Current Events in July 2010

The new rules will help curb deceptive and abusive practices in debt relief services sold through telemarketing, according to Consumers Union, the nonprofit publisher of Consumer Reports.

"Most debt settlement companies charge big fees up front even though most consumers don't get the help they expect," said Lauren Bowne, staff attorney for Consumers Union's Defend Your Dollars campaign. "These new rules will help protect consumers who are already drowning in debt from being ripped off by debt settlement companies that fail to provide any relief. But more needs to be done to ensure that the amount of fees charged for debt settlement services are fair."

Most debt settlement companies market their services through Internet, television, or radio advertising. The advertisements typically promise to reduce debt substantially and urge consumers to call a toll-free number to find out more. Once the consumer signs up, the debt settlement company takes its fees over the first half of the contract period.

The FTC reports that nearly two-thirds of consumers who enroll in debt relief services, most of whom pay an advance fee, end up dropping out of the programs within the first three years without getting the help they paid to receive.

Bad advice

Debt settlement companies usually advise consumers to stop paying their creditors and to instead set up a special account to build savings that will be used in the future to negotiate a settlement. As the consumer deposits savings into the account, the debt settlement company withdraws money to cover its fees even though it hasn't reached a settlement with creditors. By stopping payments to creditors, the consumer ends up with a worse credit score, additional penalty fees and more interest charges.

While debt settlement companies claim they settle millions of dollars in debt for consumers, they have not revealed how much debt remains unsettled. The Better Business Bureau announced that it would stop calling debt settlement services "inherently problematic" if a company could show that it met several conditions, key among them that at least one half of its customers saved as much money as was paid in fees. The GAO reported in April 2010 that two debt settlement trade associations called that standard "unrealistic."

What they do

The FTC's new regulation banning advance fees will go into effect on October 27, 2010, and takes a key step forward by addressing the timing of the fees. Under the new rules, a debt settlement company will earn fees when it reaches a settlement on at least one of the consumer's debts that the consumer agrees to in writing. Fees cannot be collected until the consumer has made at least one payment to the creditor as a result of the negotiated agreement.

Fees can be held in a dedicated account before that time but all unearned fees must be returned to the consumer if he or she decides that the debt settlement program is not working out or cancels the program. Debt settlement firms can require a dedicated account only under certain conditions, including that the account must be set up and maintained by the consumer at an insured financial institution. The consumer will be entitled to earn interest on the account and can withdraw the funds at any time without penalty.

Beginning on September 27, 2010, the FTC rule requires that debt settlement companies make certain pre-contract disclosures, including how long it will take to get results and how much it will cost. The new rules cover calls consumers make to debt settlement firms in response to advertising as well as telemarketing calls made by firms. However, the FTC's new regulation does not apply to in-person sales or to Internet-only sales, so Congress or the states will have to act to apply the new rules to those debt settlement contracts.

Michael Calhoun, president of the Center for Responsible lending, praises the new regs, but believes more needs to be done. "While the FTC's new rule helps end one of the most egregious practices of the debt settlement industry, states can do more to curb others, such as charging unreasonably high fees that are not tied to performance and doing so without assessing if a potential client is likely to benefit from a debt relief program."

Two federal bills (S. 3264 and HR 5387) have been introduced in Congress to limit debt settlement fees to a one-time $50 fee and five percent of the savings from each final settlement.

"The effective ban on up-front fees promotes fair, transparent markets," he concluded. "Consumers should pay for performance, not promises. The FTC has made clear it agrees."

American Airlines has agreed to settle a class action alleging that a number of airlines arranged a price-fixing scheme, and has promised to provide information about the other implicated airlines.

The suit is one of several accusing a number of airlines -- including American Airlines, United Airlines, British Airways, Air France-KLM, and Lufthansa -- of conspiring to slap cargo shippers with fuel and security surcharges. The carriers are accused of using the September 11 attacks as an excuse to increase those surcharges, and one suit claims that Lufthansa took the reins in announcing new fees.

The settlement was filed in New York's Eastern District, but other suits are pending in a number of foreign jurisdictions, including Canada, Australia, and South Korea.

Denial of wrongdoing

American has agreed to pay $5 million to settle its part of the lawsuit, brought by freight shippers who say they were harmed by the alleged plot. The airline says it is not culpable, and that the settlement is purely in the interest of saving time and money.

"American Airlines has done nothing wrong," American spokesman Tim Wagner said in an email to Bloomberg. "Litigation is an expensive and uncertain proposition and avoiding the cost and inconvenience of trial made paying the settlement the best financial decision for American."

The airline has also agreed to cooperate in suits that are still ongoing, suggesting that it will turn over data inculpating the other accused carriers. Indeed, American has already promised to produce witnesses and documents to the plaintiffs.

Carriers settle up

According to the AP, American -- the first airline to offer its cooperation -- agreed to settle back in April 2009 and has been cooperating ever since. Air France-KLM, by contrast, paid $87 million to settle the case, but declined to cooperate. Lufthansa and Japan Airlines have also settled, paying out $85 million and $12 million, respectively.

The shippers are happy with the agreement, according to their lawyer, Michael Hausfeld.

"It is an important step forward for shippers in Europe and around the world and demonstrates that companies can act responsibly to resolve competition disputes without resorting to excessive or protracted litigation," Hausfeld said in a statement.

In court papers, Hausfeld suggested that his client would face a relatively steep hill at trial, writing that "while AA did face some risk of liability, it would be difficult for plaintiffs to obtain a judgment against it, given the evidence."

The alleged scheme also sparked an investigation by the Justice Department, which has so far led to a dozen guilty pleas and $1.6 billion in fines. British Airways and Korean Air were each fined $300 million; Air France coughed up $350 million. The European Union also probing the matter as well.

A federal jury returned guilty verdicts against eight people on March 31, 2010,, following a month-long trial in Pensacola, Fla., involving the promotion of fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International.

Those sentenced were:

• Arnold Ray Manansala of Renton, Wash., to 12 years in prison for conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering;

• Dover Eugene Perry, also of Renton, to 10 years in prison for conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering;

• Michael Guy Leonard of Troy, N.Y., to nine years and one month in prison for conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering; and

• Mark Daniel Leitner of Fairport, N.Y., to five years in prison for conspiracy to defraud the United States and to commit wire fraud.

Tax evasion strategies

According to the evidence presented during trial, PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams. Some of the PQI vendors, such as Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion.

For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama. Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a "reliance defense" that consisted of a paper trail of frivolous correspondence which a client could allegedly use as evidence of good faith if the client were prosecuted.

The government established that other PQI vendors sold fraudulent schemes for eliminating credit card debt, the most successful of which was called Financial Solutions. That enterprise charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt.

The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy.

Warehouse bank

According to the evidence, another PQI vendor, MYICIS, operated as a sophisticated, computerized "warehouse bank." MYICIS was a single bank account in which customers pooled their money. It was promoted to PQI's clients as a method to hide their assets from the IRS as a result of the pooled nature of the account. MYICIS had 3,000 clients and approximately $100 million in deposits over a three year period.

Evidence introduced at trial showed that PQI purported to sell only CDs and tickets to offshore conferences. However, PQI acted as a gateway to its fraudulent vendors. Clients seeking the tax evasion and debt elimination vendors could access the product only if they joined PQI first. The cost of membership ranged from $1,350 to $18,750, depending on the level of access. In May 2008, a federal district court issued a preliminary injunction against the promoters of Pinnacle Quest International.

"Today's sentences send a powerful and unequivocal message to those who seek to evade and help others evade their taxes," said Acting Assistant Attorney General John A. DiCicco of the Justice Department's Tax Division. "Those who promote tax fraud schemes will be investigated, prosecuted, and convicted, and they also face substantial prison sentences."

"Victor S. O. Song, Chief, IRS Criminal Investigation, noted, "There is no secret formula that can eliminate an individual's tax obligations, and those who create elaborate schemes that have no purpose other than to mislead others and defraud the Internal Revenue Service will be prosecuted."

Sherman Jones of Santa Paula, Calif., was excited. A longtime motorcycling enthusiast, Jones had just bought a used 2005 Honda CB250 motorbike. On Friday, as the weekend approached, Jones took a few minutes to give the bike a last once-over before hitting the road to Oxnard the next morning.

Not wanting to overlook any part of his new bike, Jones applied a coat of Turtle Wax F210 Tire Foam and Shine to the tires. The next morning, as he approached his first turn at about 20 miles per hour, the bike slid out from underneath him, breaking his shoulder on impact and sending him on an expensive trip to the Ventura County Medical Centers Emergency Room.

Jones attributes the accident to the tire shine, which he believes compromised the traction of his bikes tires.

"It was like hitting ice," Jones said. "I lost total control." The official cause of the accident as stated in the police report was "slippery spray on tires", terse testimony that calls into doubt the safety of using tire shine products on two-wheeled vehicles.

And no, it's not what you're thinking. He didn't put the foam on the tire's treads. He applied it only to the sidewalls, he said.

Looking back on it, Jones hypothesizes that as the tires spin, they "generate centrifugal force which causes a build-up of the shine material near edge of the tread," creating a potential hazard when the bike is leaning through a turn. This theory has been supported by a number of forum users on various motor vehicle enthusiast websites, including www.sportbikeworld.com.

The Turtle Wax F210 Tire Foam spray can that Jones used does feature a vaguely worded warning in the fine black print caution statement on its back, simply stating, "Do not use on cycle tires." Seemingly contradictory, however, Jones' edition of the product features a "Safe for all Tires" pitch in much larger font towards the cans top, a boast that has been removed in more recent editions.

Clearer warnings

Turtle Wax competitor Armor All, which has the "Extreme Tire Shine" line, warns against the use of its product on motorcycle and bicycle tires. The companys website explains how tire shine, while ideal for protecting car tires, should not be used on two wheeled vehicles "due to slipperiness."

Meguiars Hot Shine and Black Magics Tire Wet lines, each of which compete with Turtle Waxs F210 formula, feature distinct warnings in bold capital letters that caution against the use of tire shine on two-wheeled vehicles. These warnings, while the most clearly visible of the brands available at Jones local AutoZone store, were still limited to the backsides of each can and were set in the same color as the rest of the surrounding font. Jones insists that these labels "though better, should be on the front."

All of these manufacturers are evidently aware of the dangers that may result from using tire spray on two-wheeled vehicles, but Jones questions why they don't do a better job of warning consumers.

All the companies cans state in large bold letters spanning the bottom under the front logo "Danger: Contents under pressure," yet make no mention on the front side about the dangers of using the products on cycle tires. Most everyone who has not been in a time capsule knows that pressurized cans are dangerous, but it's not immediately evident that tire shine shouldn't be used on certain types of tires.

Jones says his painful injuries serve as a daily reminder of this hidden hazard and says he has a new attitude about shiny tires: "Tire shine has a place in car shows, but not on the road."

"The only thing I use to clean my tires now is water and a brush," Jones said.

Toyota says it is recalling approximately 373,000 2000-2004 Model Year Toyota Avalons sold in the United States because the vehicle's steering lock bar could break under certain conditions.

No other Toyota or Lexus vehicles are involved in this recall, the carmaker said.

Toyota says there was improper casting of the steering lock bar, which is a component of the steering interlock system. That defect, it says, creates the possibility that a minute crack may develop on the surface.

Such a crack may expand over a long period of repeated lock and unlock operations, and eventually the lock bar could break. If this occurs, the interlock system may become difficult to unlock when stationary.

Possible lock-up

If the vehicle -- while being driven -- is steered to the right with sufficient lateral acceleration, a broken and loose lock bar may move toward the steering shaft. If the engagement hole in the shaft happens to line up at the specific time the broken lock bar has moved, this could cause the steering wheel lock bar to engage, locking the steering wheel, and increasing the risk of a crash.

The carmaker said it is aware of three accidents because of the steering problem. None of the accidents, it said, caused any injuries.

"Toyota is continuing to work diligently to address safety issues wherever they arise and to strengthen our global quality assurance operations so that Toyota owners can be confident in the safety of their vehicles," said Steve St. Angelo, Toyota chief quality officer for North America.

As part of the recall, Toyota will replace the steering column bracket on involved vehicles, a procedure that takes about two hours to complete depending on the dealer's schedule. Toyota will notify owners by first class mail beginning in late August 2010 to bring their vehicles to their local Toyota dealer for replacement of the steering column bracket at no charge to the customer.

It's the latest in what has been a year of recalls for Toyota. Most recently the carmaker recalled nearly 40,000 Lexus LX 470s for an unrelated steering problem. Since October, Toyota has recalled more than 8 million cars worldwide to address a variety of issues, most notably sudden acceleration.

The House on Wednesday unanimously approved The Truth in Fur Labeling Act (H.R. 2480) -- action that garnered support and praise from animal protection groups, consumer organizations, and designers and retailers.

Representatives Jim Moran (D-VA) and Mary Bono Mack (R-CA) introduced the bi-partisan bill in 2009 to close a federal loophole that does not require fur garments valued at $150 or less to have labels.

The Humane Society of the United States (HSUS) said that gap in the law prevents consumers from knowing if they're buying genuine or faux animal fur.

"Many consumers prefer to avoid buying and wearing animal fur, and they deserve to have the information to make informed purchasing choices," said Michael Markarian, chief operating officer for the HSUS. "The Truth in Fur Labeling Act would protect consumers by requiring all garments containing animal fur to be accurately labeled."

Shocking discovery

HSUS investigations have revealed that retailers and designers across the country sold jackets trimmed with animal fur that did not have any labels and were falsely advertised as "faux fur."

A recent HSUS probe made the chilling discovery that domestic dog fur had slipped into the country on unlabeled jackets.

Another HSUS investigation discovered raccoon dog fur on more than two-thirds of a nationwide sample of fur-trimmed jackets purchased from "well-known" retailers and designers.

Raccoon dogs are part of the canine family and look like raccoons. They are nocturnal animals that live in Asian and northern European forests. "Of the raccoon dog fur jackets tested, not a single one properly identified the animal in advertising or labeling, instead calling it such things as faux fur, raccoon or simply not labeling it at all," the HSUS said.

Closing the loophole

The bill now pending on Capitol Hill would require all fur garments sold in the United States -- regardless of their value -- to meet the standards set under the 1951 Fur Products Labeling Act. That law requires seven out of every eight fur garments sold in the country to have labels that disclose the species of animal and the country of origin, the HSUS said.

The proposed legislation would extend those labeling requirements to the approximately 13 percent of fur garments sold in the country that are exempt from the law because they have a value of $150 or less.

Consumers' rights

The bill's sponsors said consumers have a right to know if the garments they're buying are made with faux fur - or real fur that might have come from a dog or cat.

"Consumers expect to have access to all necessary information in order to make informed purchases," said Moran. "Unfortunately, a current loophole in federal regulations exempts a sizable portion of U.S. garments containing fur from labeling requirements. This means consumers could be purchasing products with the expectation that they bought 'faux' fur, but which actually contain real fur, perhaps from a dog or cat."

Bono Mack applauded her fellow lawmakers for supporting the measure. "I am pleased that the passage of this legislation will close the loophole that has for too long allowed companies to sell fur products made from cats and dogs as 'faux fur,'" she said. "It is important that consumers are provided with product labels that allow them to make informed decisions on their purchases, and this bill will help provide clarity for customers."

Consumer groups, designers, and upscale national retailers -- including the Gucci Group, Burberry, Macy's, Bloomingdale's, Saks Fifth Avenue, and Andrew Marc -- support the legislation.

The Senate will now debate the companion bi-partisan bill -- Truth in Fur Labeling Act of 2009 (S 1076) -- introduced by Senators Robert Menendez (D-NJ) and Susan Collins (R-ME).

When buying new tires for your vehicle, it's important to check the side of the tire for its manufacture date, said Connecticut Consumer Protection Commissioner Jerry Farrell.

"My tires had 50,000 miles on them so I knew it was time for a change, but I asked the technician to take a look at them anyway," Farrell said, while shopping for tires at a Wallingford dealer. "During his inspection, he explained how the materials used in tires naturally age and are affected by temperature, storage conditions, maintenance, and weather, and how tires can gradually harden and lose elasticity, leading to tread separation, cracking, and tire failure." Many times these changes are not noticeable from the outside of the tire.

Sean Kane, founder and president of Safety Research & Strategies, Inc., a Massachusetts-based national research organization specializing in safety matters, notes the majority of vehicle manufacturer owners' manuals now recommend tire replacement at or around six years -- regardless of tread wear.

Deciphering the code

To help consumers identify the age of their tires, the U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) requires that Tire Identification Numbers be printed on the sidewall of each tire. These numbers must identify the manufacturing location, tire size and manufacturer's code, along with the week and year the tire was manufactured.

The sidewall also includes the maximum pressure for your tires. But that's not necessarily the best tire pressure for your car, and you shouldn't inflate your tires to the maximum level.

Instead, look for a sticker inside the driver's-side doorjamb or glove box, or check your owner's manual for the correct air pressure for the tires on your vehicle. You will improve gas mileage by keeping your tires inflated to the proper pressure. Under-inflated tires can reduce mileage at a rate of up to eight cents-per-gallon of gas.

"When looking for the manufacture date on the sidewall, look for the long series of letters and numbers starting with the letters DOT," Farrell said. The week and year the tire was produced is printed as the last four digits of this Tire Identification Number; the last two digits identify the year, and the two immediately before them identify the week of the year. For example, if the last four digits read 2209, the tire was made in the twenty-second week of 2009.

Tire tips

"When you shop, consider choosing the tire that offers the longest possible life," Farrell said. "And remember, the unused tires sitting in your garage or in your spare tire compartment need to be checked for age also."

He also recommends having your tires inspected by your mechanic during regular automobile maintenance and keeping them inflated according to the manufacturer's recommendations for longest life and safest use. Regular tire rotation and checking for uneven wear will save on tires and gas costs.

"Buy a tire gauge and check your car's tire pressure every month," Farrell concludes. "If your tires are low on air, you're wasting gas and money. The best time to check your tire pressure is when the tires are cool -- not right after a long drive. In hot weather, check the pressure during the coolest part of the day."

July 29, 2010
For those who don't have cell phones, or those who need a cheap way to make international calls, pre-paid calling cards can be a convenient way to stay in touch. But these cards are not always a good deal.

The Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) warn that hidden costs and other problems can leave consumers with less call time than they were promised.

When you're selecting a calling card, the FTC says you should always look first at the fees. Add them up and see what kind of dent they put in the card's value.

For other ways to avoid calling card pitfalls:

• Check whether the advertised minutes only apply if you make one call and not more.

• Find out whether the advertised minutes still apply if you use the "toll-free access" number rather than the "local access" number, and whether the advertised minutes can be used to call cell phones.

• Ask whether there is an expiration date for minutes.

• Make sure that the explanation of fees makes sense to you.

• If possible, select a card that comes with a toll-free customer service number.

• Consider buying a card of a small denomination first, because if something goes wrong, your loss is limited.

The subject line of the email states: "Unauthorized ACH Transaction."

The email includes a link that redirects the individual to a fake Web page and contains a link that is almost certainly an executable virus with malware.

"Do not click on the link. The text, email, and the related website are fraudulent," NACHA warned in a statement.

NACHA said the fake emails look like this:

Damaging emails

Security experts say consumers should be aware that phishing emails frequently have links to Web pages that host malicious code and software. Do not follow Web links in unsolicited emails from unknown parties or from parties with whom you do not normally communicate, or that appear to be known but are suspicious or otherwise unusual.

NACHA said it does not process nor touch the ACH transactions that flow to and from organizations and financial institutions. It also does not send communications to individuals or organizations about individual ACH transactions that they originate or receive.

If malicious code is detected or suspected on a computer, consult with a computer security or anti-virus specialist to remove malicious code or re-install a clean image of the computer system.

It's a good idea to always use anti-virus software and ensure that the virus signatures are automatically updated. Ensure that the computer operating systems and common software applications security patches are installed and current. Be alert for different variations of fraudulent emails.

The Mariposa Botnet -- a network of remote-controlled compromised computers -- was built with a computer virus known as "Butterfly Bot" and was used to steal passwords for websites and financial institutions. It stole computer users' credit card and bank account information, launched denial of service attacks, and spread viruses. Industry experts estimated the Mariposa Botnet may have infected as many as 8 million to 12 million computers.

"In the last two years, the software used to create the Mariposa Botnet was sold to hundreds of other criminals, making it one of the most notorious in the world," said FBI Director Robert S. Mueller, III. "These cyber intrusions, thefts, and frauds undermine the integrity of the Internet and the businesses that rely on it; they also threaten the privacy and pocketbooks of all who use the Internet."

International effort

In February, the Spanish Guardia Civil arrested three suspected Mariposa Botnet operators: "Netkairo," "Jonyloleante," and "Ostiator," aka Florencio Carro Ruiz, Jonathan Pazos Rivera, and Juan Jose Bellido Rios. They are being prosecuted in Spain for computer crimes.

"The Mariposa case showed how the coordinated and joint actions of different international police forces, along with the efforts of the Internet security industry, have been able to face the global threat of cyber crime," said Maj. Juan Salom, commander of the Guardia Civil's Cyber Crime Division. "The cyber kingpins know that they are not invincible anymore because the global efforts of the FBI, Slovenian Criminal Police, and Spanish Guardia Civil have shown that it doesn't matter where or how they try to hide, they will be located and prosecuted."

Last week, the Slovenian Criminal Police identified and arrested the Mariposa Botnet's suspected creator, a 23-year-old Slovenian citizen known as "Iserdo." The work of the Slovenian and Spanish authorities was integral to this investigation, officials said.

"We are glad to cooperate with the United States; the FBI's assistance is invaluable and represents professional affirmation of our force," Slovenian Minister of the Interior Katarina Kresal and Director General Janko Gorsek, Slovenian Criminal Police, said in a statement. "This case shows that cyber crime issues call for international police cooperation that shouldn't be hindered by geographical borders. This partnership serves as a solid basis for future cooperation."

From 2008 to 2010, the Slovenian citizen created "Butterfly Bot" and sold it to other criminals worldwide. In turn, these criminals developed networks of infected computers -- botnets -- and the Mariposa variety from Spain was the most notorious and largest. In addition to selling the Butterfly Bot program, the Slovenian citizen developed customized versions for certain customers and created and sold plug-ins (add-ons) to augment the botnet's features and functionality.

"This case shows the value of strong partnerships among law enforcement agencies worldwide in the fight against cyber criminals", said FBI Cyber Division Assistant Director Gordon M. Snow. "Cyber crime knows no boundaries, and without international collaboration, our efforts to dismantle these operations would be impossible."

According to Cuomo's investigation, LHGR violated state and federal debt collection laws and, under the agreement, must immediately reform its business practices and pay $125,000 in penalties and costs. The action is the latest in the state's continuing probe of illegal practices in the debt collection industry.

"This company's business model was to harass consumers by calling them multiple times a day, continuously calling them at work after being told not to, and repeatedly calling even after the alleged debt was disputed," Cuomo said. "It is unacceptable for debt collection companies to use illegal tactics for their own profit and we will continue to put a stop to the practice."

Massive violations

Here are some of the actions that Cuomo says violated the law:

• An LHR collector called an Oswego resident up to 16 times in one day in an attempt to collect a 10-year old debt that belonged to her husband. When she questioned the debt to LHR, the collector said, "You must not know your husband that well then." The collector illegally told her she would be arrested, have a lien put on her house, her vehicle confiscated and wages garnished.

• LHR wrongly targeted a Lackawanna man for a debt he did not owe.

• LHR collectors called a Georgia resident 10 times per day in an attempt to collect a debt that was allegedly inflated to more than triple the original amount owed.

• LHR tried to recover a debt from a Mississippi man that was actually owed by his ex-wife. After explaining this and telling LHR to stop calling him, the collector told the man he would call every day at 8 a.m. until the bill was paid.

• LHR repeatedly called a California-based Iraq war veteran over a $2,500 cell phone contract from a company he never signed up with. Despite being provided proof that the debt was not his and that he was serving overseas at the time the company claimed he signed the contract, LHR collectors continued to call him.

According to the federal Fair Debt Collection Practices Act and the New York State debt collection and consumer protection laws, a debt collector cannot pose as an attorney, threaten lawsuits or other legal action which cannot be taken, tell a consumer they have committed a crime or will be arrested, or talk with third parties except to get location information.

The law further requires collection agencies to send a written notice within five days of initial communication with the consumer explaining how he or she can dispute the debt. If properly disputed, the collection agency must stop all collection attempts and send verification.

July 28, 2010
The office of Washington State Attorney General Rob McKenna reached a settlement with an Arizona company accused of violating a three-year-old state law intended to crack down on 'trust mill' schemes.

Under the agreement, The Preservation Group and its founders will offer refunds to more than 60 Washington seniors who purchased living trusts.

"We believe the defendants pushed expensive living trusts on Washington seniors while misrepresenting probate as a time-consuming process that can eat up a nest egg," McKenna said. "This case enforces the law our office requested to ensure that only legal professionals can prepare estate documents."

The AG's Consumer Protection Division accused The Preservation Group, LLC, of Chandler, Ariz., and its owners Kevin D. Boterman and Robert J. Feinholz of violating the state's Estate Distribution Documents Act. The law, requested by the attorney general, prohibits anyone who is not a licensed attorney from marketing living trusts or wills.

Exaggerated benefits

The Preservation Group conducted estate planning seminars throughout Washington from approximately August 2007 to at least September 2008. According to the state's complaint, salespeople promoted the advantages of a living trust while exaggerating the complexity of probate, the court-supervised process by which property is transferred to heirs. They then set up appointments to meet with seniors in their homes.

Seniors who paid $2,195 to $2,995 for living trusts were encouraged to provide details about their finances that the salespeople used to pitch additional insurance and investment products, the state alleged.

At the time of the sales, Boterman and Feinholz were registered to sell insurance in Washington but were not licensed to practice law.

Sales ban

The settlement filed in King County Superior Court doesn't require the defendants to admit any wrongdoing but prohibits them selling estate planning products here in the future. They agree to pay up to $40,000 in restitution to eligible consumers who request refunds, as well as $10,200 to reimburse the state for attorneys' fees and legal costs. A $25,000 civil penalty is suspended provided the defendants comply with the settlement terms.

Properly drafted and executed, a living trust can help someone avoid probate and offer other advantages, but isn't a one-size-fits-all solution. For example, individuals with small estates may avoid probate without a living trust. Joint ownership of assets is another way to avoid probate.

The scam is an evolution of an older email scam. In the past, a scammer would compromise an individual's email account and send messages to everyone in the address book. The message, which looked like it was from the victim, said the individual is traveling in a foreign country and lost all their money. It asked that the recipient wire some cash.

By hacking into a Facebook account, the scammer's job is actually easier. Instead of reaching out to everyone in an address book, the hacker appeals to the victim's Facebook "friends."

"People lower their guard when someone they know from a social networking site needs their help," said New Jersey Attorney General Paula Dow. "Rather than sending an email to random people, these thieves have learned they can improve their chances by hacking into social networking accounts and then directing pleas for money to the account holder's list of friends."

First, the scammer has to hack into the Facebook account. Some common warning signs that a criminal is trying to hijack a user's account while on the social networking site include:

• Anything that asks you to paste a code or URL into your browser;

• Quizzes, polls or contests that require you to provide personal information such as your social security number, credit card number or bank account information;

• Requests that you update Flash Player or other programs, or that you download a new program; and

• Anything that requires you to link to another page and invites your friends to that page.

In order to protect yourself, you should be wary of these warning signs and guard against any actions that would provide criminals with the tools necessary to break into your account.

If you can't log into your account, this is a warning sign that it's been hacked, Dow said. Contact the social website to report this and to have your account disabled.

By Jon Hood
ConsumerAffairs.com

July 28, 2010
Don't take that iPad outside. A class action lawsuit filed last Friday claims that Apple's latest supposed wonder quickly overheats in normal environmental conditions.

The suit, filed in federal court in Oakland, California, says that the iPad turns off, sometimes after just a few minutes of use, when exposed to direct sunlight.

The iPad does not live up to the reasonable consumer's expectations created by Apple insofar as the iPad overheats so quickly under common weather conditions that it does not function for prolonged use outdoors, or in many other warm conditions, according to the complaint.

Consumers who sunbathe with their iPads are quickly greeted by a yellow warning sign and the caption iPad needs to cool down before you can use it.

The news probably didn't surprise tech junkies, who reported on the iPad's apparent fragility soon after it was released. Zach Honig, an editor for PC Magazine, was outside in New York for only ten minutes when his iPad shut down. Honig tweeted that a minute in the fridge was all it took to revive the tablet. (Whether putting your iPad in the refrigerator is a good idea is a topic open to debate, to say the least).

The suit is a potential ding in the armor of Apple's newest gadget, which sold 3.27 million units and generated $2.17 billion in the quarter ending June 10. The iPad was introduced to great fanfare in late January, with Apple CEO Steve Jobs touting it as creating a third category of device -- fitting between traditional notebook computers and smartphones like the iPhone and Blackberry.

And while it perhaps seems intuitive that an electronic device works less well in high temperatures, the suit potentially weakens the iPad's standing as a bona fide e-reader. Indeed, the complaint takes issue with Apple's contention that [r]eading on iPad is just like reading a book, pointing out that using an iPad is not 'just like reading a book' at all since books do not close when the reader is enjoying them in the sunlight or in other normal environmental conditions.

The lawsuit also threatens to extend a weeks-long rough patch for Apple. The tech king is still trying to recover from an embarrassing rollout of the long-awaited iPhone 4, which has been so plagued with reception problems that consumers have been forced to cover the exposed antenna with duct tape.

Apple is offering a bumper to iPhone owners free of charge, which it says will fix the problem. The saga prompted Motorola to poke fun in an ad for its new Droid X phone -- a photo of that device sits below the heading, No Jacket Required.

The complaint accuses Apple of throwing consumers to the wind in the name of corporate profits, contending that the company has clearly established a policy of accepting a certain amount of collateral damage as incidental to its business operations, rather than accept the alternative costs of full compliance with fair, lawful and honest business practices.

The suit, brought on behalf of everyone in the United States who bought an iPad, charges Apple with fraud, negligent and intentional misrepresentation, unjust enrichment, and breach of express and implied warranties.

The disease-specific scheme first showed up in Mississippi, where diabetics have reported telephone calls from people claiming to be from the Diabetes Foundation of Mississippi and the American Diabetes Association. The callers request personal information such as social security numbers, dates of birth and credit card information.

The scam is all the more effective because the caller knows the intended victim has diabetes.

The Diabetes Foundation of Mississippi and the American Diabetes Foundation reported these complaints to the Consumer Protection Division of the Mississippi Attorney Generals Office. While Mississippi is the only state to report the scam, it's very possible that it will spread to other states.

Stay alert

Legitimate organizations like the Diabetes Foundation of Mississippi and the American Diabetes Foundation will not initiate a phone call or send an email asking you to provide, update or confirm sensitive information. Before responding to any request for personal information, consumers should contact the institutions directly to ensure the request is valid.

"Unfortunately, scam artists will often use the name of reputable organization to lure consumers into thinking they are dealing with a familiar organization," said Mississippi Attorney General Jim Hood. "Because of this, we continue to urge consumers to use caution before acting on unsolicited emails, voice mails, text messages or phone calls requesting personal information. Educating our consumers is one of the most important actions we can take to combat scams like this one."

Shifty home improvement contractors across Pennsylvania are under the gun.

Attorney General Tom Corbett has launched consumer protection lawsuits against seven contractors accused of failing to start work, collecting excessive down-payments, not finishing projects, performing work in a shoddy manner, failing to pay refunds, not honoring warranties and other violations of the state's Home Improvement Consumer Protection Act.

"Complaints about home improvement projects 'gone bad' are typically one of the top reasons for consumers to contact the attorney general's office and we work vigorously to investigate these complaints and prosecute violators," Corbett said. "Home improvement rip-offs impact every community across our state, taking money out of the pockets of homeowners and also victimizing the honest, hard-working businesses who could have performed the work."

Among the lawsuits:

• BCM Landscaping / BCM Hardscapes / Pro Walls and Patio, jointly operated by Wayne "Butch" Kapalka and Joseph Kapalka, both of Tarentum, Allegheny County -- accused of failing to start work, performing work in a shoddy or unworkmanlike manner, using contracts that do not comply with the Pennsylvania Home Improvement Consumer Protection Act, failing to provide the required Notice of Cancellation for consumers, not registering as a home improvement contractor and failing to register a fictitious business name with the Pennsylvania Department of State.

• CHRC Contracting, Inc., owned and operated by Larry Harrison, Philadelphia -- accused of failing to perform work, collecting excessive down payments, failing to register as a home improvement contractor with the AG's office and using contracts that do not include the required Notice of Cancellation for consumers.

• David Slaughter General Contractor, along with owner David Slaughter, Philadelphia -- accused of failing to start work, not completing contracted projects, using inferior materials, failing to register as a home improvement contractor and using contracts that do not include the required Notice of Cancellation for consumers.

• Empire Electrical, owned and operated by Scott J. Ohanian, Schnecksville, Lehigh County -- accused of failing to complete contracted work, accepting down payments without beginning projects, not obtaining necessary licenses and permits from municipalities and failing to provide the required Notice of Cancellation to consumers.

• James Gorman Roofing and Painting, owned and operated by James Gorman, Kutztown, Berks County -- accused of failing to complete work, performing work in a shoddy manner, not honoring warranties and failing to provide the required Notice of Cancellation.

• KAR Contracting, owned and operated by Keith Ruppel, Coopersburg, Lehigh County (formerly operating from Lansdale, Montgomery County) -- accused of failing to provide services in a workmanlike manner, not honoring warranties, failing to provide refunds, not registering a fictitious business name with the Pennsylvania Department of State and failing to register as a home improvement contractor.

• Mucci Construction / Mucci Concrete & Paving, along with owner James Mucci, Croydon, Bucks County (formerly operating from Morrisville, Bucks County) -- accused of failing to perform work, not obtaining required permits, collecting excessive down payments and failing to provide the required Notice of Cancellation for consumers.

The lawsuits seek restitution for all consumers who have been harmed, along with fines and civil penalties of up to $1,000 per violation or up to $3,000 for each violation involving a senior citizen.

Other cases settled

In addition to these lawsuits, the Bureau of Consumer Protection has reached voluntary settlements with ten other home improvement businesses. These contractors are accused of operating without properly registering with Corbett's office or using contracts that did not comply with state law.

The settlements, known as an Assurance of Voluntary Compliance (AVC), require these businesses to fully comply with all the terms of the Home Improvement Consumer Protection Act and the state's Consumer Protection Law, including all requirements related to registration, advertising and contracts. Each of the AVC's also includes civil penalties and costs of $1,250.

Buyer beware

Corbett encourages any consumers considering a home improvement project to verify that their contractor is properly registered with his office. In addition to checking a contractor's registration, he advises those considering work to take additional steps to protect themselves from possible home improvement scams, including:

• Getting estimates from several potential contractors.

• Requesting references for recent work, and checking those references.

• Asking other customers if they were happy with the work that was performed by a particular contractor, if there were any problems with the project and if they would hire that person again.

• Avoiding high-pressure sales pitches, "special offers" or deals on "left over" materials.

• Be wary of individuals who approach you with unsolicited offers or stories of "just being in the neighborhood."

If you're a Verizon wireless customer and want an iPhone, can figure out how to "unlock" its network safeguards, and are willing to void your warranty, the government says it's you legal right to do so.

In an official ruling, the Copyright Office of the Library of Congress ruled there's nothing in the law to prevent any mobile phone from being altered to work on a different network than it was intended.

Apple has an exclusive contract with AT&T; for the popular iPhone and has strongly discouraged consumers from "jailbreaking," the term applied to unlocking the phone's network feature. It has threatened legal action against those who do, though it has never followed through on the threat.

The Electronic Frontier Foundation (EFF) requested the ruling, as well as legal protections for artists who remix videos -- people who, until now, could have been sued for their non-infringing or fair use activities.

"By granting all of EFF's applications, the Copyright Office and Librarian of Congress have taken three important steps today to mitigate some of the harms caused by the Digital Millennium Copyright Act (DMCA)," said Jennifer Granick, EFF's Civil Liberties Director. "We are thrilled to have helped free jailbreakers, unlockers and vidders from this law's overbroad reach."

In its reasoning in favor of the jailbreaking exemption, the Copyright Office rejected Apple's claim that copyright law prevents people from installing unapproved programs on iPhones.

Jailbreak

"When one jailbreaks a smartphone in order to make the operating system on that phone interoperable with an independently created application that has not been approved by the maker of the smartphone or the maker of its operating system, the modifications that are made purely for the purpose of such interoperability are fair uses," the ruling stated.

"While some consumers may welcome the elimination of these copyright protections when considering new applications and features for their wireless devices, they still need to review the terms of service from their carrier and device manufacturer since altering the underlying source code may void the manufacturer's warranties and adversely affect how the device operates on a wireless network," said Michael Altschul, Senior Vice President and General Counsel of CTIA-The Wireless Association.

The new rules, of course, don't apply just to the iPhone. They also clear the way for jailbreaking of Motorola, Samsung or other manufacturers' phones, which may have exclusive apps. The operating system on Motorola's Droid X cannot be changed and Samsung's Captivate can install apps only from the Google and AT&T; Marketplace.

The bottom line of the government ruling, says EFF, is that the previous rules were not designed to protect consumers.

"The Copyright Office recognizes that the primary purpose of the locks on cell phones is to bind customers to their existing networks, rather than to protect copyrights," said Granick. "The Copyright Office agrees with EFF that the DMCA shouldn't be used as a barrier to prevent people who purchase phones from keeping those phones when they change carriers. The DMCA also shouldn't be used to interfere with recyclers who want to extend the useful life of a handset."

By Mark Huffman
ConsumerAffairs.Com

July 26, 2010
FFD Companies uses the Internet to market its payday loans to consumers across the country, including to at least 576 consumers in West Virginia.

But West Virginia sued the payday lender, accusing it of violating state law that keeps payday lenders out. In a settlement with West Virginia Attorney General Darrell McGraw, FFD will pay refunds totaling $305,446.53 to 576 affected West Virginia consumers and has promised not to do business in the state.

"Payday loans are not solutions but treacherous traps that can lead to financial ruin for the many West Virginians facing difficult financial circumstances," said McGraw. "We will not rest until all payday lenders agree, as the FFD Companies have now done, to stop marketing these predatory payday loans over the Internet to West Virginia consumers."

West Virginia is one of a handful of states that have outlawed payday loans by imposing an interest rate cap on loans. Payday loans are high-interest loans or cash advances with interest rates that reach as high as 600 to 800 percent APR. The loans, typically made for 14 days, are secured by a post-dated check or an agreement authorizing electronic debits from the consumer's checking account.

Earlier charges

McGraw sued FFD Companies in November 2009, charging the defendants had engaged in the making and collection of Internet payday loans in violation of West Virginia law. Since McGraw began investigating the industry in 2005, he said his office has reached settlements with 107 Internet payday lenders and their collection agencies, resulting in $2,452,978.87 in refunds and canceled debts for 8044 West Virginians.

As negotiated by the Attorney General's Consumer Division, the settlement involves eight corporations under the FFD umbrella and their principals, with offices in Delaware, Georgia, New Mexico, Nevada, Texas, and Utah. The FFD Companies and websites that entered into the agreement include: FFD Ventures, LP of Carson City, NV, and Atlanta, GA; DFD Ventures, LP of Carson City; First Fidelity, Inc. of Carson City, Wilmington, DE, and Atlanta; FFD Resources I d/b/a Cash Supply of Espanola, NM, and Atlanta; FFD Resources II, LLC d/b/a Web Payday of Atlanta; FFD Resources III, LLC d/b/a Payday Services of Salt Lake City, UT, and Atlanta; FFD Resources IV, LLC d/b/a Payday Yes of Wilmington; FFD Resources IV, LLC d/b/a Paper Check Payday of Wilmington; and Great American Credit Management of Atlanta and Houston, TX.

The recalled product is identified as Iams Veterinary Formulas Feline Renal 5.5 lbs; lot code 01384174B4; UPC code 0 19014 21405 1.

This product is available by prescription through veterinary clinics throughout the U.S.

No illnesses have been reported. A Food and Drug Administration (FDA) analysis identified a positive result on the lot codes listed above. Lot codes can be found in the lower right corner on the back of the bag.

Consumers who have purchased dry cat food with this code should discard it.

People handling dry pet food can become infected with Salmonella, especially if they have not thoroughly washed their hands after having contact with surfaces exposed to this product.

Pets with Salmonella infections may have decreased appetite, fever and abdominal pain. If left untreated, pets may be lethargic and have diarrhea or bloody diarrhea, fever and vomiting.

Infected but otherwise healthy pets can be carriers and infect other animals or humans. If your pet has consumed the recalled product and has these symptoms, you should contact your veterinarian.