Current Events in February 2010

Ohio Attorney General Richard Cordray this week named United Law Group, Inc. (ULG), a California law firm founded by California attorney Sean Alan Rutledge, in a lawsuit for bilking Ohioans who faced foreclosure out of thousands of dollars.

The lawsuit alleges that the law firm promised foreclosure rescue and legal services to save homes and collected upfront fees but failed to deliver. In at least one instance a consumer was forced into foreclosure. ULG's attorneys are not licensed to practice law in Ohio and never filed any court documents or provided legal representation on behalf of their clients.

According to the lawsuit filed in Franklin County Common Pleas Court, ULG solicited Ohioans over the phone and used high-pressure sales tactics to convince them to agree to foreclosure rescue services. Consumers then signed a Special Power of Attorney and Attorney-Client Fee Contract for representation on mortgages, loan modifications and foreclosures. To secure payment of the upfront fee ranging from $1,500 to $4,000, ULG asked for access to consumers' bank accounts and then withdrew money without regard to scheduled payment dates. The lawsuit also states that ULG often cut off all contact with consumers after the final fees were debited.

In one case, a consumer was current on her mortgage, but defaulted into foreclosure after she hired ULG and they instructed her to stop making payments.

"The egregious practices of this group are nothing less than predatory. This lawsuit demonstrates the scary sophistication of some rescue scam operations," said Cordray. "They can be savvy, with highly educated employees and target individuals who are in a very vulnerable position. The practices are absolutely unconscionable and unfortunately illustrate the need for Ohioans to be vigilant and do their homework. I strongly suggest deep research into any company requiring an upfront fee."

In November 2009, the State Bar Court of California ruled that ULG founder Sean Alan Rutledge was to be involuntarily enrolled as an inactive member of the State Bar of California for his conduct, which was found by the court to pose "a substantial threat of harm to his clients or the public."

In a separate action, Cordray filed a lawsuit against Guardian Services Group, also based in California, for promising foreclosure rescue services to Ohioans, accepting upfront fees and never delivering. The suit, filed in Montgomery County Common Pleas Court, accuses the company of charging consumers thousands of dollars and refusing to provide refunds even though the services were never provided.

In each case, Cordray is asking the courts for a permanent injunction, restitution to consumers and civil penalties of $25,000 for each violation of Ohio's Consumer Sales Practices Act. The lawsuits are part of an ongoing statewide investigation into foreclosure rescue companies operating in Ohio. To date, Cordray has filed nine lawsuits against businesses targeting Ohio consumers and has issued more than 30 cease and desist orders.

In early January, Cordray secured a judgment of $81,894 against Michael Brotherton, who operated Financial Emergency, Inc., a rescue business in Greene County. The judgment, filed in the Common Pleas Court of Greene County, stemmed from a lawsuit filed in June charging Brotherton with promising to negotiate debt settlements and loan modifications, collecting upfront fees for up to $1,269 and then failing to deliver. The court ordered full reimbursement to the five victims named in the case.

With these lawsuits, Cordray has filed against nine foreclosure rescue scam operations targeting Ohioans since taking office in January 2009. The lawsuits are part of a full-on effort to hold companies accountable for violating Ohio law in the wake of the foreclosure crisis. Cordray has additionally sued three mortgage servicers for unfair or deceptive loan modification practices. The lawsuits against Carrington Mortgage Services, American Home Mortgage Servicing Inc. and Barclays Capital Real Estate dba HomEq Servicing for violations of Ohio's Consumer Sales Practices Act introduce an unprecedented legal strategy. To date, Cordray is the only state Attorney General in the country to use this strategy to hold mortgage servicers accountable.

A group of Fifth Third Bank customers has filed a lawsuit against Fifth Third Bank, seeking refunds of millions of dollars in overdraft charges the plaintiffs contend were taken illegally.

The suit maintains that the overdraft fees were often charged when the customers had enough funds in their accounts to pay for purchases.

"It is one thing to charge an overdraft fee when someone has actually overdrawn their account. It is entirely another to charge an overdraft fee when the customer's account has sufficient funds, said Hassan Zavareei, a partner at the Washington, D.C.-based law firm Tycko & Zavareei LLP, which represents the plaintiffs.

The suit charges that in some cases Fifth Third charges overdraft fees and additional fees for every day an account is overdrawn -- even when an account is overdrawn solely because of bank fees charged by Fifth Third.

"The bank is essentially charging overdraft fees on overdraft fees," said Zavareei. "This is outrageous bank conduct, made worse by the fact that most of the bank's victims are struggling to make ends meet."

Over the years, ConsumerAffairs.com has received similar complaints about Fifth Third Bank, particularly its overdraft policies.

The lawsuit was filed in federal court on behalf of Marlene Willard, of Hephzibah, Georgia, and other bank customers who claim they were unfairly and illegally charged overdraft fees by Fifth Third Bancorp for charges they made on their ATM/debit cards.

The class action lawsuit alleges that these fees violate federal and state law, as well as the contractual relationship the bank has with its customers. The lawsuit seeks certification of a class action on behalf of Fifth Third Bank customers who were improperly charged overdraft fees or who received insufficient disclosures about such overdraft fees.

"Manipulation" alleged

The complaint alleges that Fifth Third Bank manipulates debit transaction posting to cause overdraft fees even when there are sufficient funds to pay for a certain purchase. Further, the suit claims Fifth Third Bank fails to properly disclose fees that will be charged at the point of sale, and uses deceptive disclosures in its contract with customers to hide its true overdraft policies.

"We are continuing to investigate Fifth Third and other banks around the country. Customers must be compensated for bank practices that caused hundreds of millions of dollars in improperly charged fees," Zavareei said.

The complaint also alleges that Fifth Third Bank has not allowed its customers to opt out of "overdraft protection," as recommended by Federal regulators.

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has over $100 billion in assets and operates 16 affiliates with 1,306 full-service Banking Centers in Ohio, Kentucky, Indiana,Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina.

Master Builders for Christ and Vision Builders Christian Center, along with three of its principals, have been charged in a 21-count indictment in Delaware, on charges of running a massive mortgage rescue scam.

Warrants have been issued for the arrest of Jamaar Manlove, Larry Manlove, and Rhonda Manlove, and racketeering liens have been placed on their assets. Delaware Attorney General Beau Biden says the case is believed to be one of the largest mortgage rescue fraud indictments in the state's history.

The indictment alleges that Jamaar Manlove ran a criminal enterprise involving theft, money laundering, and forgery in which he preyed on vulnerable homeowners who faced imminent foreclosure.

In these scams, struggling homeowners are convinced to sell their homes to third parties to avoid foreclosure, based on the false promise that they can repurchase their homes through a complex sale/lease-back arrangement when their financial situations improve. In reality, this never happens.

Instead, these schemes impose huge hidden fees that take thousands of dollars of equity away from homeowners, and they ultimately lose their homes, unable to obtain financing to repurchase their home.

It's not clear what role the organizations played in the alleged scheme, but both are described as Christian real estate operations. In the past, many so-called "affinity scams" have taken advantage of the victims' and perpetrator's shared beliefs to generate trust, trust that ultimately proves to be misplaced.

"Those who take advantage of vulnerable homeowners under extreme financial duress or facing foreclosure should be on notice," Biden said. "We will track you down, prosecute you, and put you behind bars."

The indictment follows a 10-month investigation by the Attorney General's Consumer Protection Unit and includes charges of criminal racketeering, conspiracy, money laundering, felony theft, forgery, and failure to file taxes. If convicted on all counts each defendant faces a minimum of two years in prison. Jamaar Manlove faces a maximum of 83 years in prison if convicted on all counts.

Biden said the case is the direct result of the collaborative work of the Delaware Attorney General's Mortgage Fraud Task Force, which was formed in June 2009 to reduce foreclosures and foreclosure-related fraud statewide.

If you can't trust the Better Business Bureau, whom can you trust?

The organization is warning about a new scam that is using its name in order to steal tens of thousands of dollars from victims who are led to believe they have won a lottery.

So far, scammers posing as BBB employees have fleeced one victim of $80,000 and several other consumers have reported that they were contacted over the phone or via e-mail by someone claiming they were with the organization.

According to the Better Business Bureau, these consumers were told that they had won a lottery and that, in order to receive the prize, they must first wire money back to the scammers. In some cases, the scammers used the names of real BBB employees --directing victims to legitimate bios and profiles on BBB's Web site -- in order to reinforce their ruse.

"Many people are struggling in the current economy and when someone tells you that you've won millions in a lottery, it can seem like an answer to prayer," said Steve Cox, President and CEO of the Council of Better Business Bureaus. "Every year, tens of thousands of people contact BBB about a suspicious lottery and instead of cashing in, many lose thousands of dollars they don't have."

BBB emphasizes that it does not run a lottery nor award prizes to consumers. Anyone who receives a call, letter or e-mail about winning the lottery should consult the following checklist in order to avoid falling victim to a lottery scam:

• Make sure the story checks out. Always confirm the facts directly with the organization the representative claims to be from -- whether it's BBB or any other organization. Use contact information that you found on your own from the organization's Web site; don't rely on phone numbers or Web links provided by the representative. Scammers often pretend to be from legitimate businesses or non-profits and a quick call directly to the organization can help set the record straight.

• Never pay money to get money. Lottery scammers make their money by convincing victims that they have to pay money up front -- to cover such costs as taxes or fees -- in order to receive their winnings. Because it is extremely difficult for the victim to track or retrieve money sent via wire transfer, scammers will often use this as their payment method of choice.

• Don't fall for the phony check. Scammers will often send a check in the mail to the victim with the instructions that in order to receive the full prize he or she must deposit the check and wire back a portion of the funds to cover fees or taxes. This gives the victim a false sense of security because the check will clear initially, but eventually be discovered as a fake. The money is then taken out of the victim's account and he or she is out the funds sent to the scammer.

The BBB lottery scam isn't the only one out there. Gregory of Columbia, SC tells ConsumerAffairs.com that he was contacted by a Paul Jones saying that he had won a $3.5 million dollar lottery. "I was informed by him to wire $1250 to an Alecia Edwards so I can collect my money. I sent the transaction and they said that they were at an airport near my location but nobody ever show to bring me any money." Gregory says the scammers are now telling him that he needs to send them another $2500 to complete the transaction. "They wont stop calling and they have the $1250 I sent them already," he concludes. "I tried to tell them to just send it back but they told me to get a lawyer if I want my money back."

Despite all the warnings, consumers continue to fall for these scams.

By Mark Huffman
ConsumerAffairs.com

February 1, 2010
By now you have probably received a notice from your credit card company outlining the changes to your account that will occur later this month, when the Credit Card Accountability and Disclosure Act finally goes into effect.

The law was changed in response to years of consumer complaints about abusive behavior by credit card companies. When the new law goes into effect on February 22, there will be several principal changes:

Payment crediting

Under the new law, if you pay more than the minimum monthly payment, the excess will be applied to balances with the higher interest rate. Currently, the credit card companies can apply it any way they choose, and usually choose to apply it to the balance with the lowest interest. The purpose of this particular change is to allow consumers to pay off their higher balances more quickly, saving on interest charges.

Paying interest

You will have a minimum of 21 days following the close of each billing cycle to pay off the balance to avoid accruing periodic interest charges. Cash advances, however, may still carry an interest charge, even if you pay it back within 21 days. The 21 day window was added because many consumers complained there was so little time between the time they received their monthly statement and when the payment was due.

Rate changes

Under the new rules, rate increases can be made on new balances with a 45-day notice. However, rates on existing credit card balances cannot be changed except under special conditions. This change is designed to end the practice of credit card companies raising customers rates on a whim.

Penalty APR

A penalty APR, also known as drastically raising your interest rate, can still be applied to your account, but only if you fail to may a minimum payment on time, make a payment in which the check bounces, or are late or exceed your credit limit on another account or loan you have with that particular credit card company, or any of its related companies. This provision does away with something called "universal default," which meant a credit card company could jack up your rate if you were late paying any bill, such as your electric bill.

Other changes include:

• No interest rate increases, in most cases, for the first year that any account is open.

• Your payment will be due on the same date each month, and if the date is a Sunday, it could be received by Monday and not draw a late fee

• In most cases credit card companies may not raise the rate on existing balances, just new charges.

• Your statement will provide a toll-free number for a reputable credit counseling agency.

In addition, credit card company communications to customers will become simpler and easier to understand. One prominent change to statements is the requirement that consumers be provided with an illustration of how long it will take them to pay off their balance, illustrating paying only the minimum amount due each month versus paying off the debt in three years. There will be other changes to statements as well.

"This includes removing the Arbitration section from the agreement effective February 22, 2010," Chase said in a letter to customers.

But Chase also emphasized that nothing in the new rules "change the interest rates and fees on your account."

And therein lies for rub for millions of credit card customers. Since Congress passed the CARD action last May, credit card companies have been busy jacking up rates, closing accounts, lowering credit limits, raising minimum monthly payments and adding new fees. In short, doing many of the things they will no longer be allowed to do after February 22.

Consumers complained so loudly that some in Congress proposed passing another law, speeding up implementation of the CARD act to early December. But the measure died when early December came and went without the measure getting out of committee.

Rep. Carolyn Maloney (D-NY), author of the CARD Act, charged lenders were taking advantage of the eight month window between passage of the law and its implementation to continue to abuse consumers. In late October 2009, a report by the Pew Health Group's Safe Credit Cards Project tended to confirm her suspicions.

The October report found that 100 percent of credit cards offered online by the leading bank card issuers continued to include practices that will be outlawed once legislation passed in May takes effect next year.

The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks' cost of lending declined.

"Since passage of the Credit CARD Act, we found that credit card issuers have done little to remove practices deemed unfair or deceptive by the Federal Reserve," said Shelley A. Hearne, managing director of the Pew Health Group, which oversees the project. "In fact, some of the most harmful practices have actually grown more widespread-not one of the bank cards reviewed would meet the legal requirements outlined in the Credit CARD Act, which is bad news for consumers."

With the Super Bowl and Winter Olympics just days or weeks away, this could be a great time to buy that new TV you've been thinking about, especially since prices are continuing to fall.

In fact, you may be able to find a set with a screen size ranging from 46 to 50 inches for as little as $600. The March issue of Consumer Reports includes ratings of over 130 LCD and plasma TVs and advice on what features are worth the price.

"Whether you're a first time buyer or you want to upgrade your existing flat-panel, TV prices have never been better and they continue to fall," says Paul Reynolds, electronics editor of CR. "It's not always best to go for the least-expensive model we've found that some features are worth the extra-cost."

Things to consider when making your purchase:

• Resolution: 1080p vs. 720p. 1080p resolution, called full HD, is now very common, but some 50-inch and smaller TVs still have 720p resolution. Salespeople may suggests that 1080p sets have better picture quality overall, but it's not always the case. Generally, a 1080p set does have the potential to display finer detail than a 720p because the screen has more pixels (the elements that make up the image). The price premium for 1080p has shrunk but still runs $100 to $200. Consumer Reports recommends buying a 1080p set if the TV is 50 inches or larger, and price isn't an issue.

• Less Blur: 120Hz & 240Hz. Ads make a big deal of 120Hz and 240Hz technologies, which promise to reduce blurring and the loss of detail that can occur when LCD TVs display fast-moving images. 120 Hz technology doubles an LCD TV's usual 60Hz frame rate, and 240Hz quadruples it. (Some models combine a 120Hz frame rate with a scanning, or flashing, backlight, to create a 240Hz effect.) Purchasing a TV with anti-blur technology can cost an extra $200 or more and results varied in the magazine's lab tests. A 60Hz set should satisfy most casual viewers, but it's worth considering a 120Hz TV now that the feature is available on lower-priced sets.

• Screen Size: Consumers in the market for a TV may opt for a smaller screen size to keep costs down. Consumer Reports suggests that consumers purchase the biggest screen their budget and space allow, rather than a smaller model with extra features that will be rarely used.

• High-priced HDMI cables: Retailers will try to talk consumers into spending $50 or more for an HDMI cable to use with a new HDTV. Consumer Reports recommends buying decent-quality cables with sturdy connectors, but not expensive ones. A 6-foot HDMI cable should cost $10 or so. Even so-called high-speed cables designed for 1080p throughput shouldn't cost more than $20 for a 3-to-6-foot cable. If low-priced HDMI cables aren't available at the store, look online.

Consumer Reports' Best Buys: HDTVs

Most of the TVs featured in Consumer Reports latest ratings have excellent or very good picture quality, so there are many fine choices. Below are is list of CR Best Buys which are mainstream values. (Sets are listed from largest to smallest screen size).

LCD TVs

• Vizio VF550M, $1,400

• Toshiba Regza Cinema Series 52XV648U, $1,400

• Toshiba Regza 46XV645U, $1,000

• Insignia NS-L42Q-10A, $650

• LG 42LF11, $700

• Sanyo DP42849, $630

• Vizio VO320E (720p), $390

• Sanyo DP26649 (720p), $300

Plasma TVs

• LG 50PQ30, $800

• Insignia NS-P501Q-10A (720p), $650

• Panasonic Viera TC-42PX14 (720p), $550

• LG 42PQ30

No list, of course, is foolproof.

Melinda of Fredericksburg, VA, tells ConsumerAffairs.com. "After 1.5 years my 32 inch Vizio began clicking off and on, then eventually turned off for good. I have been doing some research and have found out that there is a problem with the power supply. This appears to be a defect. Vizio has not agreed to fix this, as of yet. 550.00 down the drain!"

From Ed of Los Gatos CA, "Purchased a new 42 in HDTV and within 30 days it went dead. Took it into their repair center and they have had it for 60 days with no resolve in sight. The warranty period is wasting away and I cannot get an answer on what they are going to do it anything. Help."

Maria of Joliet, IL, purchased a Panasonic HDTV last year and says the lamp has burned out. "I have checked the website," she writes ConsumerAffairs.com, "and see it cost over 200 for a replacement. I also see where this is a known issue to Panasonic about this defective lamp. I now have no TV and no money to get the replacement part. I am stuck with a $1,000 TV that we can not use because the lamp is burned out."

Tiffany of Albuquerque, NM tells us that she purchased a 37-inch Insignia TV and two days after the one-year anniversary it went dead. No picture sound or anything. "I watch TV probably 1-2 hours a day," she says. "Many calls to get help and guidance for this worthless TV and nothing. They said that since it was out of its warranty they would do nothing. I could either take it to a shop or throw it out."

The complete report, "Best TVs for the buck," is available in the March 2010 issue of Consumer Reports. The report includes buying advice, ratings of over 130 LCD and plasma TVs, best and worst brands, and six easy steps to get high-definition TV programming.

If you don't like anything you see on the list or in the stores, you can always take matters into your own hands.