caregiver loses approximately $110 per day in wages and health benefits due to care giving responsibilities.

"The wellbeing of family caregivers and direct care workers are inextricably tied together. As the wages of the latter go up, it makes it that much harder for family caregivers to purchase the services they need, said Suzanne Mintz, co-founder of the National Family Caregivers Association. The solution to this ironic situation is that easing the financial strain on family caregivers must go hand in hand with raising the wages of direct care workers."

Health care reform

With Congress attempting to address health care reform and its many components, Monday's symposium emphasized the need for a national long term care strategy including funding, education and support for the caregiver. Additionally, the event served to highlight the viability of numerous legislative proposals in support of caregivers aimed at helping to solve the nation's long term care challenges.

"We've got to do much more with regard to long term care and how it's provided, how it's financed," said Rep. Charles W. Boustany, Jr., (R-LA). He noted that "most seniors did not realize that Medicare doesn't do much in terms of providing for long term care."

Older adults who suddenly develop problems handling their financial affairs could face a worse problem down the road. New research links poor money management skills with the onset of Alzheimers disease.

The study is published in the September 22, 2009, print issue of Neurology, the medical journal of the American Academy of Neurology.

"Our findings show that declining money management skills are detectable in patients with 'mild cognitive impairment' in the year prior to developing Alzheimers disease," said study senior author Daniel Marson, JD, PhD, with the Department of Neurology and Alzheimers Disease Research Center at the University of Alabama at Birmingham. "Doctors should proactively monitor people with MCI for declining financial skills and advise them and their caregivers about steps they can take to watch for signs of poor money management."

He said caregivers should consider overseeing a person's checking transactions, contacting the person's bank to find money issues such as bills being paid twice, or become cosigners on the checking account so that both signatures are required for checks written above a certain amount. Online banking and bill payment services are also good options, he said.

The study involved 76 older people with no memory problems and 87 older people with mild memory problems but no symptoms of dementia. The participants were given a money management test at the beginning of the study and then again after one year. The test included tasks of counting coins, making grocery purchases, understanding and using a checkbook, understanding and using a bank statement, preparing bills for mailing, and detecting fraud situations.

After one year, 25 of the 87 people with MCI had developed Alzheimer's type dementia. The study found that while those people with no memory problems and those with MCI who did not develop dementia scored higher initially and maintained the same scores a year later, the scores of those people with MCI who developed dementia were lower initially and dropped by nine percent on checkbook management abilities, and six percent on overall financial knowledge and skills during the same period.

Momentum is building for a way to protect Americans from excessive checking account overdraft fees.

Senate Banking Committee Chairman Christopher Dodd (D-CT) has already announced that he is working on legislation.

"Overdraft protection programs" let customers overdraw their accounts, without their knowledge, when they use checks, electronic transfers, debit card purchases, and ATM withdrawals. Account holders are often enrolled in the programs without their consent and many banks will slap customers with fees of upwards of $30 for this "courtesy" even if their account is only overdrawn by a few cents.

It is a service most customers do not know they have and may not want. According the Center for Responsible Lending (CRL), 80 percent of consumers would rather have their transaction denied than have it covered in exchange for a fee.

A recent survey released by the Consumer Federation of America found the median overdraft fee is $35. The highest is $39, charged by Citizens Bank for the third overdraft in a year. Fourteen of the sixteen largest banks charge $35 or more per overdraft, either initially or after a few overdrafts in a year.

Nine of the largest banks surveyed charge tiered overdraft fees, escalating the cost of more than one or two overdrafts over a year. For example, Regions Bank charges $25 for the first overdraft, $33 each for the second and third, and $35 each for four or more.

The Financial Times reported that banks stand to collect a record $38.5 billion in fees for customer overdrafts this year. The most cash-strapped customers are the hardest hit, with 90 per cent of overdraft fees coming from ten percent of checking account holders. According to CRL, banks collect nearly $1 billion per year in overdraft fees from young adults and $4.5 billion from senior citizens.

ConsumerAffairs.com has received thousands of complaints about overdraft charges. Among them:

• Vesta of Sacramento, California, who writes, "Provident extended me $500.00 courtesy pay on my checking account for being a long time customer. So, if I have an overdraft, the courtesy pay will cover it. But, the problem is, every time I have an overdraft and courtesy pay pays it, they charge me $23.00 fee. If I'm one cent overdraft, courtesy pay will pay it and charge me $23.00 fee."

• Reginald of Washington, DC, tells ConsumerAffairs.com that he has been charged two overdraft fees of $35.00 each by Chevy Chase Bank. "The two charges," he says, "were for amounts of $3.08, and for $1.05. These charges were made prior to a $4.94 purchase at McDonalds. If there was an overdraft, it should have been only one and that should have been for the $4.94 purchase since it was the last purchase." Reginald says a representative of the bank with whom he spoke, "was of absolutely no help whatsoever."

"Excessive, automatic overdraft fees are forcing many American families deeper into debt at a time when they are already struggling to make ends meet," said Dodd. "I am working on a bill to protect consumers from these fees."

Dodd's bill will require customers to "opt-in" to these programs, prohibiting banks from charging consumers overdraft fees without their consent.

CRL President Michael Calhoun expressed his organization's support for President Obama's call for the creation of a new agency to bring oversight to the financial services industry.

"The regulators responsible for making our financial system work have failed," said Calhoun. "We urge Congress to act quickly to create the Consumer Financial Protection Agency so that individual Americans, who account for nearly $7 out of every $10 spent in the economy, can put the money that financial institutions unfairly siphon off to more productive purposes, like buying beneficial goods and services and saving for the future."

September 21, 2009
On paper, it looked like a "can't miss" investment. Own a piece of 4,000 ATMs in high traffic locations around the country and share in the transaction fees from the thousands of consumers in need of cash.

Maybe such an investment would pay off, but it didn't for the investors who poured money into what federal prosecutors say was an $80 million Ponzi scheme. The U.S. Attorney for Manhattan has charged two men -- Vance Moore of Raleigh, North Carolina, and Walter Netschi of McKinney, Texas -- with nine counts of wire fraud and one count of conspiracy.

"Moore and Netschi knew when they collected these funds that the promises on which the fund-raising was based were false," according to an indictment unsealed in Manhattan federal court.

According to the FBI, the defendants never purchased more than a few ATMs. Instead, they used some of the money to pay generous returns to early investors. Those early investors, convinced they were in on a great thing, helped spread the word, convincing others to invest as well.

"The defendants claimed the revenue in their investment opportunity derived from ATM fees," said FBI Assistant Director-in-Charge Joseph Demarest. "In fact, it was a classic Ponzi scheme, and the phantom revenue came from new investors. The scheme itself, until discovered, was one giant cash machine."

A lawyer representing Netschi said his client is innocent and said he intends to take the case to trial.

First-time home buyers still have time to cash in on the government's $8,000 tax credit, but they'd better hurry. Only home purchase transactions that close before November 30, 2009 are eligible.

The tax credit is contained in the American Recovery and Reinvestment Act, passed to stimulate home purchases. The Internal Revenue Service says more than 1.4 million taxpayers so far have taken advantage of the credit.

If you currently own a home, or have owned a home within the last three years, you won't qualify. But for others, the program makes purchasing a house that much more affordable.

The credit of up to $8,000 is generally available to homebuyers with qualifying income and who meet the above requirements.

While the IRS has encouraged all eligible homebuyers to take advantage of the first-time homebuyer credit, the agency acknowledges misinformation about the program can lead to fraud. It has cautioned taxpayers to avoid schemes that help ineligible people file false claims for the credit. Currently, the agency said it is investigating a number of cases of potential fraud and is using computer screening tools to identify questionable claims for the credit.

Since a home closing can sometimes take 60 days, home buyers have little time to lose. Closings are often completed in less time, but the IRS says buyers who are counting on the credit should plan for the worst.

The credit cannot be claimed until after the purchase is completed. For purchases made this year before Dec. 1, taxpayers have the option of claiming the credit on their 2008 returns or waiting until next year and claiming it on their 2009 returns.

The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $80,000 or more.

The credit reduces the taxpayer's tax bill or increases his or her refund, dollar for dollar. Unlike most tax credits, the first-time home buyer credit is fully refundable. This means that the credit will be paid to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

There's one other consideration. If you take the $8,000 tax credit and sell or rent the home within three years, you will be required to repay the $8,000 to the IRS. So make sure you're going to live in the home for a while before signing on the dotted line.

Dannon has settled a massive consumer class action alleging that ads for certain brands of its yogurt overstate their claimed health benefits. The settlement will shell out $35 million to affected consumers.

The suit alleged that ads of both Activia and DanActive yogurt exaggerated their beneficial effects on human health. The ads promote the yogurt as improving digestion and have become well known for their goofiness; a recent Activia iteration features actress Jamie Lee Curtis, seated on a couch, noting that our busy lives sometimes force us to eat the wrong things at the wrong times, and promoting Activia as the solution to digestive issues.

A voiceover in the ad claims that Activia is clinically proven to help regulate your digestive system in two weeks if eaten everyday.

The ads credit Bifidus Regularis, a Dannon-created name for bacteria found in mammals' large intestines, with Activia's positive effects on digestion.

'Bifudis Regularis'

According to the official Activia website, Dannon selected Bifidus Regularis for Activia because it survives passage through the digestive tract, arriving in the colon as a living culture, where it plays a beneficial role in your intestinal ecosystem. Whether this appetizing section of the Activia campaign will stay or go remains to be seen.

Dannon, a subsidiary of the French company Groupe Danone whose U.S. headquarters is in White Plains, N.Y., agreed to create a fund to reimburse qualified consumers, up to $100 each.

As part of the settlement, Dannon agreed to make changes to its ad campaign to bring it in line with the product's actual benefits (or lack thereof). The company also promised to make changes to the yogurt's labels and packaging.

In the settlement, which still requires final approval from an Ohio federal court, Dannon denied wrongdoing and said it was agreeing to settle only to avoid the uncertainty and expense of further litigation.

It's unclear how much of the ad content will change, or if Curtis will stay on board. As with most commercials, certain claims might be misleading but technically true; at one point, Curtis says that 87% of this country suffers from digestive issues, although this figure may include those who experience occasional heartburn or stomach aches.

A big win

The agreement is a significant victory for Coughlin Stoia Geller Rudman & Robbins, the San Diego-based class action firm that once won a $7 billion lawsuit against Enron. The $35 million Activia settlement is the largest-ever for a suit alleging false advertising of a food product.

The firm is apparently confident in its legal strategy; it's now pushing forward with a similar suit targeting General Mills' Yoplait Yo-Plus yogurt. That item is similarly advertised as promoting good health by regulating digestive pathways. In its complaint against General Mills, Coughlin Stoia says that the company falsely claims to have clinical proof to back up its claims. That suit is being heard in Florida.

Facebook has agreed to shut down its controversial Beacon advertising program, at long last bowing to privacy advocates and users of the social-networking site concerned about the system's Orwellian nature. The agreement is part of a settlement in a class action filed against Facebook last year.

Beacon has been a key Facebook feature since its November 2007 rollout. The service recorded users' activity on other sites, then relayed those actions back to the user's friends. The concept was intended to promote products and services in a more personal way; Facebook users who saw activity on friends' news feeds, the thinking went, would be more likely to visit the external website themselves. At its inception, over 40 websites signed up to participate.

The system tracked and recorded activity such as buying a product or signing up for a company's service. According to the lawsuit, Facebook began tracking users' actions even before it gained permission to post that information on their profiles. By the time users became aware of the practice, the suit alleges, personally identifying information had already been communicated to Facebook.

Opt-in

Beacon has attracted controversy almost since its inception. In November 2007 the same month the service was introduced Facebook announced that users would be given greater control over how the Beacon system worked on their page. When that failed to satisfy privacy-conscious consumers, Facebook turned Beacon into an opt-in system, so that consumers had to actively choose to participate in the program.

At the time, Facebook CEO Mark Zuckerberg took action to stop the bleeding. We've made a lot of mistakes building this feature, but we've made even more with how we've handled them, he said in a groveling statement. We simply did a bad job with this release, and I apologize for it.

The extent to which Facebook had actually protected users' privacy, however, was still in dispute. An analyst with Computer Associates (CA) found that even consumers who didn't opt into Beacon still had their actions tracked by Facebook; the activity just wasn't reported on the consumers' news feeds. More disturbingly, CA reported that even users who weren't logged into Facebook still had their actions tracked by the site.

Complex procedure

The suit also notes that Beacon was originally an opt-out system, meaning that to remain unaffected by Beacon, users had to actively turn the feature off. While this was technically possible, the suit alleges that the procedure to do so was exceedingly complex, requiring users to go to every participating site and opt out on each one. This procedure discouraged consumers from taking action, the suit says.

Facebook claims it had already been phasing the Beacon program out, but that a small number of advertisers were still making use of the service. In a statement, company spokesman Barry Schnitt said that Facebook has learned a great deal from the Beacon experience.

Beacon was just one of many Facebook features that drew the ire of privacy advocates. Facebook has revamped its privacy controls twice in the past three months, in response to concerns that the system had grown large enough that users were ignoring it altogether.

The suit concerns the period between November 7, 2007, when Beacon was introduced, and December 5, 2007, when the opt-out feature became available. The settlement agreement was finalized last night and will require final approval from the U.S. District Court for the Northern District of California.

By Mark Huffman
ConsumerAffairs.com

September 18, 2009
Scams are nothing new. Federal and state governments working together to combat them, however, is a more recent development.

In the last few months federal regulators and state attorneys general have shown a new aggressiveness in dealing with economic crimes aimed at consumers. Foreclosure rescue and other mortgage related scams have drawn special attention.

"A clear lesson of this financial crisis is that American consumers need better protection against fraud," said Treasury Secretary Tim Geithner. And while we will prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond. The Obama Administration is acting preemptively, across federal agencies and alongside state governments, to stop consumer fraud."

Treasury, Financial Crimes Enforcement Network, the U.S. Department of Justice, the Department of Housing and Urban development and the Federal Trade Commission have recently committed to taking proactive measures to curb abuse by coordinating information and resources across agencies to maximize targeting and efficiency in fraud investigations. This includes alerting financial institutions to emerging schemes, stepping up enforcement actions and educating consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.

"Our efforts to attack mortgage fraud must be, and are, concerted and coordinated," said Attorney General Eric Holder. "Working together, we can send a clear and straightforward message: Those who prey on vulnerable American homeowners cannot hide from the hand of the law. If you perpetrate mortgage fraud, we will find you and we will bring you to justice."

Geithner and Holder were among the officials meeting this week with 12 state attorneys general to compare notes on their respective anti-scam efforts. The officials reviewed emerging trends and proactive strategies to combat fraud against consumers in the housing markets as well as best practices to bolster coordination across state and federal agencies.

Meanwhile, the FTC announced two new law enforcement actions in a continuing crackdown on mortgage foreclosure rescue and loan modification scams, bringing to 22 the number of these cases the Commission has filed since the housing crisis began. The FTC also announced developments in similar pending mortgage-related actions, several of which have involved coordinated case work from FinCEN.

Connecticut Attorney General Richard Blumenthal said his state has adopted a landmark ban on upfront fees for mortgage repair schemes -- a model, he says, for national action in the battle against exploitation of consumers seeking to save their homes.

"Homeowners should never pay an upfront fee for help with negotiating a loan modification," said Illinois Attorney General Lisa Madigan. If youre asked to pay an upfront fee, thats a sure sign youre dealing with a scavenger whose only goal is to con you out of money you cant afford to lose, and who will ultimately rob you of any opportunity to save your home with the help of legitimate organizations."

Michigan victims get refunds

In Michigan, Attorney General Mike Cox says residents of his state victimized by foreclosure fraud schemes can receive refunds as a result of charges filed against SaveMyHome USA, Payment Doctors and the Michigan Economic Reinstatement Program. The companies were held accountable after an undercover investigation by the Attorney General's office discovered that the companies' representatives made misleading statements and charged borrowers upfront fees in violation of the Michigan Credit Services Protection Act.

"Families already facing a foreclosure crisis should not have to worry about being ripped off in the process," said Cox. "This sends a clear message to scam artists that we are watching."

The companies offered mortgage modification assistance to homeowners facing foreclosure. They claimed they would help homeowners by working with their lenders in an attempt to modify the borrower's mortgage.

However, an undercover investigation by the Attorney General's office discovered that the companies charged borrowers upfront fees, a practice prohibited by law. After paying the upfront fee, many borrowers found that the companies could not secure a modification and were subsequently unable to get their money back.

By Mark Huffman
ConsumerAffairs.com

September 18, 2009
Many third-party marketing agreements, in which one business shares consumers' credit information with another business, results in unauthorized charges on debit and credit cards.

While these charges can be disputed, it's a headache for consumers. If they don't notice the charge for a month or two and end up paying it, its almost impossible to get a refund.

ConsumerAffairs.com has received hundreds of these complaints over the years, including one recently from Sherry, in Meadow Vista, Calif. But Sherry also suggested a solution.

Why don't we require the banks to send out an electronic notice to have us consumers approve the electronic payments before they come from our accounts? she asked. They have the ability to send us overdraft notices.

When a consumers uses a debit or credit card, they almost always either enter their signature or provide a PIN. However, a merchant may enter a transaction on a consumer's account without either one. They just need the account number, name on the card and expiration date.

What Sherry would like to see is a requirement that consumers actively approve any transaction entered without a signature or PIN. And she's probably correct that the technology exists to do it.

In fact, Visa last year began a pilot project with eight large North American banks to to test the delivery of real-time notification alerts on Visa accounts.

The program was designed to help consumers by alerting cardholders in real-time or near real-time of transaction activity on their Visa account -- typically within seconds rather than hours or days. Participants received notification alerts from Visa through email or Short Message Service (SMS) delivered directly to their mobile devices.

While such a system is not the authorization check that Sherry is requesting, it's the next best thing. Through the alert received via email or SMS text, Visa says cardholders can verify the transaction details, and if the transaction appears to be irregular, can immediately contact their bank to help stop further transactions on the card.

The service is designed to help cardholders keep closer track of their transactions and spending levels as they go about their daily routine. According to a recent Javelin Strategy & Research report, consumers also view timely alerts as a valuable resource to help detect fraud.

"Information is power, especially when delivered in a timely manner," said Elizabeth Buse, Global Head of Product at Visa Inc. "Visa already delivers real-time transaction risk scores to financial institutions, and we are now empowering cardholders in this pilot with real-time transaction alerts.Participating Visa cardholders can typically receive alerts before they walk out of the store, rather than hours or even days later."

Visa made the system available on mobile devices powered by Android, the Open Handset Alliance's open source platform for mobile devices, including the T-Mobile G1 phone, at the end of last year. No word on when the system might be expanded.

An Arizona woman has filed a class action lawsuit accusing Quorn Foods of not disclosing on labels the fact that some people have serious allergic reactions to the main ingredient in its Quorn line of meat substitutes.

That ingredient happens to be a fungus-mold, actually-discovered in the 1960s in a British dirt sample. The company grows the fungus in vats and processes it into a fibrous, proteinaceous paste.

But more than a thousand people have reported to the Center for Science in the Public Interest (CSPI) that they have suffered adverse reactions, including nausea, violent vomiting, uncontrollable diarrhea, and even life-threatening anaphylactic reactions after eating the patties, cutlets, tenders and other products made with Quorn's fungus.

Kathy Cardinale, a 43-year-old advertising executive, ate Quorn's Chik'n Patties on three separate occasions in 2008. Each time, within two hours of eating the product, Cardinale became violently ill. Thinking she had had a stomach virus, Cardinale didn't realize that she was reacting to the Quorn until the third time she ate one of the patties, after which she vomited seven or eight times within two hours.

"I felt like the soles of my feet were going to come out of my mouth, I was vomiting so hard," said Cardinale. "Once I began to research Quorn online I realized I wasn't alone and that other people had similar stories. It was unbelievable to me that the company knew this was going on and wasn't warning consumers about these problems."

Quorn Foods, which is British-owned, markets its signature organism as being related to mushrooms, truffles, and morels, since all of those are fungi. While that's true, it's as misleading as claiming that humans are related to jellyfish since they're both animals, according to CSPI. Quorn's fungus is named Fusarium venenatum; "venenatum" is Latin for "venomous."

As early as 1977, a study found that some people have adverse reactions to Fusarium venenatum. That unpublished study conducted by Quorn's developer found that ten percent of 200 test subjects who ate the fungus experienced nausea, vomiting, or other gastrointestinal symptoms, compared with five percent in a control group.

The company claims the rate of illness is trivial, though a 2005 telephone survey of consumers in Britain -- where the products have been marketed longer and more widely than in the United States -- commissioned by CSPI found that almost five percent of Quorn eaters experienced adverse reactions. That was a higher percentage of people than that of those who reported allergies to shellfish, milk, peanuts or other common food allergens. Since 2002, more than 1,400 British and American consumers have filed adverse reaction reports on a website maintained by CSPI, quorncomplaints.org.

"It's almost unheard of for a company to market something as healthy when it actually makes a significant percentage of its customers sick within minutes or hours," said CSPI litigation director Steve Gardner. "It is the company's legal obligation to warn consumers about these serious adverse reactions, and getting the company to meet that obligation is the purpose of this lawsuit."

"Quorn Foods should either find a fungus that doesn't make people sick, or place prominent warning labels about the vomiting, diarrhea, breathing difficulties, and other symptoms Quorn causes in some consumers," said CSPI executive director Michael F. Jacobson.

While the Food and Drug Administration (FDA) does not disagree that Quorn products cause sometimes-severe allergic reactions, the agency still considers the Quorn ingredient to be "generally recognized as safe."

"At a time when the public and doctors are deeply concerned about the rise in food allergies, it is deeply distressing that the FDA knowingly permitted a powerful new allergen into the food supply," said Jacobson. "We call on the FDA to revisit its policy."

California, one of the hardest-hit states in the mortgage meltdown, has launched an investigation into credit rating agencies' role in fueling the financial crisis.

California Attorney General Edmund G. Brown Jr. today issued subpoenas to Standard & Poor's, Moody's and Fitch to determine whether the firms violated California law when they gave stellar ratings to assets that turned out to be shaky.

"Standard & Poor's, Moody's and Fitch put their seal of approval on high risk mortgage-backed securities, recklessly giving stellar ratings to shaky assets that proved toxic to the entire financial system," Brown said. "This investigation is meant to determine how these agencies could get it so wrong and whether they violated California law in the process."

Moody's Investors Service, Standard & Poor's, and Fitch Ratings grade the creditworthiness of corporations and municipalities and the financial instruments, including bonds and securities, they issue. Investors depend on these ratings to gauge risk and make investment decisions.

At the peak of the housing boom, these agencies gave their highest ratings to complicated financial instruments -- including securities backed by subprime mortgages -- making them appear as safe as government-issued Treasury bonds.

In rating these securities, Brown maintains the agencies worked behind the scenes with the same Wall Street firms that created them. For their work, he says the firms earned billions of dollars in revenue, at a rate nearly double what they earned for rating other financial products.

Banks, pension funds and other investors relied on these ratings when they purchased trillions of dollars of securities backed by subprime mortgages because of the high returns and apparent low-risk. Those purchases helped fuel the housing bubble by providing funding for lenders to issue ever-riskier subprime and other toxic mortgages. When the bubble burst, however, those risky mortgages defaulted in record numbers and investors were left holding worthless securities, unable to sell them.

Subsequently, the agencies downgraded the credit ratings of $1.9 trillion in residential mortgage backed securities, a tacit acknowledgement of their failure to adequately assess the risks of the debt they rated. The rating agencies either ignored or did not understand the risks of the debt they rated.

Given the role the rating agencies' played, Brown is directing the agencies to provide by October 19, 2009 information that will help answer questions designed to establish whether the rating agencies failed to conduct adequate due diligence in the rating process.