Current Events in May 2010

May 21, 2010

General Motors has announced the recall of 1.5 million 2007-2009 model cars, trucks and crossovers to disable a heated washer fluid system module that could pose a fire risk. There are no known injuries or crashes related to the condition.

Because the feature will be disabled, GM said it will pay $100 to the owner or lessee of each vehicle.

"While our analysis shows the number of incidents is very small compared with the number of vehicles on the road, we want our customers to have complete peace of mind," said Jeff Boyer, executive director of Safety. "We always want to make sure customers can count on the safety and quality of their GM vehicle."

Dealership service personnel will remove the heated washer fluid module and reroute washer fluid hoses. Customers will begin receiving recall letters this month, but they can contact their dealer at any time to make an appointment to have the heated washer system removed, the company said.

"This was a unique technology available from only one supplier, and that supplier has stopped manufacturing, which left no opportunity to collaborate on an improved design," Boyer said. "We want to be clear that the voluntary payment to customers is for the loss of the feature, not the recall."

Models included in the recall are the 2006-2009 model year Buick Lucerne; Cadillac DTS; Hummer H2; 2008-2009 model year Buick Enclave; Cadillac CTS; 2007-2009 model year Cadillac Escalade, Escalade ESV, Escalade EXT; Chevrolet Avalanche, Silverado, Suburban, Tahoe; GMC Acadia, Sierra, Yukon, Yukon XL; Saturn Outlook; and 2009 model year Chevrolet Traverse.

Most of the vehicles, 1,365,070, are in the United States; there are 98,794 affected vehicles in Canada; 26,228 in Mexico, and 38,093 exports.

The heated washer fluid system was recalled in August 2008 because a short circuit on the printed circuit board could overheat the control-circuit ground wire. Dealers at the time installed an in-line fuse in the heated washer module wiring.

The government closed its initial investigation after the 2008 recall. GM continued to monitor the performance of the heated washer fluid module in the field and continued communications with NHTSA.

In June 2009, a new and second failure mode was identified by GM with the first confirmed report consisting of smoke only. Since then, GM has been made aware of five fires.

May 21, 2010
Food cravings are the scourge of every dieter. When you fall below your normal caloric intake for the day, your body often cries out for something to eat - anything from pizza to peanut butter.

Why do we get intense desires to eat certain foods? Although food cravings are a common experience, researchers have only recently begun studying how food cravings emerge.

Psychological scientists Eva Kemps and Marika Tiggemann of Flinders University, Australia, review the latest research on food cravings and how they may be controlled in the current issue of Current Directions in Psychological Science, a journal of the Association for Psychological Science.

We've all experienced hunger, where eating anything will suffice, but what makes food cravings different from hunger is how specific they are. We don't just want to eat something; instead, we want barbecue potato chips or cookie dough ice cream.

Many people experience food cravings from time to time, but for certain individuals, these cravings can pose serious health risks, researchers warn. For example, food cravings have been shown to elicit binge-eating episodes, which can lead to obesity and eating disorders. In addition, giving in to food cravings can trigger feelings of guilt and shame.

Where do food cravings come from?

Many research studies suggest that mental imagery may be a key component of food cravings - when people crave a specific food, they have vivid images of that food. Results of one study showed that the strength of participants' cravings was linked to how vividly they imagined the food.

Mental imagery takes up cognitive resources, or brain power. Studies have shown that when subjects are imagining something, they have a hard time completing various cognitive tasks.

In one experiment, volunteers who were craving chocolate recalled fewer words and took longer to solve math problems than volunteers who were not craving chocolate. These links between food cravings and mental imagery, along with the findings that mental imagery takes up cognitive resources, may help to explain why food cravings can be so disruptive: As we are imagining a specific food, much of our brain power is focused on that food, and we have a hard time with other tasks.

Use your imagination

How do you get these powerful cravings under control? New research findings suggest that that this relationship may work in the opposite direction as well. It may be possible to use cognitive tasks to reduce food cravings.

The results of one experiment revealed that volunteers who had been craving a food reported reduced food cravings after they formed images of common sights. For example, they were asked to imagine the appearance of a rainbow. Even imagining different smells seemed to work.

In another experiment, volunteers who were craving a food watched a flickering pattern of black and white dots on a monitor, similar to an untuned television set. After viewing the pattern, they reported a decrease in the vividness of their craved-food images as well as a reduction in their cravings.

According the researchers, these findings indicate that "engaging in a simple visual task seems to hold real promise as a method for curbing food cravings."

The authors suggest that "real-world implementations could incorporate the dynamic visual noise display into existing accessible technologies, such as the smart phone and other mobile, hand-held computing devices." They conclude that these experimental approaches may extend beyond food cravings and have implications for reducing cravings of other substances such as drugs and alcohol.

May 20, 2010
California authorities have arrested nine men and charged them with 97 criminal counts for allegedly stealing at least $2.3 million from more than 1,500 desperate homeowners who were promised loan modifications but received no relief.

Attorney General Edmund G. Brown Jr. said the men worked out of a Southern California boiler room, tricked out in high-roller style with a roulette wheel and other casino equipment.

"This company was just a boiler room, long on promises and upfront fees but short on foreclosure relief," Brown said. "Its operators cruelly defrauded citizens trying valiantly to hang on to their homes."

Arrested Tuesday and Wednesday night were Gregg Scott Quinn, 37, of Camarillo and Juan Pierre Washington, 40, of Winnetka, who worked as company sales managers and supervisors. They are being held at Los Angeles County Jail.

A work station in the Canoga Park boiler room. State photo.

The four principal owners of the business, Niv Iskin, 30, of Reseda, Reviv Karpman, 38, of Tarzana, Tomer Kogman, 29, of Receda and Avraham Yechizkia, 34, of Encino; and a sales manager, Barel Iskin, 23, of Woodland Hills, are still being pursued by law enforcement.

Brown's office initiated its investigation in March 2009 in response to numerous consumer complaints against the defendants' Canoga Park-based loan modification business, which operated as Mason Capital Group, LLC and Gretchen Fox and Associates.

When agents executed a search warrant at the office, they found a Las Vegas casino-themed sales floor complete with craps, poker and black jack tables fashioned as workstations, and a roulette wheel that top-selling telemarketers spun for cash bonuses.

Between January 2008 and June 2009, the four owners took in at least $2.3 million in up-front fees, which ranged from $1,000 to $5,000, from more than 1,500 homeowners throughout the country, Brown's office said. In almost every case, no loan modifications were completed, as promised. Financial records indicate that the four owners spent hundreds of thousands on private school tuition, travel, entertainment, shopping and other personal expenses while running Mason Capital Group, LLC and Gretchen Fox and Associates.

To corral sales, the four owners used a telemarketing operation that targeted homeowners facing mortgage payment increases or foreclosure. During an initial call, the telemarketers touted the company's team of "attorneys, forensic accounting personnel, and loan negotiators" available to negotiate reductions in interest rates, monthly payments and principal balances; their suppos! ed 90% to 100% loan modification success rate and refund guarantee. The telemarketers then collected financial information from homeowners to determine if they "qualified" for the company's services.

Soon after the initial call, homeowners received a follow-up call to inform them that their case had been "reviewed" and "approved." Telemarketers closed sales by insisting the approval would expire unless homeowners acted quickly, while reminding them about the refund guarantee if promised results were not achieved.

In fact, the company completed very few loan modifications, rarely contacted lenders, failed to honor the refund guarantee, employed unlicensed "loan processors" and had no legal staff negotiating with lenders.

While homeowners waited, they were told their loan modifications, or refunds, would be voided if they tried independently to contact their lender. Many lost their homes to foreclosure as a result.

To skirt the state's foreclosure laws, avoid paying refunds and conceal profits, the owners changed company names, claimed bankruptcy and shifted loan modification files to another business they created called, American Financial Group, LLC.

Investigators located victims in dozens of California cities, including: American Canyon, Anaheim, Antioch, Artesia, Atwater, Bakersfield, Ceres, Chico, Cotati, Cloverdale, Crestline, Delano, Elk Grove, Encino, Fountain Valley, Fremont, Fresno, Guerneville, Hanford, Hayward, Hercules, Hood, Indio, La Jolla, Lancaster, Laguna Hills, Lodi, Long Beach, Los Angeles, Manteca, Modesto, Montclair, N. Hollywood, Newhall, Newman, North Highlands, Oakdale, Oakland, Ontario, Palmdale, Pittsburg, Pleasanton, Poplar, Porterville, Redding, Richmond, Riverbank, Rodeo, Sacramento, San Jose, San Pablo, Santa Clara, Santa Rosa, Sebastopol, Stanton, Stockton, Tracy, Tulare, Turlock, Union City, Upland, Valley Village, Van Nuys, Visalia, W. Sacramento and Yuba City.

Brown said his office will seek restitution for the victims.

By law, all individuals and businesses offering mortgage foreclosure consulting or loan modification and foreclosure assistance services must register with Brown's office and post a $100,000 bond. It is also illegal for loan modification consultants to charge up-front fees for their services.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

With the increased skin cancer concerns associated with tanning, you wouldn't think a tanning salon would go so far as to actually claim tanning is good for you. But Texas Attorney General Greg Abbott says that's exactly what a San Antonio salon operator did.

Abbott has gone to court, charging Curtis Ryan, Lynda Ryan and their son Tony Ryan, operators of Euro Tan, routinely solicit customers using colorful brochures and a Web site - both of which include statements about the health benefits associated with using a tanning salon.

For example, Abbott says the defendants improperly claimed that tanning reduces the incidence of melanoma because of the delivery of high doses of Vitamin D to the skin. The claims misstated the tanning beds' approved uses. Under state and federal law, the defendants' tanning beds are only approved by the U.S. Food and Drug Administration (FDA) for cosmetic tanning of the human body.

In addition, Euro Tan claimed "research" showed that increased dosages of Vitamin D can benefit those with autism, autoimmune illnesses, other cancers and chronic pain. Other medical-related claims in the defendants' brochure indicated their tanning beds would lower blood pressure, decrease pre-menstrual syndrome symptoms, increase muscle strength and improve the immune system.

Abbott says the tanning salon also promoted an unapproved medical device. The defendants claimed that their "mineral wrap" could eliminate cellulite and detoxify fat cells, which constitutes a medical claim. A company Web page posting asked rhetorically, "Is Sunscreen Causing Cancer?" and, while urging the responsible use of sunscreens, the Web site implied that tanning salon customers can dispense with sunscreens altogether.

The state's enforcement action charges the defendants with violating the Food, Drug and Cosmetic Act, as well as various Texas Health and Safety Code laws. The FDA has not approved tanning beds as Vitamin D delivery devices or devices that reduce cancer or other health risks. Any advertisements for these unapproved uses are false and violate state law, Abbott said.

Under the Texas Health and Safety Code, tanning salons are prohibited from claiming that indoor tanning devices provide any health or medical benefits. The state's enforcement action also cites the Texas Deceptive Trade Practices Act (DTPA), which prohibits deceptive advertising.

The attorney general seeks an injunction to halt the misleading practices. The office seeks civil penalties of up to $20,000 per violation of the DTPA, as well as $25,000 per day for each violation of the Health and Safety Cod

May 20, 2010

The Federal Trade Commission reached its third settlement as part of a recent agency crackdown on fraud in the prepaid calling card industry that has forced companies to pay more than $4 million.

The latest agreement requires New York-based Diamond Phone Card, Inc. and its principals to pay $500,000. It also bars them from misleading consumers about the talk time that their calling cards provide, and requires them to clearly disclose in the same language that they are marketed all fees associated with their cards.

The FTCs July 2009 complaint against Diamond Phone Card like the FTCs complaints against other calling card companies alleged that the company made false claims about the number of calling minutes their cards deliver, and that it failed to properly disclose maintenance and other hidden fees. Some fees were disclosed in nearly illegible print on the bottom of the companys advertisements. The FTCs testing showed that consumers received only about half the advertised minutes from Diamond prepaid calling cards.

Unlike Diamond Phones ads, the FTCs message here is clear, said FTC Chairman Jon Leibowitz. If you deceive consumers about the prepaid calling cards youre selling, we will take you to court and force you to give up the money you made through deceptive sales tactics.

The complaint named the company and its principals, Nasreen Gilani, Samsuddin Panjawani, and Faiez Farishta. The FTC alleged that they marketed calling cards to recent immigrants for calls to a wide range of international locations, including the Dominican Republic, El Salvador, Mexico, India, Pakistan, and Guatemala.

The FTC has established a joint federal-state task force in 2007 to deal with deceptive marketing practices in the prepaid calling card industry. The task force also includes representatives from the Federal Communications Commission and more than 35 states. The settlement has been filed with the U.S. District Court for the Eastern District of New York.

In approving the settlement, Commissioners Edith Ramirez and Julie Brill urged Congress to expand the FTCs authority to take action and seek fines against telecommunications carriers and distributors that engage in unlawful conduct by deceptively marketing prepaid calling cards.

For immigrants from Latin America, Africa, Asia and elsewhere around the world, American military families, and other consumers, prepaid calling cards can serve as a critical lifeline to friends and family, Commissioners Ramirez and Brill said. Noting the widespread deceptive practices in the marketing of these cards, the Commissioners said, "the time has come to give the FTC more powerful tools to tackle fraud in the prepaid calling card industry.

May 20, 2010
If you've sometimes thought there's not a lot of difference in the deals you get from Verizon Wireless, Sprint, or AT&T, you're not alone. The Federal Communications Commission is openly questioning the amount of competition in the wireless industry.

In its annual report on the state of competition in the mobile wireless industry, the FCC finds there appears to be increasing concentration in the mobile wireless market. One widely-used measure of industry concentration indicates that concentration has increased 32 percent since 2003 and 6.5 percent in 2008.

"Specifically, the report confirms something I have been warning about for years -- that competition has been dramatically eroded and is seriously endangered by continuing consolidation and concentration in our wireless markets," said Michael Copps, one of the three Democrats on the Commission. "We are going to need an extra dose of vigilance going forward and use whatever policy levers we have available to ensure good outcomes for American consumers," he said.

The report found that providers continue to invest significant capital in networks, despite the recent economic downturn. One source reports capital investment at around $25 billion in both 2005 and 2008, while another shows that capital investment declined from around $25 billion to around $20 billion during the same period.

Because industry revenue has continued to grow, both sources show that capital investment has declined as a percentage of industry revenue over the same period, from 20 percent to 14 percent.

The report also tracks the changes in how consumers are using wireless services. At the end of 2008, some 90 percent of the U.S. population had some type of mobile wireless device.

More smartphones

Handset manufacturers have introduced a growing number of new smartphones -- 67 in 2008 and 2009 -- that provide mobile Internet access and other data services, and provide many of the functionalities of personal computers.

The report also shows that data traffic has grown significantly, with the increased adoption of smartphones and data consumption per device. Especially as mobile wireless broadband usage grows, access to spectrum becomes increasingly important for competition.

While many wireless service providers have access to significant amounts of mobile spectrum, most of the spectrum below 1 GHz, in both the cellular band and the 700 MHz band, is not widely held.

In mid 2009 the U.S. Government began an investigation of competition in the wireless industry. The FCC is currently considering ways to provide more spectrum to wireless companies to meet a growing demand for smartphones and other mobile devices.

By Mark Huffman
ConsumerAffairs.com

May 19, 2010

Sources of identity theft are well known. If you respond to a spam email, there's a good chance your identity will be stolen.

Likewise, large mainframe computers with your medical records or credit card account information could compromise your identity if a hacker should break in.

But here's a source you might not have considered: in millions of offices across the country there are digital photocopiers that retain the copied information on a hard drive. If the copied information includes your personal data, that too could be the source of identity theft.

Similar to computers, hard drives have become routine for midsize to large photocopiers, especially those built since 2005. All images scanned on the machines are stored in the hard drive, including documents with personal data such as medical history, Social Security numbers and bank account numbers.

Adding to the insecurity, these photocopiers are often connected to an office network and businesses may fail to place a strong password in order to gain access. The lack of a password or a weak password could enable web-savvy hackers to gain access to the network and steal stored data.

Businesses may think they have a bullet proof security system in place, but unless they have included their digital copier in the plan, there may be a gaping security flaw.

"Business owners are required under Maryland's Personal Information Protection Act (PIPA) to take steps to protect consumers' personal information," said Maryland Attorney General Douglas F. Gansler. "Without taking necessary precautions, copier hard drives could be resold to third parties, possibly in a foreign country, where identity theft is harder to control."

Business owners and office administrators have several options to protect stored data:

• "Disk Scrubbing." Businesses can purchase software that scrubs the disk or removes all the data from hard drives. This prevents even the smartest cyberthief from finding any data to steal.

• Encryption software. Software to prevent data from being stored at all or to encrypt data can be found online. Some photocopier manufacturers, such as Sharp or Xerox, offer packages with their products.

• Passwords. Place a password on the copier that cannot be easily guessed, such as a numerical password similar to a PIN. The copier would then require the password to gain access to the stored data.

Businesses that maintain personal information should protect that information and dispose of it in a manner that renders it unreadable. Improperly disposing of consumers' personal information could be considered a security breach.

Nothing gets consumers angrier than to be signed up for some membership program, without their knowledge, when they make an online purchase. The Senate will consider a measure that could make such practices a thing of the past.

Sen. Jay Rockefeller (D- WV), Chairman of the Senate Committee on Commerce, Science, and Transportation, has introduced legislation, the Restore Online Shoppers' Confidence Act, to end the deceptive online sales tactics that have been the subject of a year-long Commerce Committee investigation.

A Commerce Committee staff report, the second of two reports, charges Affinion, Vertrue, and Webloyalty - the companies that used aggressive sales tactics to enroll online consumers in services without their consent - developed policies designed to prevent online consumers from getting their money back when they called to question the mystery charges on their credit and debit cards.

"Tricking consumers into buying goods and services they do not want is completely unacceptable," Rockefeller said. "It's not ethical, it's not right, and it is not the way business should be done in America."

Rockefeller said the committee's investigation uncovered misleading practices and, as a result, offending companies have been forced to change their ways. He says his bill will ban these deceptive online sales practices once and for all."

So-called "loyalty" programs are offered by companies that contract with other online merchants to share their customers' credit card information. The sharing company either receives a flat fee or a percentage of every "sale."

Unsuspecting consumers

An unsuspecting consumer might be enrolled in one of these programs and charged a monthly fee by accepting a "free" gift or a discount at the end of their transaction. Their acceptance of the discount constitutes their agreement to enroll in the membership program, though most consumers are unaware of the linkage, and are completely unaware that the merchant with whom they have just made a purchase is sharing their credit card information.

Rockefeller says the first staff report, released in November 2009, revealed how Affinion, Vertue, and Webloyalty used a set of online sales tactics to charge millions of consumers for membership clubs and services the consumers did not want and were unaware they had purchased. The report found that these companies bilked millions of Americans out of more than one billion dollars by partnering with hundreds of legitimate websites that were willing to share their customers' billing information, including credit and debit card numbers, for financial gain.

The new Commerce Committee staff report shows what happened when consumers called Affinion, Vertrue, and Webloyalty to get their money back for the services they were unknowingly charged for. Findings of the new report include:

Refund mitigation

• In a practice known as "refund mitigation," the three companies created scripts and policies intended to minimize the amount of money they would have to return to consumers who had inadvertently enrolled in the clubs. For consumers who insisted on refunds, the companies employed a variety of tactics to keep the refund amounts as small as possible, including requiring customers to obtain refunds by completing written affidavits.

Magic words

• Each company instructed their call center representatives not to issue refunds to consumers, unless the consumers mentioned certain key words like "attorney general," "Better Business Bureau," or "bank representative." These policies were designed to satisfy those consumers who were most likely to create additional "customer noise" problems and reputational damage for the companies. Consumers who did not mention the "magic words" did not receive full refunds.

Multiple memberships

• Because they could encounter the aggressive sales tactics of Affinion, Vertrue, and Webloyalty while shopping on hundreds of different websites, online shoppers were frequently enrolled inadvertently in multiple membership clubs offered by the same company. Consequently, many customers who called Affinion, Vertrue, and Webloyalty to cancel one membership and request a refund were actually enrolled in more than one of the companies' clubs. Webloyalty and Vertrue trained their agents not to inform consumers about these additional memberships.

Failure to follow credit card rules

• Affinion, Vertrue, and Webloyalty violated MasterCard and Visa's rules for credit card and debit card transactions and American Express placed the companies in monitoring programs for merchants with high rates of disputed charges from cardholders (known as "chargebacks"). Between 2006 and 2008, the three largest credit card companies processed 1.4 million chargeback requests and over 10 million refunds, totaling hundreds of millions of dollars, from cardholders disputing charges from Affinion, Vertrue, and Webloyalty. Despite these rule violations and the high volume of consumer complaints, the three companies enjoyed uninterrupted access to the payment systems operated by Visa, MasterCard, and American Express until late 2009. Once Chairman Rockefeller notified the credit card companies of the aggressive online sales tactics in December 2009, the companies quickly took action to ensure that Affinion, Vertrue, Webloyalty, and their e-commerce partners were in compliance with their rules for merchants and that their cardholders were no longer subject to the misleading "data pass" process.

Rockefeller says his bill will help put an end to the deceptive online sales tactics uncovered by the Commerce Committee's E-commerce investigation by requiring them to clearly disclose the terms of the offers to consumers, and to obtain consumers' billing information, including full credit or debit card numbers, directly from the consumers. It would also prohibit retailers from sharing consumers' billing information including credit and debit card numbers, to post-transaction third party sellers, like Affinion, Vertrue, and Webloyalty.

Webloyalty issued a statement in response to the Commerce Committee's report, saying it has already taken action to mend its ways.

"We have evolved our business practices over time based on our independent analysis as well as in response to feedback from consumers, industry groups, lawmakers and regulators," the company said in a statement. "We believe that the practices we adopted in January 2010 - including requiring consumers to enter their full credit card information to enroll in our programs - represent significant enhancements to our business practices."

Hollywood has glamorized the "tan and fit" look, and as a result, millions of people flock to tanning booths throughout the year to maintain a bronze "glow." But the health costs can be quite high, as researchers have linked exposure to ultraviolet light with skin cancer.

Amber Peterson, 31, used to visit tanning booths every other day for 10 years until she was diagnosed with the deadliest form of skin cancer at age 26. After surgery to remove the melanoma and several lymph nodes, this blond-haired, blue-eyed, fair-skinned woman is currently cancer-free. She has since traded in tanning beds for self-tanner in a bottle.

"I was addicted to tanning. I liked the look and feel of being tan, but it could have cost me my life," Peterson said. "Despite the warnings, no one thinks that they are going to get skin cancer. I never thought that this would happen to me. I am just lucky to have survived."

Peterson is not alone. Julie Casey, 37, has been tanning once or twice a week since childhood. Only she has not been able to kick the tanning addiction, and she rarely uses sunscreen.

"While I recognize the risks, I crave being tan and get depressed if I do not visit the tanning booth on a regular basis," Casey said. "This makes it very difficult for me to break the habit."

Tanorexic

Casey is a self-described "tanorexic." Tanorexia, or an addiction to tanning, is common among young, white females. Approximately 20 percent of 18 - 29 year-olds use indoor tanning booths, according to a study published in the Journal of the American Academy of Dermatology. Dermatologists at Loyola University Health System believe tanning addictions are a legitimate health problem.

"When a person visits a tanning booth, the body releases endorphins," said Anthony Peterson, MD, director, Department of Dermatology, Loyola University Health System. "These chemicals produce the same feelings of euphoria that entice drug addicts and alcoholics."

This may explain why the indoor tanning business is booming. Thirty million Americans visit tanning salons each year despite the risk for wrinkles and the dangers of ultraviolet radiation. Ultraviolet radiation causes approximately 90 percent of skin cancers, according to Dr. Peterson, and the risk for melanoma increases by 75 percent if you tan indoors before age 35.

"Excessive tanning is a serious health concern in our society," Dr. Peterson said. "We have to treat this like any other addiction and educate young women about its dangers to curb this behavior."

May 19, 2010
This week, an administrator working on behalf of the Federal Trade Commission mailed checks to 3,500 consumers nationwide who were defrauded by a group of marketers accused of hawking phony business opportunities. Consumers who were victims of this scam will receive a total of $95,000 in redress.

These are legitimate checks, and the FTC urges consumers to cash them.

The reimbursement stems from the February 2008 settlement of a case brought as part of a Commission-led law enforcement sweep that included more than 100 actions filed by the FTC, the Department of Justice, the U.S. Postal Inspection Service, and other agencies in 11 states. In this case, known as EDI Healthclaims, the FTC alleged that scammers used mass mailings to consumers offering a work-at-home business opportunity to earn easy money electronically processing health-care providers medical claims for insurance reimbursement.

According to the FTC, the defendants misled consumers by stating they would help them find their first medical billing client and give them a list of providers in their area looking for billing help after the consumers paid a licensing fee of between $4,985 and $5,985.

Consumers, who were promised they would earn at least $1,200 a month, often made nothing and lost their up-front fee, according to the FTCs complaint.

The redress checks are valid for 60 days from the date they are issued. Consumers should call 1-877-678-0676 with any questions. The FTC never requires the payment of money up front, or the provision of additional information, before consumers cash redress checks issued to them.

May 18, 2010

Oregon Attorney General John Kroger today announced three lawsuits and two settlements in a major initiative to crack down on non-profits and fundraisers that claim to help U.S. veterans but keep most of the money they raise.

Our society owes an immense debt to our veterans, said Attorney General Kroger. There are too many organizations that claim to be helping veterans, but are instead enriching themselves. We are going to stop this.

Settlements totaling $180,000 have been reached with Center Stage Attractions, a professional fundraising firm based in Florida that used a Salem, Ore., call center, and its client charity, The Veterans Fund. Center Stage was accused of making false statements to potential donors, including falsely claiming how donations would benefit veterans and sending false pledge invoices. The Veterans Fund allowed Center Stage to keep 80 percent of the money raised in its name and did little to monitor Center Stages conduct.

Center Stage and The Veterans Fund have both agreed to never solicit funds in Oregon again. Center Stage has agreed to pay $150,000 and The Veterans Fund agreed to pay $30,000 to resolve the Departments allegations.

The Oregon Department of Justice also filed three other lawsuits against groups soliciting donations for veterans.

The first of those lawsuits is against Veterans of Oregon & Members of the Community (VOMC) and its fundraiser, Associated Community Services (ACS). Although ACS has raised more than $500,000 on behalf of VOMC, little if any of the money benefited the homeless and hospitalized vets that donors were told they were helping.

ACS kept 80 percent of the money it raised. In addition to misleading donors, the defendants are charged with violating Oregons no-call law and breaching fiduciary duties associated with operating as a charity. VOMC is accused of using the small fraction of the money it received to pay the expenses of the head of the charity and others to travel around the state awarding medals.

Another lawsuit was filed against Community Support (CS), a large national fundraiser that is accused of violating settlements it had previously reached with Oregon, including violating the do-not-call rule and failing to clearly disclose its professional fundraising status to donors. CS typically keeps at least 80 percent of the money it raises for veterans and other charities.

The final lawsuit is against No Veterans Left Behind Association, an Oregon-based non-profit.

Since mid 2009, defendants and their paid solicitors set up booths in front of major retail stores in several Oregon counties, selling veterans-related gear and soliciting cash donations. They told store owners and shoppers that No Veterans Left Behind was an all-volunteer group that gave between 75 to 80 percent of its donated proceeds directly to needy veterans. In fact, as the lawsuit alleges, the persons who ran the organization kept at least 80% of the donations for their own use. At least $17,000 was allegedly donated and used improperly.

The Attorney General seeks, among other things, a temporary restraining order and a preliminary injunction to shut down No Veterans Left Behind and preserve what may be left of the donations and proceeds.

May 18, 2010

That deal on a used car might not be as good as you think. For example, an "emergency liquidation" might not mean the dealer has to slash prices. It may be just a gimmick to get you on the lot.

That's the reasoning behind Iowa Attorney General Tom Miller's lawsuit against Smart Automotive Group of Louisiana, which Miller says used deceptive "false-premise" ads for used-car sales events in Iowa.

"We alleged they used deceptive ads to trick consumers into thinking used cars and trucks were being sold at bargain prices at special sales events when in fact vehicles were from dealers' regular used-vehicle inventories," Miller said.

According to the lawsuit, Smart Automotive sale ads falsely used terms such as "Seized and Repossessed Vehicle Event," "Statewide Used Vehicle Liquidation," "Emergency Disposal Event," and other deceptive and misleading terms that were not true.

Smart Automotive Group sold promotional advertising and sales packages to Iowa auto dealers to increase sales of the dealers' used vehicles, the suit said. Such packages "are designed to trick consumers into believing the vehicles come from a source other than the dealer's usual used vehicle inventory and are available at lower than usual retail prices," the suit said. Miller called the practice "false-premise" deceptive advertising.

"The problem is that such ads mislead customers into thinking vehicles must be sold quickly and at bargain prices, when that is not the case," Miller said. "Consumers are misled, and sometimes they end up paying prices that are even higher than normal."

The suit also alleged Smart Automotive Group used other misleading ads or tactics, such as scratch-off prize cards, as "a subterfuge designed to trick consumers into visiting the dealership," subjecting consumers to undesired sales pitches.

The suit also said Smart Automotive sometimes sent in sales teams who "use high-pressure sales tactics to sell consumers vehicles under false pretenses."

The suit was filed Friday morning in Polk County District Court in Des Moines. It asks the court to order civil penalties up to $40,000 per violation of the Consumer Fraud Act, order restitution for consumers, and prohibit future violations.

Defendants named in the lawsuit are Smart Automotive Group, LLC, located at 1329 Gardenia Drive, Metairie, LA, and Bernard E. Burst III of New Orleans, President of Smart Automotive Group.

May 18, 2010

New York Attorney General Andrew M. Cuomo today filed a lawsuit against three nationwide lenders and their affiliated companies for preying on members of the military by selling them grossly overpriced electronics and then trapping them in illegal and open-ended credit plans. Cuomo has also notified Defense Secretary Robert Gates and Secretary of the Army John McHugh of the findings of his investigation.

Cuomos suit is against Frisco Marketing of N.Y., LLC, doing business as SmartBuy and SmartBuy Computers and Electronics; Integrity Financial of North Carolina, Inc.; Britlee, Inc., doing business as MilitaryZone; GJS Management, Inc. and Rome Finance Company, Inc. and Rome Finance Co. LLC, all owned and/or operated by Fayetteville, N.C.-based John Paul Jordan, Stuart Jordan, and Rebecca Wirt, and Concord, California-based William Collins and Ronald Wilson.

SmartBuy operated in Watertown, N.Y. near Fort Drum, home of the U.S. Armys 10th Mountain Division. The lawsuit seeks to ban the companies from doing business in New York State, obtain restitution for all victims, and nullify all of the deceptive sales contracts.

Cuomos investigation determined that SmartBuy and its affiliates purchased laptops, gaming systems, televisions, and electronics from other retailers and then relabeled the items for sale at grossly inflated prices. The company then aggressively targeted members of the military - some of whom were about to deploy to Iraq and Afghanistan - and their families to get them to purchase the items.

The investigation found that salespeople were trained to specifically seek out people in uniform and people with military-style haircuts.

National network

SmartBuy is part of a national network of companies and individuals that seek to profit by defrauding members of the military, Cuomo said. Our lawsuit not only seeks to bar them from ever doing business again in the state, but also to vindicate the countless soldiers who were preyed upon and defrauded by SmartBuy and its affiliated companies.

Cuomos investigation found that SmartBuy peddled products that were marked up 225 to 325 percent above the original retail price and financed the sales illegally.

The sales were made only to members of the military through monthly direct withdrawals from payroll, known as allotments, and backed up with agreements giving the company access to the soldiers bank accounts. The soldiers were rarely told the final price of the product up front, nor was it explained that they were really opening a line of credit.

If a soldier defaulted, SmartBuy and its affiliates illegally contacted the soldiers commanding officers. The tactic put service members in an untenable situation because Army regulations forbid soldiers from putting themselves in a financially precarious situation.

In New York, SmartBuy, until recently, operated a storefront and kiosk in the Salmon Run Mall in Watertown. Once the business was notified of the Attorney Generals impending legal action, SmartBuy abruptly shut down the location. Since Cuomos office filed its notice of proposed litigation against the company last month, the Attorney Generals Watertown office has received more than 50 additional complaints about SmartBuy.

Although SmartBuy stated that its interest rates were between 10 and 19.2 percent, the effective interest rate averaged to 244 percent after adding the undisclosed markups, and an additional compounded 35 percent kickback retained by the financing end of the scheme (Rome Finance and Integrity Financial). None of the lenders involved are licensed in any state.

Hard sell

The Attorney Generals investigation found that soldiers were approached by aggressive sales representatives with enticements of good deals. Among the instances of fraud perpetrated by SmartBuy and its affiliated companies:

• In August 2008, a soldier preparing to deploy to Afghanistan, where his wife was already serving, was told he could get a really good deal by bundling a purchase including a laptop, iPod, camcorder, and PSP for a monthly $90 direct withdrawal (allotment) from his paycheck. In reality, the final price SmartBuy charged was at least double the normal retail price for the items. Two days later, he attempted to return the unopened items, but he was told by the manager he could not return them without paying a $400 restocking fee in cash.

• In April 2009, a soldier currently serving in Iraq visited the SmartBuy store with his wife and purchased a 47 LCD TV for $4,632.17, plus an additional 12 percent interest. His wife later found the same model for sale at Sams Club for approximately $1,100.

• In June 2007, a soldier was told by a SmartBuy sales representative that she could get him a good deal on a computer. He ended up in an agreement allowing SmartBuy to charge him $3,945 for the item, which would be available for pickup in two days. That same day, after speaking with his wife and finding the same computer elsewhere for $800, he canceled his order and allotment. Approximately one year later, he began receiving phone calls and emails from a finance company attempting to collect on the nonexistent debt, even while he was deployed in Afghanistan. After he returned home in 2010, a company representative contacted the soldiers commanding officer over the nonexistent debt. At this point, the company was trying to collect $4,800 from the soldier.

In 2008, SmartBuys collective locations across the country brought in between $32 and $36 million. At the Watertown location, SmartBuy financed more than $4 million in unsecured debt to military customers. Attorney General Cuomos investigation has determined that all SmartBuy locations across the country are set up in close proximity to large military establishments and communities. Among the findings of the investigation:

• SmartBuys merchandise was actually purchased from other retailers, including Sams Club, Costco and Wal-Mart. A former employee told investigators she witnessed a coworker taking merchandise purchased from the local Sams Club and preparing it by removing any Sams Club stickers and identifiers from the boxes.

• Before hiring, a prospective employee reported being asked by personnel from SmartBuys corporate office how they felt about selling overpriced items to customers.

• The operation did not typically hire military service members at SmartBuy because they would then know what we did here, according to a former employee.

Cuomos lawsuit, filed in State Supreme Court of Jefferson County, seeks to:

• Bar the defendants from doing business in New York State

• Order the defendants to pay restitution to all consumers who purchased items at the Watertown location through the operations fraudulent and illegal financing arrangements

• Declare all financing agreements entered into in New York as part of this scam to be null and void

• Direct the business and owners to disgorge all profits derived from each consumer transaction at the Watertown store

• Obtain $5,000 in civil penalties for each deceptive or illegal act, plus $2,000 in costs per act

The defendants operated a similar scheme in Tennessee, which ultimately led to a 2009 court order shutting down the operation in that state. Rome Finance, its agents, assigns, and representatives or affiliates were permanently banned from conducting any business in the State of Tennessee in that case.

Consumers who did business with SmartBuy or any of its affiliated organizations are urged to contact Attorney General Cuomos Office at 800-771-7755 or email smartbuy@ag.ny.gov.

Other SmartBuy stores across the country include:
• Fayetteville, NC (Fort Bragg), Cross Creek Mall
• Killeen, TX (Fort Hood), Killeen Mall
• Colorado Springs, CO (Fort Carson), The Citadel
• Lawton, OK (Fort Sill), Central Mall
• El Paso, TX (Fort Bliss), Cielo Vista Mall
• Savannah, GA (Fort Stewart/Hunter Army Airfield), Oglethorpe Mall
• San Diego, CA (Camp Pendleton), Horton Plaza (closed early 2010)

Dealers will inspect the vehicles and, if necessary, repair them free of charge.

The affected units were assembled from April 7, 2010 through April 13, 2010.

Owners may contact Nissan at 1-800-647-7261.

Consumers may contact the National Highway Traffic Safety Administration (NHTSA) at 1-888-327-4236 (TTY: 1-800-424-9153) or at www.safercar.gov.

By Truman Lewis
ConsumerAffairs.com

May 17, 2010
Connecticut Attorney General Richard Blumenthal and 22 other state attorneys general are urging Internet message board host Topix.com to improve consumer protections and eliminate its $19.99 fee for priority review to eliminate abusive or inappropriate posts.

In a letter to Topix CEO Chris Tolles, Blumenthal and his colleagues expressed significant concerns with the Forums and Polls pages and the websites $19.99 fee to expedite review of inappropriate posts.

Topix.com, of Palo Alto, CA, describes itself as a top ten online newspaper destination, which encourages readers to post comments about news items or other matters of community interest. Topix LLC is a privately held company with major investments from Gannett Co., The McClatchy Company and Tribune Company.

Blumenthal said Topix should do more, and charge nothing, in exchange for enforcing its own terms of use intended to protect victims, particularly children, from online abuse.

We are calling on Topix to abandon its outrageous pay-to-police policy and I urge consumers to join us in telling Topix to stop exploiting pain and abuse on its site, Blumenthal said. Forcing victims to pay in exchange for promptly stopping abusive, obscene and harassing Internet posts is exploitive financial bullying. The perpetrators, not victims, should be charged this unconscionable fee for making false or abusive posts.

Topix earns a dime off of other peoples devastation -- making money from mistreatment when victims pay up to protect themselves or their children from online bullying and abuse. This backwards system must be stopped immediately to protect children and others -- as well as Topixs own reputation.

Our coalition is calling on Topix.com to do the right thing and stop a system that harms consumers twice -- first by the abusive poster and then by the unconscionable removal fee.

An initial investigation by Connecticut and Kentucky found that the Forums and Polls section of Topix is routinely used to post abusive, vulgar and obscene comments, often about children, in blatant violation of Topixs terms of service. The forums also appear to operate without moderators.

Blumenthal and Kentucky Attorney General Jack Conway first contacted Topix in February and asked that the website respond to their concerns and make changes. Topix proposed only minor changes, and failed to eliminate its pay-to-police fee.

Blumenthal and fellow attorneys general have asked Topix to:

• Eliminate the $19.99 fee for expedited review. Charging consumers $19.99 for an expedited review of abusive posts that violate the Topix Terms of Service is unconscionable. Topix should abandon the fee and develop alternative measures to screen and promptly remove abusive posts that violate their terms of service, including hiring additional personnel, if necessary, to timely review abuse reports.

• Improve disclosures regarding the feedback system. In addition to ending the $19.99 expedited review option from the flag abuse drop down link, Topix should make its feedback and flagging options more clear and concise so that consumers can understand how to protect themselves and their children.

• Reduce time for reviewing abuse reports. A 7-14 day turnaround time for reviewing abuse reports is inadequate. Topix should review complaints more promptly, as MySpace and Facebook have done -- within 72 hours for routine abuse reports and 24 hours for emergency reports.

• Improve screening of abusive posts. Abusive posts continue to dominate many of the forums. Topix should immediately revamp its technology to block improper posts and repeat offenders, and explore additional technological measures to block abusive and hateful posts before they are posted.

The attorneys general from the following states and jurisdictions have joined Connecticut and Kentucky in writing to Topix: Arizona, Arkansas, Guam, Illinois, Iowa, Kansas, Maine, Maryland, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, N. Mariana, Ohio, Rhode Island, South Dakota, Tennessee, Virginia and Washington.

With rising gold prices and a continuing recession, more consumers are selling their jewelry to businesses that advertise on television and the Internet. Congress is consideration legislation to make sure consumers aren't cheated.

The Federal Trade Commission says it has begun to see complaints from consumers who are seeking to make ends meet by selling gold jewelry, watches, and other family heirlooms containing precious metals. Consumers complain that some online jewelry buyers provide a price quote only if asked.

In some cases, consumers submit their items and receive payment only after buyers have melted their items into their raw form. Once that happens, dissatisfied consumers have limited recourse.

The proposed Guarantee of a Legitimate Deal Act would make sure that consumers have a chance to consider and reject a specific offer to buy their precious metals before an online purchaser melts or resells the items. It also would require businesses that offer to buy consumers jewelry or precious metals to insure items they ship back to consumers who decline their offers.

In addition, the measure would give the FTC the authority to seek civil penalties, which would serve as a powerful deterrent and make it easier for the agency to take action against buyers who violate the law.

Jim Kohm, Associate Director of the Enforcement Division of the FTCs Bureau of Consumer Protection, testified before a House subcommittee, saying that the FTC supports the proposed legislation.

MY 17, 2010

The announcement earlier this month that United Airlines and Continental Airlines will merge continues a trend of consolidation in the airline industry.

With two major carriers joining forces, what will be the impact on consumers? Will there be fewer flights and higher ticket prices? Several state attorneys general are asking those questions.

A number of states have announced plans to jointly review the proposed merger to ensure that consumers won't be adversely affected.

Ohio Attorney General Richard Cordray, who will lead the multi-state review, noted that the $3.2 billion proposed deal to combine the third and fourth largest airlines in the United States could have a huge impact.

A merger this large may have staggering ramifications for the industry, for consumers, and for the broader economy, Cordray said. Ohio has a lot on the line with this deal. Cleveland is a Continental hub, which is very important both for our states travelers and economy. I feel strongly that it is in the best interest of Ohioans for us to take a leading role in reviewing this proposed deal. We will work closely with other states and the Department of Justice to ensure that state and federal antitrust laws are not violated.

Cordray said that the review will focus on ensuring that competition is not reduced through higher fares, fewer choices in flights or a drop in service quality. He also wants to make sure Cleveland Hopkins International Airport remains a viable hub.

With all the problems for taxpayers associated with corporations that become too big to fail, we need to be especially diligent as antitrust enforcers in looking carefully at the potential effects of consolidation in critical sectors of our economy, such as the airline industry, Cordray said.

Cordray co-chairs the National Association of Attorneys General antitrust committee, which addresses issues of federal/state cooperation and areas of common interest regarding antitrust enforcement, including multi-state litigation and federal/state legislative and policy proposals.