Current Events in November 2009

Internet telephone provider Vonage says it will pay $3 million to 32 states who sued the company on behalf of consumers. Without admitting to any wrongdoing, Vonage also said it would give refunds to affected consumers and change its business practices.

Since 2002, Vonage has offered a Voice over Internet Protocol (VoIP) service, which allows for telephone voice transmission over a high-speed Internet connection. In its newspapers, TV, direct mail and Internet advertising, Vonage failed to clearly communicate to prospective customers that they must be equipped with high-speed Internet in order to use its services.

Many customers, particularly senior citizens, were not clearly informed of this requirement and were unable to use the service. Yet Vonage required them to pay activation/cancellation and return shipping fees for computer-related equipment. Todays agreement makes full and clear disclosures a priority requirement.

Similarly, the states argued that Vonages "free trial" or "risk free" offers put many at a disadvantage when they attempted to cancel their service at the close of the trial period. Customers who chose to cancel had to do so by telephone and receive a "return authorization number" before returning Vonage's VoIP computer device. Many customers reported unreasonably long wait times before reaching a company representative.

Through this settlement, Vonage is held accountable for customer service and advertising practices that led Ohioans to be confused and dissatisfied," said Ohio Attorney General Richard Cordray. "As a result, consumers who had an issue with the company as far back as 2004, still have the opportunity to get a refund by filing a complaint with my office within the next 120 days."

Consumer confusion

Customers who thought they had canceled the service complained that they continued to receive monthly bills from the company. Others asserted that Vonage debited funds from their checking accounts, even after the customers attempted to cancel their Vonage service. The assurance of voluntary compliance prohibits Vonage from billing any customers after they have canceled within the free trial period.

"This agreement is designed to ensure that Vonage fully discloses all of its fees and conditions for the services it offers," said Illinois Attorney General Lisa Madigan. "It is also a helpful reminder that consumers should always read the fine print before signing up for a telecom service to search for any extra costs associated with enrolling in programs or services."

The states' investigation found that Vonages use of the phrase "free trial" was deceptive. Despite free service offers, Vonage charged many customers activation fees, shipping and handling fees, taxes, universal service fees, regulatory recovery fees and emergency 911 fees, none of which were clearly disclosed in advance.

The agreement prohibits future misrepresentations of service by Vonage and requires the company to fully and clearly disclose all terms associated with promotional offers. Vonage must also ensure that customers who accept the free trial offer receive the VoIP computer adapter within the promised seven to 10 days. Many complained of not receiving the device until near the end of the trial period, which restricted their ability to try out the service over time.

Under today's agreement, Vonage is also paying refunds to eligible customers who experienced problems and have not already received refunds.

November 16, 2009
Attorney General Edmund G. Brown Jr. today announced the arrest of William Arthur Sassman II who "looted" the life savings of dozens of investors to bankroll his lavish lifestyle and prop up a multi-million dollar Ponzi scheme.

Sassman, 41, of Sacramento, was arrested at his residence this morning on a total of 100 counts: 43 counts of grand theft, 40 counts of misrepresentation or omission in the sale of a security, 16 counts of first-degree burglary and 1 count of use of a device, scheme, or artifice to defraud in the sale of a security. If convicted, Sassman faces up to 52 years in prison. Sassman is being held in the Sacramento County Jail and bail has been set at $3.2 million.

"William Arthur Sassman solicited millions of dollars from California investors with promises of high returns on business and real estate investments," Brown said. "In reality, Sassman looted their savings to prop up a Ponzi scheme, so he could buy homes and Ferraris."

Over the past decade, Sassman used four companies-InTex, LLC; Formulating Insurance Agency (FIA); Formulating Investments (FI); and Systematic Management Services (SMS)-to solicit investments ranging from approximately $10,000 to $500,000 from more than 50 individuals across Northern California and beyond.

Sassman, a licensed insurance agent, convinced investors, many of whom were senior citizens, to shift their savings from IRAs, annuities, life insurance accounts, 401(k)s and certificates of deposit to "high return" investments with his companies. These investments included foreclosed properties and real estate in Georgia, Mare Island and Vallejo; a strip mall in Folsom; commercial property in El Dorado Hills; the production of a laptop computer stand called the "Notefloat" and annuity, stock and foreign currency investments.

However, Sassman made few, if any, of these investments and rarely paid the double to triple digit returns he promised. Instead, Sassman spent investors' millions financing his lavish lifestyle, including $1.1 million on his American Express card, $300,000 on automobiles, $75,000 at Polo Ralph Lauren and three homes.

The limited funds Sassman invested were channeled into other illegal operations including a "stock trading program" run by a group indicted in federal court earlier this year for running a Ponzi scheme and a European investment scam that promised a 200 percent profit in 45 days or 800 percent annually.

As Sassman burned through investor funds, he paid returns to early investors by using funds from new ones. Investors are still owed close to $4.4 million, and additional losses could reach $3 million.

In September 2009, Sassman and his companies filed for bankruptcy.

Some of Sassman's victims

In October 2004, a Sacramento resident invested more than $250,000 in FIA. Sassman promised her a seven percent annual return. Her money was combined with money from other investors for a total of more than $700,000. Of that money, approximately $400,000 was spent on Sassman's personal expenses, more than $50,000 went to Sassman's wife, and more than $34,000 was paid in returns to other investors. The victim lost $170,000 of her investment.

In late 2005, Sassman promised a Rancho Cordova woman that if she closed her $78,000 life insurance policy and invested the funds with him, she would receive an 8 percent return on her investment. In early 2009, the victim was diagnosed with cancer and her son took over her finances. Her son contacted Sassman and requested $7,000 from his mother's investment to help pay for her medical expenses. Sassman promised to send a check, which never arrived. Soon after, the victim's son contacted Sassman and asked him to return the entire balance of the $78,000 investment. Sassman sent a check for $14,000 that bounced. The victim's investment was never returned.

In January 2007, a Sacramento couple invested more than $80,000 with Sassman's company SMS to be invested into real estate and to earn interest. Sassman informed the couple that their money had been used to purchase property, which was undergoing renovation. The couple was unaware that their entire investment had been used to pay other investors.

It's not just American car manufacturers who are sometimes slow to recognize and admit safety problems in their vehicles. In September, Toyota grudgingly agreed to recall about 3.8 million Toyota and Lexus models because of reports of unintended acceleration.

The company set no land speed records with the recall. Consumers had been complaining about the sudden acceleration for years. And many were not happy with Toyota's explanation of the problem. The company blamed the frightening out-of-control spurts of speed on floor mats which supposedly could slide onto the accelerator, pressing it to the floor but many Toyota owners find the explanation unconvincing.

"I have had three accidents or near accidents with my new 2009 Toyota Prius due to a combination of mysterious acceleration and loss of brakes," Paul of Sedona, Arizona, told ConsumerAffairs.com. My car suddenly seemed to accelerate on its own and my brakes failed. How I stopped my car I will never know."

Not only were consumers skeptical, so was the National Highway Traffic Safety Administration (NHTSA). Earlier this month, NHTSA issued a highly unusual statement scolding Toyota for what it called "inaccurate and misleading" information in Toyota press release about the recall.

"NHTSA has told Toyota and consumers that removing the recalled floor mats is the most immediate way to address the safety risk and avoid the possibility of the accelerator becoming stuck. But it is simply an interim measure," NHTSA said. "This remedy does not correct the underlying defect in the vehicles involving the potential for entrapment of the accelerator by floor mats, which is related to accelerator and floor pan design."

Now what?

So much for buying a few million floor mats. The auto industry is now abuzz with speculation about what Toyota will have to do to remedy the problem to NHTSA's satisfaction. Reports from Tokyo say Toyota has set aside more than $5 billion to replace the accelerator pedals on all of the 3.8 million vehicles, although the company has so far denied those reports.

It's not clear exactly what changes will be made but it apparently involves a complete redesign of the accelerator pedal.

The problem with the floor mats is not that they can slip over the accelerator and push it down -- but rather that the mats can slide under the pedal and push it forward, which in the worst case can result in full-throttle acceleration that defies an instant solution. Many Toyotas have "On" and "Off" buttons that take three seconds to operate.

No one knows how many accidents may have been caused but an August tragedy on a San Diego freeway put the problem at the top of the auto safety agenda. In that accident, a California highway patrolman and his family were killed in their runaway Lexus ES 350. Someone calling from the car before it crashed at over 100 miles per hour said they couldn't stop it. Seconds later, it struck an SUV.

Narrow escapes

Others have escaped injury, but only narrowly. Radha of Philadelphia was in a parking lot earlier this year when his 2009 Prius began accelerating unexpectedly.

"I went all in for the brakes -- no reaction from the car," he said. "Car crashed into a light pole, tilted to its right crashed down in parking spot right next to where I wanted to park. With me hanging by the seat belt, car still accelerating, I went for the power button. No response to that either.

Radha managed to crawl through the window to escape from the car, the engine running wide open as the car lay on its side. When police arrived, they managed to switch the car off, Radha said.

Mary of Medford, Oregon, also reported that four incidents of unintended acceleration in her 2007 Prius were accompanied by an apparent lack of response from the brakes. She said her dealer was able to duplicate the problem twice but couldn't resolve it.

"It has nothing to do with the floor mat," Mary said.

Affected models

Toyota and Lexus vehicles affected by the recall are:

• 2007-2010 Camry

• 2005-2010 Avalon

• 2004-2009 Prius

• 2005-2010 Tacoma

• 2007-2010 Tundra

• 2007-2010 ES 350

• 2006-2010 IS 250 and IS350

Toyota recalled 55,000 Camry and Lexus models in September 2007 following complaints of runaway acceleration. Owners of the popular Prius Hybrid had also complained of the problem but were not included in that recall, though Prius models are included in the current recall.

A federal judge has ruled that South Carolina vanity license plates inscribed with a cross and the words I believe violate the First Amendment's requirement of separation of church and state.

In a 57-page ruling, Judge Cameron Currie of the U.S. District Court for the District of South Carolina said that the I Believe Act, under which the plates were created, is clearly unconstitutional, since it promote[s] a specific religion, Christianity. The Act, passed in 2008 after a similar law was struck down in Florida, made no attempt to create license plates centered around other religions.

Lt. Gov. Andre Bauer, who was the driving force behind the law, dismissed the ruling as that of an activist judge bent on destroying Christianity. In a statement, Bauer called Currie a liberal judge appointed by Bill Clinton who is using her personal wishes to overrule the Legislature and the will of the thousands of South Carolinians who want to purchase the tags, and said her ruling was nothing less than another attack on Christianity.

Bauer said he has asked South Carolina Attorney General Henry McMaster to appeal the ruling. McMaster is reportedly considering his options. Bauer and McMaster are both running to replace disgraced Gov. Mark Sanford. Indeed, in her ruling, Judge Currie questioned whether Bauer was motivated by sincerely held Christian beliefs or an effort to purchase political capital with religious coin.

Whether or not McMaster appeals the ruling, the issue is far from resolved. Immediately after the ruling, the Palmetto Family Council, a private group, announced its Plan B to resurrect the plate with private dollars. Under South Carolina law, private groups can apply to have specially-created vanity plates issued. Whether such a scheme would pass constitutional muster is unclear. If such a plan involved significant state action for example, if the DMV was the ultimate issuer of the plate the plate could be again invalidated.

While Bauer said he was personally offended at Judge Currie's act of awarding legal fees to the American-Arab Anti-Discrimination Committee and Americans United for Separation of Church and State, the suit was originally brought on behalf of a Methodist minister, a Christian minister, a rabbi, and a Unitarian pastor. The Hindu American Foundation and the American-Arab Anti-Discrimination Committee were later joined as parties.

Judge Currie said the suit amounted to a waste of taxpayer money. Her ruling noted that, despite the clear language of Supreme Court First Amendment cases, this state's limited resources have been used to promote, pass, and defend a state law [which] amounts to state endorsement not only of religion in general, but of a specific sect in particular. She issued a permanent injunction barring the defendants from issuing or manufacturing the plates, and from taking applications or money for future orders.

The Federal Reserve this week issued a new rule requiring banks to allow customers to decide whether they want the automatic "courtesy" overdraft protection, that covers debit card purchases when they overdraw their accounts, but nicks them with a hefty fee.

Under the new Fed rules, bank customers must be allowed to "opt-in" for this protection. It addresses a longstanding consumer complaint that paying the overdraft fees is much worse than having a purchase denied due to insufficient funds.

While the new rule should go a long way in mitigating this consumer complaint, some think it doesn't go far enough. Rep. Carolyn Maloney (D-NY) has drafted legislation that also allows bank customers to "opt-in" to overdraft protection.

"I'm glad that the Federal Reserve has recognized the need to address outrageous overdraft policies by requiring a strong affirmative opt-in to debit-card overdraft plans, and I commend Chairman Bernanke for taking the regulators in this direction," Maloney said. "The Fed's rule is an endorsement of the need for more overdraft protection for consumers."

But Maloney said Congress still needs to act on the issue. She says there are shortcomings in the new Fed rule that her bill would address.

"The Fed still allows institutions to charge an unlimited quantity of overdraft fees, would do nothing to make fees proportional to the amount of the overdraft, and would not address the manipulation of posting order of charges to accounts," Maloney said. "Under the Fed's new rule, a $5 cup of coffee could still become a $40 cup of coffee after an overdraft fee is added!"

Maloney says her bill, H.R. 3904, caps the quantity of fees at one per month or six per year, requires that fees be reasonable, and prohibits posting-order manipulation, and includes all transactions, not just debit cards. She says her bill has wide support, including from House Financial Services Chairman Barney Frank, who is a co-sponsor.

Unintended Consequences

But as with the credit card reforms passed earlier this year, some in the financial industry warn of unintended consequences. They point out that banks will likely respond to rule changes - that remove billions from their revenue lines each year - with some rule changes of their own.

For example, Tim Smith, CEO of Probity Financial Services and the former President of a nationwide bank consulting firm, says nothing in the new Fed rule or the Maloney bill requires banks to keep customers.

What will banks do when a consumer hits the six overdraft fee maximum in a year? Smith says the most likely outcome will be to close their accounts, just as credit card companies have been closing many cardholder accounts in the wake of the credit card reform bill.

Smith cites an FDIC study of bank overdraft programs to suggest more than one in ten checking accounts would fall into this category. He says these consumers may be forced to turn to check cashing services and prepaid debit card services to meet their spending needs, both of which are likely to be just as expensive as bank's overdraft programs.

"Banks can and should adapt to limitations placed on their aggressive overdraft policiesBut, let's be honest, if Congress establishes a limit on the number of overdrafts a bank can charge in a given year, there is a very real possibility that millions of consumers will be forced out of the banking system," Smith said. "This is a classic case where the intentions are good, but the outcome will likely be very different than what Congress envisions."

By James Limbach
ConsumerAffairs.com

November 13, 2009
A U.S. Department of Transportation administrative law judge (ALJ) has okayed a set of stiff fines levied against the Internet travel agency Ultimate Fares and its owner for violations of advertising regulations.

ALJ Richard C. Goodwin has fined the company $600,000 and its owner, owner Roni Herskovitz, $30,000. The order also bars Herskovitz from any involvement in the online air travel agency business for 12 months.

An investigation by DOT's Aviation Enforcement Office found that Ultimate Fares failed to include the federal excise tax and the service fee it charged to consumers in fares published on its website between March 2008 and September 2009. This violated the Department's requirement that published airfares must state the full price to be paid including service fees and any ad valorem tax, such as the Federal excise tax, which is assessed as a percentage of the fare.

Ultimate Fares continued to omit the tax from its stated fares even after the enforcement office began its investigation, and also failed to disclose which flights were being operated on a code-share basis as required by the Department's rules.

Ultimate Fares has been the subject of numerous consumer complaints:

• Sandeep A. from Nesconset, N.Y., tells ConsumerAffairs.com, "After giving my credit card number and no confirmation from the company after 48 hours regarding my flight, the company has put me on phone hold in excess of 30 minutes on three occasions and no response even after getting in touch with the operators. They can't tell me even if the tickets are going to be ready for the international travel."

• Darlene K. of Brick, N.J., writes ConsumerAffairs.Com that after receiving confirmation of her booking of a flight to Reno, she and her husband arrived at the airport to find they had no reservations. "As a result, I needed to purchase new airline tickets at a cost of $1427. I also had to cancel my time-share reservation at an additional cost of $189. We also needed to purchase our hotel accommodations at a cost of $621.22. Due to Ultimate Fares' negligence, we encountered monetary hardship, unnecessary stress and an enormous amount of time trying to resolve this problem to no avail."

• Dror Z. of Toronto writes ConsumerAffairs.com, "I booked a flight from NYC to Mumbai, India through ultimatefare.net, which is the website for Ultimate Fares Inc. I paid with my debit card. By the day of traveling, the money was not collected from my account and when I arrived to the airport, the ticket was cancelled. In the days before the flight, I sent a few e-mails to the customer support department, but all I got back was an automatic response that the message was received but no action was taken. A month later I found out that the money was taken, since I needed it and it wasn't there. I've contacted them over the phone and via e-mail but the money was not returned to me. About two months ago I have contacted Ultimate Fares Inc. again, demanding my money back. Again I was moved from one agent to the other and at the end, no action was taken. I was forced to borrow $600 from various people. I needed a medical treatment, and couldn't get it because I didn't have money to pay for it."

The fine -- the largest ever assessed for advertising violations -- will become final in 30 days unless the Department decides to review the action or a petition for review is filed.

When insurance broker Marsh & McLennan came under investigation for bid rigging in 2004, its share price lost half its value. Now, some investors in the company will get some of their money back.

The company announced today it will pay $400 million to settle a lawsuit, led by pension funds in New Jersey and Ohio. The firm earlier negotiated an $850 million settlement with the State of New York, which brought the first case.

Ohio Attorney General Richard Cordray says today's settlement holds Marsh accountable for its wrongdoing and requires the company to compensate investors for their injuries.

"Through violations of securities laws, Marsh harmed the investments and retirement benefits of workers in Ohio and across the country," Cordray said. "This massive fraud was built on unethical and illegal practices and violated the best interests of clients and shareholders alike."

The Public Employees Retirement System of Ohio, the State Teachers Retirement System of Ohio and the Ohio Bureau of Workers' Compensation, together with the State of New Jersey Department of Treasury, Division of Investments, have served as lead plaintiffs representing shareholders in the case.

Investors harmed

Marsh is one of the world's largest providers of insurance brokerage and consulting services. In the lawsuit against Marsh, the lead plaintiffs sought redress for investors who were harmed by Marsh's failure to disclose an alleged scheme that generated substantial earnings from illegal, anticompetitive arrangements with insurance carriers.

The alleged scheme involved steering business to certain insurance carriers in exchange for kickbacks known as "contingent commissions." According to the complaint, in some instances Marsh even generated fake bids to shield participating insurance carriers from competition. The alleged scheme violated numerous laws.

In 2005 Marsh & McLennan agreed to pay $850 million in restitution to policyholders harmed by its actions and adopt a new business model that avoids similar conflicts of interest.

According to the original complaint, filed by then-New York Attorney General Elliott Spitzer, Marsh collected approximately $800 million in contingent commissions in 2003. The complaint alleged that those commissions were tainted by conflicts that harmed Marsh's customers -- large corporations, small and mid-size busineses, municipal governments, school districts and some individuals.

Cordray says Marsh never revealed this scheme to the investing public, despite the huge role contingent commissions played in the company's earnings. Marsh's improper business practices came to light in October 2004 after Spitzer's investigation revealed an industry-wide scandal involving price-fixing and improper bid manipulation activities.

Within days of that news, Marsh & McLennan Companies lost $9 billion in market capital as its stock price collapsed. Shareholders, including many in Ohio, suffered tremendously, Cordray said.

American Home Mortgage Servicing has reached a settlement with the State of Massachusetts, agreeing to modify 8,200 mortgages held by Massachusetts homeowners.

The firm had previously been blocked by a state court from foreclosing on the mortgages, originated by H&R Block Mortgage and Option One Mortgage. The mortgages were the subject of a lawsuit last year by Massachusetts Attorney General Martha Coakley.

The suit alleged Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments -- a practice that has contributed significantly to the foreclosure crisis in Massachusetts, Coakley says. Under the agreement, filed in Suffolk Superior Court, AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind in their mortgage payments.

The Attorney General's litigation with Option One, H&R Block Mortgage, Block Financial Corp., and their parent company, H&R Block, Inc., is ongoing, and is expected to go to trial in 2010. The lawsuit is seeking redress for the damage incurred by homeowners and Massachusetts communities as a result of the unfair and deceptive lending practices of the defendants. The lawsuit also alleges civil rights violations because the defendants' policies and practices resulted in discriminatory pricing to the detriment of black and Hispanic borrowers; disparate pricing violates antidiscrimination laws.

In April 2008, AHMSI purchased the right to service the Option One and H&R Block Mortgage loans. As a result, AHMSI was named as a defendant in the office's ongoing enforcement action, and became subject to certain obligations under a preliminary injunction issued by the Suffolk Superior Court in November 2008, which limited the defendant's ability to foreclose on the loans originated by Option One and H&R Block Mortgage. The Attorney General's complaint did not allege loan origination misconduct by AHMSI, and the company cooperated with the Attorney General in reaching this agreement.

"Our office continues to work to protect homeowners from the fallout of the subprime lending crisis in Massachusetts, and to assist those homeowners who fell victim to unfair and deceptive lending practices to stay in their homes," Coakley said. "Our agreement with AHMSI is another step toward that goal, and it will provide much-needed relief to thousands of homeowners. As I said in testimony to Congress earlier this year, I believe that loan modifications are key to stemming the tide of foreclosures in our state and across the nation."

The agreement provides that borrowers holding Option One and H&R Block Mortgage loans now serviced by AHMSI will receive a number of significant benefits, including:

• Loan modifications for eligible borrowers who are unable to make their scheduled payment and are more than 45 days past due in their mortgage payments. AHMSI will modify those loans through a variety of steps to provide borrowers affordable monthly mortgage payments. The steps include reduced interest rates, extended amortization periods, and, if necessary, principal forbearances.

• Relocation payments of $3,000 to $7,500 for delinquent borrowers who do not qualify for loan modifications, and alternatives to foreclosure, such as deeds-in-lieu of foreclosure.

• Opportunities for the Attorney General's Office to object to foreclosures and denials of loan modifications, including a requirement that AHMSI obtain court approval to foreclose upon a loan where AHMSI and the Attorney General's Office cannot resolve an objection.

Virginia Attorney General Bill Mims has announced that the state's Anti-Price Gouging Statute, which prohibits the charging of unconscionable prices for necessary goods and services, has been activated as the remnants and Tropical Storm Idea and a coastal Nor'easter bringing flooding and tidal surges along the Eastern Seaboard.

Storm surges and localized flooding were being reported up and down the East Coast, as far north as New Jersey and throughout the Gulf Coast and Southeastern regions. Oil companies raced back to the Gulf as Ida moved ashore and, in Mobile, Alabama, a new cruise ship -- the Carnival Fantasy -- arrived a day late for its maiden voyage to the Mexican coast.

In Virginia's Chesapeake Bay communities, many homeowners awoke this morning to find boat docks underwater and electrical service interrupted. There were no immediate reports of injuries.

Gov. Tim Kaine declared a state of emergency in Virginia last night. By law, Virginias price-gouging statute goes into effect upon the issuance of a declared state of emergency by the Governor.

The Virginia Post-Disaster Anti-Price Gouging Act, which became law July 1, 2004, prohibits the charging of "unconscionable" prices for "necessary goods and services" in the affected areas within Virginia for the 30-day period following the disaster that resulted in the declared state of emergency.

The basic test under the statute is whether the price charged for the goods or services "grossly exceeds" the price charged within 10 days before the disaster. "Necessary goods and services" includes those goods or services for which demand does, or is likely to, increase as a result of the disaster.

The Attorney Generals Office has reached seven legal settlements with gas stations over price gouging after a state of emergency was declared Sept. 10, 2008 as Hurricane Ike approached the Gulf Coast.

Virginias Post-Disaster Anti-Price Gouging Act leaves room for standard market forces to work in times of disaster and prohibits only the charging of unconscionable prices for necessary goods and services during these rare times, Attorney General Mims said. Hopefully Virginia retailers will be aware of this laws current activation, and keep it in mind as they proceed with business during this flooding and storming. We intend to enforce our statute, as our record of law suits and settlements demonstrates. We will continue to do so in a reasonable and fair manner.

Anyone who suspects price gouging should report it to the Office of Consumer Affairs -- 804-786-2042

Baby boomers are supposed to be different, the first generation to redefine retirement and aging on their own terms; robust, active and energetic.

Could that all be just self-congratulatory hype?

Researchers at UCLA have concluded that Baby Boomers may well be entering their 60s suffering far more disabilities than their counterparts did in previous generations.

In the study, which will be published in the January 2010 issue of the American Journal of Public Health, researchers from the division of geriatrics at the David Geffen School of Medicine at UCLA found that the cohort of individuals between the ages of 60 and 69 exhibited increases in several types of disabilities over time. By contrast, those between the ages of 70 and 79 and those aged 80 and over saw no significant increases - and in some cases exhibited fewer disabilities than their previous groups.

While the study focused on groups born prior to the post-World War II Baby Boom, the findings hold "significant and sobering implications" for health care because they suggest that people now entering their 60s could have even more disabilities, putting an added burden on an already fragile system and boosting health costs for society as a whole, the researchers say.

New Pressures On Health Care System

If this is true, it's something we need to address," said Teresa Seeman, UCLA professor of medicine and epidemiology and the study's principal investigator. "If this trend continues unchecked, it will put increasing pressure on our society to take care of these disabled individuals. This would just put more of a burden on the health care system to address the higher levels of these problems."

The researchers used two sets of data -- the National Health and Nutrition Examination Surveys (NHANES) for 1988-94 and 1999-2004 - to examine how disabilities for the three groups of adults aged 60-69, 70-79, and 80 and older had changed over time.

They assessed disability trends in four areas: basic activities associated with daily living, such as walking from room to room and getting into and out of bed; instrumental activities, such as performing household chores or preparing meals; mobility, including walking one-quarter mile or climbing 10 steps without stopping for rest; and functional limitations, which include stooping, crouching or kneeling.

The study focused primarily on trends for the more recent 60-69 age group -- those born between 1930 and 1944, just before the start of the Baby Boom, whose data was included in the 1999-2004 NHANES. In particular, researchers felt this group could offer insights into the health of the Boomers following them, who are now entering their 60s.

Older generation has fewer disabilities

The researchers found that between the periods 1988-94 and 1999-2004, disability among those in their 60s increased between 40 and 70 percent in each area studied except functional limitations, independent of sociodemographic characteristics, health status and behaviors, and relative weight. The increases were considerably higher among non-white and overweight subgroups.

By contrast, the researchers found no significant changes among the group aged 70 to 79, while the 80-plus group actually saw a drop in functional limitations.

One reason for this uptick, researchers say, is that disabilities may be linked with the changing demographic make up of the U.S. population. The fastest growing segments of the population, they say, are over-represented when it comes to obesity, for example.

The researchers note that their controls for differences in socio-demographics, health status and health behavior do not completely explain the increase in disability trends among the 60- to 69-year olds. Still, the trends within that group "are disturbing," Seeman said.

"Increases in disability in that group are concerning because it's a big group," she said. "These may be people who have longer histories of being overweight, and we may be seeing the consequences of that. We're not sure why these disabilities are going up. But if this trend continues, it could have a major impact on us, due to the resources that will have to be devoted to those people."

The owner of a now-defunct New Jersey wedding photography studio has pleaded guilty to theft charges, bringing to a close one of the state's biggest consumer nightmares for brides.

Marc S. Schwartz, 47, of Randolph, N.J., pleaded guilty Wednesday to fourth-degree theft of services before a New Jersey Superior Court judge.

Schwartz is the former owner of Celebration Studios, which contracted to provide still and video photography services at weddings throughout New Jersey. In 2005 ConsumerAffairs.com began receiving numerous complaints from New Jersey brides who said they had paid thousands of dollars up front for the company's services but had not gotten any pictures.

In January 2008 the company closed its doors and went out of business, causing even more consternation.

"I hired them for both photo and video for my wedding on December 5, 2004," said Jennifer, of North Bergen, NJ. "I received my proofs but didn't receive any prints, albums or video footage. They were never available to make appointments and never attempted to help me get all that I paid for."

Brides complained that they paid as much as $6,000 in advance but never received any pictures. One year ago, the New Jersey Attorney General's Office obtained a court order, allowing it to retrieve the stashed merchandise and begin distributing it to customers of the now-defunct Morris County photography company. The court also ordered subcontractors who had worked for Celebration Studios, some of whom were never paid, to turn over their materials as well.

Happy ending

While the story had a happy ending, many brides received their wedding pictures years after their wedding had taken place.

Under Schwartz's plea agreement, he must pay $75,000 in restitution to eight photographers, and the state will recommend that Schwartz be sentenced to one year of probation. In pleading guilty, Schwartz admitted that he hired the photographers to take photos and videos for Celebration Studios and failed to pay them in accordance with their agreements.

In addition, a plea was entered on behalf of the corporate defendant, Celebration Studios, to a third-degree charge of theft by failure to make required disposition of property. The company, through its attorney, admitted that it engaged in theft and fraudulent business practices by entering into contracts with customers and receiving money for wedding photography services and products that were paid for, but not delivered.

"We took swift legal action through the Division of Consumer Affairs to ensure that any photos and videos that were in the possession of Celebration Studios were secured for the affected couples," said New Jersey Attorney General AnneMilgram.

By James Limbach
ConsumerAffairs.com

November 11, 2009
Almost a quarter of heart failure patients insured by with Medicare are back in the hospital within a month after discharge, researchers report in Circulation: Heart Failure, a journal of the American Heart Association.

Each year, from 2004 through 2006, more than a half million Medicare recipients over age 65 went to the hospital for heart failure and were discharged. And each year, about 23 percent returned to the hospital within 30 days -- signaling a need to improve care, researchers said. Readmission rates for all causes were almost identical all three years.

"I was hoping for improvement and was disappointed to find that was not the case," said Joseph S. Ross, M.D., M.H.S., the study's lead author and an assistant professor of geriatrics and palliative medicine at Mount Sinai School of Medicine in New York. "Despite the increased focus on the need to reduce readmissions, about a quarter of patients are back into the hospital within 30 days."

Heart failure occurs when a heart weakened by disease can no longer pump effectively. Before discharge heart failure patients should receive written information on:

• Eating a proper diet;

• Engaging in appropriate physical activity;

• Taking medicines correctly;

• Monitoring their weight; and

• Knowing what to do if their symptoms worsen.

However, the current fee system in the United States doesn't encourage a focus on prevention, researchers said. In their analysis, they report doctors and hospitals are financially awarded more for treating and hospitalizing patients, not for preventing hospitalizations through such strategies as disease management.

"Physicians aren't paid to coordinate care," Ross said. "That physician is busy seeing patients and that's what they're paid to do. If we want to deliver better care, this trend is what we need to address."

Another barrier to optimal care is a lack of communications between doctors who care for patients in the hospital and the patients' regular physicians who help patients manage their chronic disease, Ross said. The disruption to the continuum of care can have a negative effect on the patient.

The average age of patients in the study was 80 years and more than half (57 percent) were women. Most patients had multiple chronic diseases: 60 percent had heart arrhythmias; 73 percent had atherosclerosis or hardening of the arteries; 49 percent had diabetes; and 29 percent had kidney failure.

"Coming back and forth into the hospital isn't good for patients, and it isn't good for the healthcare system," said Ross, who plans to research the reasons heart failure patients are readmitted to the hospital. "This is a tremendous challenge."

Findings of the study are important for patients and hospitals, Ross said.

"Patients should use this information to vet hospitals, to look at the quality of care delivered there and ask questions about the care they receive," he said. "Hospitals should consider the rehospitalization rate a grade which, from these findings, needs improvement."

By Mark Huffman
ConsumerAffairs.com

November 11, 2009
As the economy has worsened, the number of scams targeting credit and debit cards appears to be on the rise. Consumers should carefully protect their credit card information to prevent becoming a victim.

An unauthorized charge can be when someone has stolen your credit card or its number and expiration date. The law is very clear about consumers' rights in these cases.

By reporting the unauthorized charges to your credit card company's fraud department, the Federal Trade Commission (FTC) says consumers can limit their liability for unauthorized credit card charges to $50, under the Fair Credit Billing Act.

To take advantage of the law's consumer protections, you must:

• Write to the creditor at the address given for "billing inquiries," not the address for sending your payments. Include your name, address, account number and a description of the billing error, including the amount and date of the error.

• Send your letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to you. If the address on your account was changed by an identity thief and you never received the bill, your dispute letter still must reach the creditor within 60 days of when the creditor would have mailed the bill. This is why it's so important to keep track of your billing statements and immediately follow up when your bills don't arrive on time.

• Send your letter by certified mail, and request a return receipt. This will be your proof of the date the creditor received the letter. Include copies (NOT originals) of sales slips or other documents that support your position. Keep a copy of your dispute letter.

The creditor must acknowledge the consumers' complaint in writing within 30 days after receiving it, unless the problem has been resolved. The creditor must resolve the dispute within two billing cycles (but not more than 90 days) after receiving the letter.

Other unauthorized charges

But many unauthorized charges are made, not by people who physically steal your credit card, but by companies that claim you have made a legitimate purchase. Usually a consumer has never heard of the company making the charge, so rightly feels they could not have authorized the charge.

"I recently noticed a charge to my checking account for 11.99 from "great Fun CT," Jeanette, of East Rutherford, N.J., told ConsumerAffairs.com. "After further investigation I realized these charges were being charges to my checking account on a monthly basis starting Dec. of 08."

Jeanette tracked down the company, Trilegiant, and was told they had proof she had registered for the "membership" and agreed to pay the monthly fee. She was told a copy of the authorization would be mailed to her, but she says it never came.

These types of unauthorized charges stem from "negative option" marketing practices, where the consumer may accept a "free" gift but provide their credit card number for a small shipping and payment fee. Later much larger fees appear on their credit card bill. When they complain, the company claims they agreed to purchase additional "services," with the agreement buried in the fine print.

Clear and conspicuous

How does the law treat these kinds of unauthorized purchases? The FTC says the law requires that any additional sale to the consumer must be stated in a "clear and conspicuous" manner. That leaves plenty of gray area for the company and the consumer to disagree over what is "clear and conspicuous."

To fight these types of unauthorized charges, consumers should ask their credit card company to challenge the charge as fraudulent. According to the Office of the Comptroller of the Currency, actions that a bank can take in reviewing a claim are:

• Looking at the transaction in light of other purchases,

• Reviewing if the goods were delivered to the residence or place of business,

• Comparing signatures, requesting a police report,

• Requesting documentation to assist in validating the claim,

• Requesting a signed written statement from the cardholder or authorized user, and

• Requesting information about the cardholder's knowledge of the person who allegedly used the card or of that person's authority to do so.

The bank will notify you of the results of their investigation.

Avoiding the hassle

Consumers, of course, want to avoid having to go through this hassle in the first place. That requires being very careful in how you use your credit card.

For starters, never agree to accept a "free" gift or "trial" offer, especially if it is offered at the conclusion of a legitimate transaction in which you have used your credit card. Plenty of well known companies that you have done business with have had third party marketing agreement with other marketers, sharing your credit card information without your knowledge or consent.

Be especially careful with your debit card, since it is an entryway to your bank account. Money removed from your account in an unauthorized transaction is almost impossible to recover.

Be very leery of any telemarketer who requests your bank information or your credit card number "for verification." Keep in mind that, since 1996, a seller or telemarketer is required by law to obtain your verifiable authorization to obtain payment from your bank account.

That means whoever takes your bank account information over the phone must have your express permission to debit your account, and must use one of three ways to get it.

The person must tell you that money will be taken from your bank account. If you authorize payment of money from your bank account, they must then get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account.

By Jon Hood
ConsumerAffairs.com

November 11, 2009
SnapNames.com, a prominent domain auction site, has been served with a class action lawsuit brought on behalf of consumers defrauded by a company vice president who allegedly submitted bids in an attempt to artificially drive up prices.

According to the complaint, filed Monday in a Miami court, Nelson Brady, Vice President of Engineering at SnapNames, submitted bids in tens of thousands of auctions over a four-year period, forcing good-faith bidders to shell out extra cash for their desired domains.

SnapNames announced the scandal in a notice sent out last week. The statement included the stunning admission that the fraudulent bids affected a full five percent of auctions since 2005 no small amount, given that the site holds hundreds of auctions every day. The company says that the employee flew under management's radar, setting up an account under a false name. This is a clear violation of our internal policy and was not approved by the company, according to the statement.

Perhaps anticipating litigation, SnapNames immediately promised rebates to consumers affected by Nelson's actions, to avoid any question about whether the company benefited from this conduct. Rebates will be for the difference between the prices they [consumers] paid in winning auctions, and the prices they would have paid had the employee not bid in the auctions. How the company plans to determine the difference between those two amounts is anybody's guess, although it says it will appoint an auditor to evaluate each consumer's claim.

The case is being handled by Santiago Cuerto, a Miami-based lawyer with the Cuerto Law Group. He filed the suit after his brother, who participated in auctions on SnapNames during the relevant time period, learned of the scam.

Cuerto told PC Magazine that his brother had suspected false bidding on a number of domain auction sites. He's been frustrated by the process for years, Cueto said of Carlos Cuerto. I think the entire industry needs to be cleaned up. To that end, Cuerto said he won't hesitate to file additional suits against other domain name sites if and where phantom bidding is occurring.

Brady, who used the handle Halvarez, apparently attracted the attention of fellow bidders long before the scandal was uncovered. A namepros.com thread from early 2006 features one frustrated user asking for good tactics on beating this guy on snapnames. Further downthread, a fellow bidder asks, Is that guy 'halveraz'? He seems to be there most of the time on my names, and I operate in a very specialized niche.

Users on a March 2009 dotweekly.com thread expressed a mixture of curiosity and grudging respect for the phantom bidder. User Acro notes that Our buddy 'halvarez' has transformed this practice into a science at Snapnames. Farther down, Ms Domainer remarks, Halvarez is legend; he has appeared in many of my auctions, tucked safely in the middle of the bidding list. A user named Tony says, In defense of 'Halvarez', he doesnt back out of domain bids.

SnapNames is encouraging those with questions to contact the company at (866) 690-6279 or support@snapnames.com. The company has also posted an FAQ page on its website. The Cuerto Law Firm is asking for affected consumers to contact them at (305) 777-0377 or info@cuertolawgroup.com.

By Jon Hood
ConsumerAffairs.com

November 11, 2009
AARP is taking more heat over marketing of one of its insurance plans, as a Texas couple files a class action lawsuit claiming that ads led them to believe the group's Medical Advantage Plan -- which is no longer being sold through AARP -- was a primary insurance plan, rather than one providing limited coverage for crucial medical care.

James and Alison Halperin received a packet touting the Medical Advantage Plan in early 2008, and were so excited that they dropped their existing policy and signed up. Shortly thereafter, Alison was diagnosed with breast cancer and informed that she would need costly surgery. In case that wasn't bad enough, the Halperins were treated to another kick in the gut when they found out their new AARP-provided plan wouldn't cover the urgent procedure.

The Halperins' policy, provided by UnitedHealth Group, is a so-called limited benefit plan: its coverage is limited to a specific dollar amount. Typical insurance plans, by contrast, cover a percentage of all health-related costs, regardless of how high the bill ends up being. Unfortunately for the Halperins, AARP's plan is especially stingy in its coverage of surgical procedures, providing anywhere from a few hundred to $10,000, depending on what kind of surgery is needed.

The plan's appeal lies in its relatively low premiums, attractive for consumers who might have trouble attaining a traditional plan or who are struggling in the still-gloomy economy. The plans are targeted to consumers between 50 and 64. An AARP spokesman said the plans were not designed to be comprehensive insurance, nor should they be communicated in this manner.

The Halperins accuse Washington, D.C.-based AARP of violating the city's Consumer Protections Procedure Act. Their complaint alleges that AARP has preyed upon Plaintiffs and thousands of Americans over age 50 by luring unsuspecting consumers in need of affordable health care to enroll in AARPs health insurance program.

Plan canceled

The Halperins' allegations are only the latest in a series of claims that AARP misled consumers as to the extent of the plan's coverage. Last year, Sen. Chuck Grassley of Iowa sent a letter to AARP's then-CEO Bill Novelli voicing concerns that consumers who purchased the plan might not realize that it only provides limited coverage. Grassley also sounded the alarm about Essential Plus Health Insurance, a second AARP policy with similar terms as the Medical Advantage Plan.

Insurance is supposed to limit your exposure to the potentially high cost of a serious illness, Grassley told USA Today. These plans do the opposite.

The ensuing firestorm led AARP to stop offering the plans, technically known as "fixed-cash benefit indemnity plans."

Unkind year

All in all, 2009 has not been kind to AARP.

Approximately 60,000 seniors have canceled their memberships since July, apparently in protest of the group's support for health insurance reform. A competing, conservative-backed group creatively named the American Seniors Association has been trying to woo AARP members over to its side. While AARP originally refused to back a specific bill, the group last week endorsed the Affordable Health Care for America Act, the bill currently snaking its way through Congress.

Illinois Attorney General Lisa Madigan has filed suit targeting a telemarketing scam that promises to reduce consumers' credit card interest rates immediately, but ultimately fails to achieve any savings for consumers.

"During these difficult economic times, consumers are understandably looking for ways to ease the burdens of rising debt," Madigan said. "But I urge consumers to be wary when solicitors try to make tempting claims of 'immediate' savings. In such cases, the schemers rarely deliver and usually leave consumers in an even worse financial situation than before."

Madigan filed suit against Priority Direct Marketing International, Inc. (PDMI), a Bedford, Texas-based telemarketing firm run by its President, William Fithian, and Advanced Management Services NW, LLC (AMS), a Spokane, Wash.-based firm owned by Ryan Bishop.

The suit claims that the two companies work in a concerted telemarketing scheme to solicit and enroll consumers in deceptive debt negotiation service agreements that promise to immediately reduce consumers' credit card interest rates, with a guaranteed savings of $2,500.

PDMI and AMS telemarketing representatives allegedly promise consumers that the companies will negotiate with consumers' credit card companies to lower interest rates, and will provide full refunds if they are unsuccessful.

After consumers agree to enroll in the program, the telemarketing schemers allegedly charge consumers' credit cards for set up fees ranging from $391 up to $1,590, the suit contends. The defendants allegedly tell consumers that these fees will be reimbursed at a later date by the consumers' banks. Only after consumers' credit cards are charged for the setup fees do they receive any documentation on the program's terms and conditions, which on several points, contradict the telemarketers claims in their sales solicitations.

Specifically, PDMI and AMS misleadingly claim that they can guarantee an interest rate reduction for all customers or provide full refunds in instances where rate reductions are not secured. When customers have requested refunds, after the defendants have failed to negotiate any interest rate reductions, the defendants allegedly refuse altogether or give refunds minus a non-refundable $199 fee that was not disclosed during the sales pitch.

Madigan's lawsuit charges the defendants with violating the Illinois Consumer Fraud and Deceptive Business Practices Act by misrepresenting the services they provide to consumers and the effects the services will have on consumers' credit.

The suit asks the court to enter a permanent injunction barring the defendants from engaging in debt settlement in Illinois and to order the defendants to pay restitution for complainants, civil penalties of $50,000 for violating the Consumer Fraud Act, and an additional $50,000 for each violation committed with the intent to defraud.

Madigan advises consumers looking for legitimate financial assistance to consider credit counseling services that charge modest fees and provide true financial and budget counseling based on a consumer's personal circumstances.

States continue to step up pressure on companies marketing loan modification services to distressed homeowners, calling some of these operations out and out scams.

In Florida, Attorney General Bill McCollum has sued two Central Florida companies and their owner over allegations they charged up-front fees for foreclosure rescue-related services.

National Payment Modification Company and The Bostonian Group, LLC, which conducts business under the name People's First, allegedly charge up to $2,500 in up-front fees to homeowners trying to rescue their homes from foreclosure.

Also named in the lawsuit is William Rodriguez, the owner of both companies, who was a founding owner of Wineberg, Lopez, & Rodriguez Company. The Attorney General's Office sued Wineberg, Lopez, & Rodriguez Company in March and obtained an emergency injunction barring the company from charging homeowners any fee in advance for providing foreclosure-related rescue services. That case is still pending in Orange County Circuit Court.

An investigation conducted by members of the Attorney General's Economic Crimes Division, working as part of the Attorney General's Mortgage Fraud Task Force, determined that both companies charge the up-front fee and divide it into five equal payments secured by post dated checks.

Each check, according to the lawsuit, is associated with a separate "sub-contract" or step in the loan modification process. Consumers complained that both companies cash the post-dated checks even though the companies have not begun negotiations or even contacted the consumers' lenders.

The Attorney General's Office is seeking permanent injunctions prohibiting the companies from charging up-front fees, restitution on behalf of injured consumers, civil penalties of $15,000 for each violation, and reimbursement for attorney's fees and costs related to the investigation.

The Attorney General's Office has filed numerous civil lawsuits to enforce the state law prohibiting companies from charging up-front fees for foreclosure-related rescue services and is currently investigating over 75 additional companies.

National retailer Target has agreed to pay $375,000 to settle New Jersey charges that it sold infant formula and non-prescription drugs beyond expiration dates, sold merchandise that did not match posted prices, and failed to post prices on its merchandise.

The settlement also resolves allegations that Target failed to maintain sufficient quantities of advertised merchandise, failed to post its rain check policy, failed to post bicycle safety notices, and violated a previous Consent Order with the New Jersey Division of Consumer Affairs.

As part of the settlement, Target has voluntarily created a new senior management position, entitled Group Pricing Compliance Specialist, whose duties include monitoring compliance with Target's policies as well as the settlement terms as to price accuracy. Target has also agreed to provide all Target employees in the state with initial training as to price accuracy. The compliance position and the initial training shall be in effect for two years.

"We will continue to monitor all major retail chains to ensure that consumer rights are protected and out-of-date non-prescription drugs and infant formula are not available for sale on store shelves," said New Jersey Attorney General Anne Milgram.

The Office of the Attorney General, the Division of Consumer Affairs, and the Office of Weights and Measures filed suit against Target in September 2008, after inspections of 21 of the company's 40 New Jersey stores by investigators from the Division's Office of Consumer Protection and the Office of Weights and Measures.

Under the settlement, Target has agreed not to sell or offer for sale any non-prescription drugs or infant formula beyond their expiration dates, to check the expiration dates before displaying such merchandise for sale, to conduct weekly checks of the expiration dates of the merchandise offered for sale and to arrange for the destruction or return to the manufacturer or supplier of any expired merchandise removed from the store shelves.

Further, Target agreed not to sell or offer for sale merchandise at a price that exceeds the price posted at the point of display. Target also agreed not to sell or offer for sale any merchandise unless the total selling price is plainly marked by a stamp, tag, label or sign. In addition, Target agreed to have a sufficient quantity of advertised merchandise to meet anticipated demand or shall advertise merchandise as available in limited quantities. Finally, Target agreed to conspicuously post its raincheck policy as well as the notices required by the state's Bicycle Safety Act and Regulations.

The $375,000 settlement amount represents $350,000 in civil penalties, $10,000 to reimburse the state's attorney fees, and $15,000 to reimburse the state's investigative costs.