Current Events in July 2010

The scam, in which victims are promised "free" money from the government, has shown up recently in Ohio.

"Since early June, my office has received more than a dozen reports of Ohioans who were targeted by scammers posing as grant officers," Ohio Attorney General Richard Cordray said. "Many of the calls appear to originate in the 202 area code. This creates an illusion of legitimacy because 202 is a Washington D.C. area code."

The reported scams are reaching consumers through phone calls, e-mails and letters sent through the U.S. Postal Service. All use the term "grant" and most require the recipient to pay a percentage upfront before acquiring the "free" money.

"Scammers are targeting Ohioans who are in a weakened position. It's an approach that preys upon the desperation and hope of struggling individuals, and it is reprehensible," Cordray said.

Cordray offers the following tips to avoid the "grant" scams:

• Be wary of mailings that appear to be from federal, state or other governmental agencies. Don't assume that a letter or postcard is actually from the government just because it uses words such as "federal," "stimulus package" or "grant." Even if the sender's name sounds official or legitimate, the originator might be phony.

• To determine if a letter, e-mail message or service is really from the government, contact the government agency in question from a number you know to be correct. For example, log onto the agency's actual Web site, such as www.irs.gov, and use a phone number or e-mail address suggested on the site.

• NEVER send money to a stranger through a wire transfer service. Don't trust requests for advance fees or upfront payment.

Because of the recent bank bailout activity by the Federal Reserve, many scammers claim that new laws also provide little-publicized funds for individuals. No such laws exist.

Some scam ads feature a picture of President Obama, or say that Obama is providing federal money to individuals for certain uses. That's not true. Much paperwork is required to receive any government grant.

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.

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.

Fox News personality Glenn Beck is nothing if not controversial.

He raised eyebrows last July when he said that President Obama "has a deep-seated hatred for white people or the white culture." In 2005, he said he was "so sick of" families who lost loved ones on September 11 "because they're always complaining."

Now, the conservative firebrand's penchant for stirring the pot seems to be rubbing off on one of his sponsors.

Two California district attorneys have announced that they are investigating Goldline International, which makes hundreds of million dollars a year by selling gold coins during conservative broadcasts, including Beck's.

"There are two main types of complaints we're seeing," Adam Radinsky, an attorney with the Santa Monica City Attorney's Office, told ABC News on Monday.

"One is that customers say that they were lied to and misled in entering into their purchases of gold coins. And the other group is saying that they received something different from what they had ordered."

Radinsky's office, along with the Los Angeles County District Attorney, is looking into over 100 consumer complaints about Goldline and Superior Gold Group, both based in Santa Monica.

Congressional investigation?

At least one congressman is raising concerns as well.

Rep. Anthony Weiner, of New York, told ABC that Goldline is tricking consumers into buying so-called "collectible coins," which aren't worth as much as pure gold. "Once they get people on the phone, they basically steer them into these so-called collectible coins and that's where the rip off becomes really profound," Weiner said.

And indeed, ABC found several consumers who say they were basically coerced into buying coins that turned out to be worth much less than what they paid for them. Joe Kismartin, a 63-year-old Detroit resident, told the network that he thought the gold would be a good investment.

"I told the gentleman I don't want coins," Kismartin told ABC. "He said I got the deal here, the special deal, I got Swiss coins. He more or less talked me into buying the coins."

Unfortunately, those coins -- for which Kismartin paid $5,000 -- turned out to be worth a mere $2,900.

Playing to the audience

Goldline's main selling point -- that gold is a beacon of security in an otherwise unpredictable economy -- dovetails nicely with Beck's broadcasts, which hew to an anti-government, even conspiratorial tone. Last August, addressing claims that the health care bill contained provisions for medication-rationing "death panels," Beck said, "I believe it to be true."

The company is not shy about its affiliation with leading conservative figures. Its website quotes Beck as calling it "a top-notch organization," and boasts that "Mark Levin, Fred Thompson, and Laura Ingraham" -- three other conservative talk show hosts - "trust and use Goldline for their gold."

Beck, for his part, said the allegations were part of a plan by the government to "nudge the gold industry out of business. They can't have people buying gold," Beck said on his radio program on Wednesday. "They need to own all the gold. They're going to nudge us. Mark my words."

Consumers with complaints about Goldline can contact the Santa Monica City Attorney's office.

While home prices have declined from their 2006 highs during the real estate bubble, builders have started delivering less square footage on new homes. The National Association of Home Builders (NAHB) says the size of new U.S. single-family homes completed in 2009 dropped to a nationwide average of 2,438 square feet, reversing a trend of the past three decades.

New single-family homes were almost 100 square feet smaller in 2009 than they were in 2007, according to recently released U.S. Census Bureau data. What's behind the trend? The need to deliver more affordable homes is one reason, perhaps, but according to NAHB, not the main one.

The builders say one reason homes are getting smaller is homeowners want to keep energy costs in check. This growing energy-efficiency consciousness is one of many trends that the association said was likely to continue.

Despite the tendency towards a smaller footprint, overall energy usage has been growing. One reason could be the spread of air conditioning.

Census Bureau data show that fewer than half of all new single-family homes completed in 1973 had air conditioning while nearly nine-out-of-ten new homes were air conditioned.

Regional differences

Not surprisingly, there are regional differences in those nationwide findings. The proportion of homes with air conditioning ranged from a low of 69 percent in the West to a high of 99 percent in the South. The Northeast and Midwest were at 75 percent and 90 percent, respectively.

Still, even as energy use climbs, so does energy efficiency.

"Residential Energy Consumption Survey," a U.S. Energy Information Administration (EIA) report released in 2005, confirms that while both floor size and overall energy consumption have been trending upwards for decades, energy consumption per square foot has been dropping.

The survey shows that new households were smallest from 1970 to 1979, averaging 1,863 square feet. They steadily increased through 2005, according to the EIA report.

Likewise, overall household energy consumption was lowest from 1980 to 1989, but has been rising ever since. However, even as residences have grown, the amount of energy used per square foot has declined from 51.8 Btu per square foot before 1940 to only 33.4 Btu per square foot in structures built from 2000 to 2005.

In an emergency situation, consumers needing home repairs are more vulnerable to scams, said Janet Jenkins, Administrator of the Wisconsin Division of Trade and Consumer Protection. We call such scam-artists Storm Chasers.

Sometimes these contractors arrive on scene shortly after the storm, collect money up front for promised repairs, and then disappear without doing any work; or the contractor starts the work and then asks for more money than the agreed-upon price to finish the project.

Storm Chasers are typically from out-of-state, have little or no background in home repair, and charge ridiculous prices for shoddy work.

The Wisconsin officials offered these timely tips:

• Be wary of any contractor who knocks at your door. Call the police or sheriffs department to check them out.

• Try to get a local contractor. Ask contractors if they are subcontracting your job. Be careful if local contractors are using outside subcontractors.

• Get lien waivers from anyone you pay for home repairs. It is necessary to do this because if the person collecting the money doesnt pay the supplier or worker, a lien could be put on your property.

• Get a written contract, with a start and completion date, and warranty information. Also make certain the contract states exactly what work is to be done and what materials are to be used. Never rely on verbal commitment.

• Contractors that register with the state are issued a card. Make sure any contractor you are considering hiring shows you their state registration card.

• Have someone watch the work being done. Ask your local building inspectors to visit your job site often.

• Request a copy of the contractors certificate of liability insurance.

Price-gouging

In Louisiana, price-gouging laws went into effect following the state of emergency declaration from Governor Bobby Jindal in response to Tropical Storm Bonnie.

Price gouging is when a seller prices merchandise much higher than is reasonable or fair. The price gouging statutes prohibit the raising of prices above the pre-emergency levels unless there is a national or regional market commodity shortage.

This means that gasoline, petroleum products, hotels, motels, and retailers are prohibited from raising prices during this state of emergency unless they incur a spike in the price of doing business. The price gouging laws carry both civil and criminal penalties.

Louisiana residents and visitors who suspect price gouging should contact the Louisiana Attorney Generals Office at 800-351-4889.

By Mark Huffman
ConsumerAffairs.com

July 23, 2010
If you have long distance service, you pay into the Universal Service Fund, established by Congress in the early 20th century to expand telephone service to rural areas.

Since rural America currently enjoys telephone service, wouldn't it make more sense to use that money to expand broadband services to rural areas? Lawmakers in both parties think it might.

Rep. Rick Boucher (D-VA), Chairman of the Subcommittee on Communications, Technology, and the Internet, and Rep. Lee Terry (R-NE) have introduced the Universal Service Reform Act of 2010. They say the measure would improve and modernize the Universal Service Fund (USF) by reining in the size of the fund and promoting broadband deployment.

"The Universal Service Fund is broken," Boucher said. "Consumers currently pay more than thirteen percent of long distance revenues into the fund and have at times this year contributed over fifteen percent. Our legislation is a comprehensive and forward-looking measure, which will control the spiraling growth of the Universal Service Fund while ensuring that sufficient universal service support is available on a technology-neutral basis to the carriers which rely on it to provide service."

"The measure will expand who pays into the fund, control the growth of the fund and modernize the fund by allowing its use for the deployment of high-speed broadband service," said Terry.

Expanding broadband

The legislation declares broadband to be a universal service and requires universal service fund recipients to offer high-speed broadband services throughout the areas where they receive support. The measure recognizes that it may not be economical to serve the most remote areas with wireline technologies and permits the resale of satellite broadband to ensure broadband availability in those places.

"The current Universal Service fund has failed to keep up with the changing telecommunications landscape," said Terry. "This bill is a comprehensive approach that will ensure high speed broadband service is available to many more customers in Nebraska and across the nation, especially in rural areas."

Providers generally welcomed the bill. Verizon issued a statement congratulating Boucher and Terry for updating the Universal Fund for the broadband era.

"They recognize the universal service program was designed for a different time and that with consumers shouldering its ever-increasing costs, reform is overdue," the company said in a statement.

"We agree that universal service reform is necessary and look forward to working with Congressmen Boucher and Terry to make certain that the universal service program serves the needs of 21st century consumers, who are increasingly relying on their wireless services and products for everything from health to learning," said CITI, an association representing wireless providers.

Competitive bidding

Boucher and Terry say their bill will limit universal service support in areas where there is competition among providers of voice and broadband services and direct the Federal Communications Commission to adopt a competitive bidding process to determine which wireless carriers will receive universal service support.

The measure also directs the FCC to establish and implement performance goals for each universal service fund program and to determine the appropriate methodology for audits of universal service fund recipients.

July 22, 2010
While it was predicted that the new Credit CARD Act passed last year would create some unforeseen problems for consumers, the new law appears to be working, according to the Pew Health Group's Safe Credit Cards Project.

At least, so far.

The group's report says most of the practices deemed "unfair" or "deceptive" by the Federal Reserve have disappeared from new credit card offers since federal passage of the CARD Act. However, the group warns, new trends have emerged that could cost cardholders significantly.

The report finds issuers have eliminated practices such as "hair trigger" penalty rate increases (disproportionate charges for minor account violations), unfair payment allocation, and raising interest rates on existing balances. However, Pew's research also highlights a sharp rise in cash advance fees, continued widespread use of other penalty interest rates and an emerging trend of credit card companies failing to disclose penalty interest rates in their online terms and conditions.

"While it's been less than a year since passage of the Credit CARD Act, the new law appears to be working for millions of Americans who have credit cards," said Shelley A. Hearne, managing director of the Pew Health Group. "The elimination of most of the 'unfair' or 'deceptive' practices of the credit industry since we last surveyed the marketplace marks a major milestone in the move to make credit cards safer, transparent and more fair for consumers. Most of the news is good, but we are seeing the rise of new harmful behavior."

The Pew Safe Credit Cards Project said it has examined all consumer credit cards offered online by the nation's 12 largest banks and 12 largest credit unions. Together these institutions control more than 90 percent of the nation's outstanding credit card debt. For this latest report, which measures how the industry has changed since the passage of the Credit CARD Act, Pew gathered data in March 2010 on nearly 450 cards.

Findings

• Many of the most troublesome practices of the credit card industry have been eliminated. A credit card issuer can no longer unilaterally decide to raise interest rates on existing balances. Likewise, practices including "hair trigger" penalty rate increases, unfair payment allocation, and over-limit fees without prior consent are a thing of the past. Earlier Pew research found that before the implementation of the law, 100 percent of the credit cards surveyed included at least one of these practices.

• Beyond the requirements of the new law, there are new practices that benefit consumers. Fewer than 25 percent of all cards examined had an over-limit fee, compared with more than 80 percent of cards in July 2009. Additionally, mandatory arbitration clauses, which can limit a consumer's right to settle disputes in court, are now found in 10 percent of cards versus 68 percent in July 2009.

• Predictions that legislation would spawn the growth of new fees have yet to materialize. There was minimal change in the number of cards that include an annual fee (down one percentage point from July 2009 to March 2010). During that period, the median size of these fees increased from $50 to $59 for banks and from $15 to $25 for credit unions.

• Some disclosures stopped including the size of penalty interest rates even as issuers reserved the right to impose them. At least 94 percent of bankcards and 46 percent of credit union cards came with interest rates that could go up as a penalty for late payments or other violations. But nearly half these warnings failed to inform the consumer of the actual penalty interest rate or how high it could climb.

"Although we applaud changes by the card industry to create a fairer and more transparent marketplace, our research shows that some challenges remain," said Nick Bourke, director of Pew's Safe Credit Cards Project and report co-author. "For the first time, we have seen credit card disclosures warning consumers that interest rates could go up as a penalty for certain actions, but not stating how high those rates could go. Federal regulators should pay attention to this problematic new trend. When issuers withhold vital pricing information, it leaves cardholders in the dark and puts their financial security at risk, which is why federal regulations have long required issuers to disclose their rates and fees up front."

Disclosure

The report concludes that federal bank regulators should enforce existing regulations that require companies to disclose full and reliable credit card penalty rate information. It also says the Federal Reserve should prohibit issuers from charging penalty interest rates that are higher than initially disclosed when the consumer opened the card account.

The report also shows that surcharge fees for cash advances rose sharply between July 2009 and March 2010. Bank cash advance and balance transfer fees increased on average by one-third during this period, from three percent of each transaction to four percent. Credit union cash advance fees went up by one quarter, from two percent to 2.5 percent.

Other pricing data are also included in the report, showing recent increases in a variety of credit card interest rates and fees.

Scammers use a variety of tactics to make their offers seem legitimate. Their initial contact usually occurs by telephone, letters, e-mails and phony websites. "They often try to convince consumers to send them money or give personal information, such as bank account numbers and Social Security numbers," says Michael S. Kappas, President and CEO, Apprisen Financial Advocates, a national nonprofit consumer credit counseling agency.

Identity theft was the number one complaint last year, according to the FTC. Over 300,000 cases were reported representing 25 percent of all complaints. And consumers reported paying almost $2 billion on those complaints.

Stay alert

Apprisen describes some common signs to look out for:

• 1. You're pressured to "act now!"

• 2. You've won a contest you've never heard of.

• 3. You have to pay a fee to receive your "prize."

• 4. Your personal information is requested.

• 5. The company refuses to provide written information.

• 6. The company has no physical address, only a P.O. Box.

• 7. The company insists you pay in cash.

Apprisen offers the following information to all consumers -- in particular senior citizens, who are favorite targets of scammers -- tips that Kappas says "will help consumers stay safe and protect their pocketbook."

Research businesses and charities

Before doing business with a company, check its reputation with the State Attorney General's Office and the Better Business Bureau.

Read the fine print

Read all the terms and conditions of any agreement before you sign. Look for exclusions. Always get warranties in writing. Review any contracts with a trusted attorney, friend or family member.

Remember your rights

Laws protect you from unfair, deceptive and unconscionable practices in consumer transactions. If you've actually won something, you don't need to send money to get it.

Reconsider the purchase

Take your time before you make a decision. Ask questions and demand answers.

Review your credit report

Many scams lead to identity theft. One of the best ways to catch ID theft early is by monitoring your credit report on a regular basis. Look for unauthorized open accounts. You can request a free copy of all three credit reports at annualcreditreport.com.

Report fraud

If you have a problem with a purchase you made, notify the company in writing. Explain your complaint, the facts of the situation, the resolution you desire, and give a deadline for the resolution. If you suspect fraud or if you cannot resolve the problem on your own, file a complaint with the State Attorney General.

By Mark Huffman
ConsumerAffairs.com

July 22, 2010
It's no secret that the Obama administration's home mortgage modification program, which was designed to help troubled homeowners avoid foreclosure, was a big disappointment. And maybe it isn't a surprise, either.

Neil Barofsky, inspector general for the Troubled Asset Relief Program (TARP) told Congress Wednesday the Treasury Department failed to set clear goals for the administration's modification program.

"It's a simple recommendation that we made, that Treasury put forth how many people it truly expects to help stay in their houses through permanent modifications," Barofsky told the Senate Finance Committee.

The numbers speak for themselves. Of the millions who have applied for a loan modification over the last 15 months, fewer than 400,000 have been granted permanently modified loans. Early projections were that three to four million homeowners who were struggling to make payments would receive lower interest rates or reduced principal, helping them avoid foreclosure.

Consumer frustration with the modification process, managed by participating loan servicers, has been well documented on the pages of ConsumerAffairs.com.

From the beginning of the process, homeowners reported remarkably similar problems; lost paperwork, requests to fax the same documents multiple times, speaking with a different mortgage officer each time, and a perceived sense of both indifference and incompetence on the part of the servicer.

Falling through the cracks

Guy of Jackson, South Carolina, reported a typical experience last year in trying to work with Nationstar, the mortgage servicer that bought his Ditech loan.

"We were told what documents were needed and how to send them to Nationstar," Guy told ConsumerAffairs.com. "Those documents were readied and I faxed all eight pages to Nationstar. My fax machine printed the confirmation.

But several months passed and Guy said he was close to losing his home, without having heard from his loan servicer. "We contacted Nationstar and we were advised our loan modification process was never started because our necessary documents never arrived," he said. "I explained that I had a fax confirmation and I sent the documents months before. Nationstar advised us at that time to re-send the documents."

Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the bailout and a leading candidate to head the new Consumer Financial Protection Agency, told the committee the program was too small and too slow.

"Fifteen months into this program, for every one family that appears to have made it to a permanent modification that's likely to stabilize that family in that home, 10 more have been moved out through foreclosure," she said. "This is a program that's behind the curve."

Warren said in many cases, loan servicers have little incentive to help a homeowner achieve a modification, since they stand to earn fees if the home eventually goes to foreclosure.

"It's just not a program that's working for homeowners," Warren said. "It's not a program in some cases that's working for investors. And most importantly, it's not a program that's working for the economy over all."

July 22, 2010
Selling a house got a lot harder last month, as a federal tax credit for buyers finally expired. The pace of new construction also hit the skids.

Sales of existing homes fell 5.1 percent in June from the month before, according to the National Association of Realtors. Compared with June 2009, however, sales were up nearly 10 percent.

Earlier this week, the Commerce Department reported construction of new homes fell to an eight-month low in June. Housing starts dropped five percent from May -- the lowest rate since last October.

"June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months," said Lawrence Yun, NAR's chief economist. "Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels."

The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.

A parallel NAR practitioner survey shows first-time buyers purchased 43 percent of homes in June, versus 46 percent in May. Investors accounted for 13 percent of sales in June, little changed from 14 percent in May; the remaining purchases were by repeat buyers. All-cash sales were at 24 percent in June compared with 25 percent in May.

Total housing inventory at the end of June rose 2.5 percent to 3.99 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace; there was an 8.3-month supply in May.

Too many homes for sale

"The supply of homes on the market is higher than we'd like to see. But home prices are still holding their ground because prices had already overcorrected in many local markets," Yun said. "Raw unsold inventory remains 12.7 percent below the record of 4.58 million in July 2008."

Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in June in comparison with June 2009. In addition, existing single-family home sales rose in 12 of the 19 areas from a year ago while two were unchanged.

Existing condominium and co-op sales slipped 1.5 percent to a seasonally adjusted annual rate of 670,000 in June from 680,000 in May, but are 20.5 percent higher than the 556,000-unit pace in June 2009. The median existing condo price5 was $180,100 in June, which is 1.4 percent below a year ago.

Northeast sales remain strong

Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 960,000 in June and are 17.1 percent above June 2009. The median price in the Northeast was $244,300, down 1.2 percent from a year ago.

Existing-home sales in the Midwest dropped 7.5 percent in June to a pace of 1.23 million but are 11.8 percent higher than a year ago. The median price in the Midwest was $155,900, down 0.1 percent from June 2009.

In the South, existing-home sales fell 6.5 percent to an annual level of 2.01 million in June but are 11.0 percent above June 2009. The median price in the South was $163,600, unchanged from a year ago.

Existing-home sales in the West dropped 9.3 percent to an annual pace of 1.17 million in June but are 0.9 percent higher than a year ago. The median price in the West was $221,800, up 1.5 percent from June 2009.

By Mark Huffman
ConsumerAffairs.Com

July 21, 2010
President Obama today signed legislation that he said represents "the strongest consumer financial protections in history" -- the Dodd-Frank Wall Street Reform and Consumer Protection Act, which squeaked to Senate passage with the votes of three Republicans who defied their party's leaders.

Supporters fought for months to pass the legislation that they say will protect consumers from hidden fees and investment scams and require the financial industry to provide clear information so consumers can make the best financial decisions.

Obama echoed those claims in his remarks as he signed the measure at the Ronald Reagan Building in Washington. "These protections will be enforced by a new consumer watchdog with just one job: looking out for people - not big banks, not lenders, not investment houses - looking out for people as they interact with the financial system," he said.

President Obama signs the financial regulation bill at the Ronald Reagan Building in Washington. -- White House photo

"If youve ever applied for a credit card, a student loan, or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print. What often happens as a result is that many Americans are caught by hidden fees and penalties, or saddled with loans they cant afford," Obama said.

Obama added: "With this law, well crack down on abusive practices in the mortgage industry. Well make sure that contracts are simpler - putting an end to many hidden penalties and fees in complex mortgages - so folks know what theyre signing.

"With this law, students who take out college loans will be provided clear and concise information about their obligations.

"And with this law, ordinary investors - like seniors and folks saving for retirement - will be able to receive more information about the costs and risks of mutual funds and other investment products, so that they can make better financial decisions as to what will work for them. "

With an eye on the upcoming midterm elections, Republicans -- who had almost unanimously opposed the measure -- said that the government's attempt to more closely regulate banks and Wall Street would lead to more bailouts, not fewer. Republican Rep. Mike Pence of Indiana echoed last week's call by Minority Leader John Boehner (R-Ohio) to repeal the measure.

"This financial-services reform is nothing more than a permanent bailout of Wall Street that will restrict credit, kill jobs, raise taxes and expand government control of the private sector," Pence said.

Obama returned the favor, calling the Republicans "a partisan minority determined to block change."

Consumer protection

The measure establishes a first-of-its-kind regulator, whose sole job will be consumer financial protection -- cracking down on abusive lending and financial practices including mortgages, credit cards, payday loans and bank accounts. Mortgage reforms include requirements that borrowers provide evidence of their ability to repay mortgages, and prohibitions on compensating lenders for steering consumers into higher-cost loans.

For consumers who are also investors, it seeks to ensure accountable, transparent derivatives trading: Nearly all derivatives will have to be exchange traded and cleared, so trades have enough money backing them and regulators can spot problems before they threaten the entire economy. Commercial banks will be prohibited from trading in some of the riskiest swaps. Supporters say it will strengthen reform by closing the loophole to ban all swaps trading by taxpayer-backed commercial banks.

It adopts the so-called "Volcker Rule," named for the former Federal Reserve chairman who proposed it, It limits banks' ability to speculate with taxpayer-insured deposits, and prohibits financial companies from betting against their clients. Supporters say it closes the loophole to ban all speculation with taxpayer-backed funds.

It begins to tackle "too-big-to-fail," creating a new system to break up, rather than bail out, failing financial firms and make banks pay the bill. It will set strict size and leverage limits, and rebuild the walls between investment and commercial banks.

Car dealers

Thanks to furious lobbying efforts by car dealers, who portrayed themselves as "Main Street" rather than Wall Street, the consumer protection measure does not specifically tighten the clamps on car dealers but the new consumer watchdog agency will have jurisdiction over loans made by auto finance companies such as Ford Motor Credit and Ally Financial, formerly GMAC.

Consumer advocates had wanted individual car dealers to be brought under the new regulator's supervision, noting that dealers originate about $250 billion in car loans each year. But dealers and White House officials said the bill will ride herd on dealers by regulating the auto industry's lending arms.

"The auto dealer lenders will have a hard time competing with really very high fees or practices against" loans made by banks and auto lenders that will be subject to new oversight, Diana Farrell, deputy director of the White House National Economic Council, told The Detroit News. The Federal Trade Commission (FTC) also gets expanded authority over dealer lending practices.

"The newly created Bureau of Consumer Financial Protection will have direct federal oversight over all auto loans and those that underwrite, fund or service auto loans, such as banks, credit unions, finance companies and 'buy here-pay here' operations at dealerships," Ed Tonkin, chairman of the National Automobile Dealers Association, said comments published today by Automotive News, a trade journal.

Payday lenders

One unsavory slice of the financial services industry that will come under federal regulation for the first time is payday lenders -- the ubiquitous storefront and online lenders who loan small amounts of money at exorbitant short-term interest rates, making it nearly impossible for financially-struggling consumers to pay off their initial loan.

The new Consumer Financial Protection Agency (CFPA) is expected to enact caps on the interest rates that can be charged for short-term loans. Payday lenders claim they provide a valuable service by loaning money to consumers who would otherwise not be able to get credit, but it's hard to find impartial observers -- or clients -- who go along with that claim.

"I have paid these people so much money you would not believe," Sandra, of Fuquay Varina, N.C., wrote in a complaint about OneClickCash.com to ConsumerAffairs.com. "I think a law should be made to do away with these companies."

State governments have also been cracking down on payday lenders.

Wall Street oversight

"This bill sets the wheels in motion to replace the failed deregulatory policies of the 1990s with real oversight of Wall Street," said Carmen Balber, Washington Director for Consumer Watchdog.

AARP said it supports the legislation because it will establish a watchdog that will protect consumers from getting a mortgage or credit card that has hidden fees that cause their bills to skyrocket; ensure Americans get the clear, accurate information they need to shop for mortgages, credit cards and other financial products; and crack down on investment scams targeted at older Americans.

"Over the last three years, older Americans have lost billions of hard earned dollars due to the failure of an outdated and compromised financial regulatory system," said AARP Maryland senior state director Rawle Andrews. "The failures that led to this crisis require bold action to restore responsibility, accountability and consumer confidence in our financial system, and this bill will protect Americans' money and help stabilize our entire economy."

Heather McGhee, Director of Demos' Washington DC office who supported efforts to pass the bill, said the reform will help middle class consumers.

Greater security

"After the new consumer regulator opens its doors, Americans will open a checking account or apply for a loan with greater security because their lender will be accountable to basic standards of fairness and transparency," McGhee said. "Investors will know that their broker-dealers are acting in their interest. Businesses hedging risk will know the real price of the derivatives contracts they buy. And if we have truly independent regulators with the will to stop reckless speculation, those regulators will have the power and tools to do so."

Michael D. Calhoun, president of the Center for Responsible Lending, also hailed Senate passage of the law, saying will help end a nightmare for many American families.

"People will get loans they can afford to repay, and principles of fairness and value in financial products will trump easy money and self-enrichment," Calhoun said. "The new regulatory framework will go far to reduce risky practices and restore common-sense in financial services."

July 12, 2010

Just when it seemed as though the various types of phishing attacks had been identified - up pops another that is even more sophisticated. Most commonly known as "tabnabbing," it is also called "tabnapping" or kidnapping of Internet tabs.

Phishing scams typically involve sending hoax emails to your computer in an attempt to steal your usernames, passwords and bank details. Often the sender will claim to be from your bank and will ask you to verify your bank details by clicking on a link contained in the email. The link directs you to a fake website which looks like your bank's website. Once you have typed in your login details, the criminals who set up the fake site have access to your information.

How it works

Tabnabbing does not rely on persuading you to click on a fake link. It targets Internet users who open lots of tabs on their browser at the same time and changes the way a legitimate site looks behind your back.

An inactive browser tab is replaced with a fake page set up specifically to obtain your personal data -- without you even realizing it has happened. Scammers can actually detect when a tab has been left inactive for a while and spy on your browser history to find out which websites you regularly visit so they know which pages to fake.

Here is an example: You open the login page for your online bank account, but then you open a new tab to visit another website for a few minutes. This has left the original tab unattended during this time. When you return to your bank's website, the login page looks exactly how you left it, but it is again requesting that you login. This is reasonable because you just assume that you have timed out on your original login.

What you don't realize is that a fake page was substituted and when you re-enter your username and password it is not for the official bank login but for the con artist. Once you re-enter your login information, you will be redirected to your bank's website since you never actually logged out in the first place, giving you the impression that all is well. Meanwhile, the con artist has just obtained your login information and can now login to your account without your knowledge.

Tabnabbing should be fairly easy to avoid as long as you are careful. North Dakota Attorney General Wayne Stenehjem offers five tips for protecting yourself:

• 1. Make sure you always check to be sure the URL in the browser address page is correct before you enter any login details. A fake tabbed page will have a different URL than the website you think you are using.

• 2. Always check to make certain the URL has a secure https:// address even if you don't have tabs open on the browser.

• 3. If the URL looks suspicious in any way, close the tab and reopen it by entering the correct URL again.

• 4. Avoid leaving open tabs that require you to type in secure login details. Don't open any tabs while doing online banking. Open new windows instead.

• 5. Don't log in on a tab that you have not opened yourself.

While this type of attack on your computer could potentially be devastating, it is relatively simple to keep yourself safe online. Follow the steps outlined above and if you question a URL, close out of the site and start over again. Or simply do not leave tabs open on the Internet.

July 21, 2010
The airwaves are becoming crowded with commercials for reverse mortgages, and officials in Pennsylvania have outlined a new set of policies on that financial instrument they say will better protect homeowners.

Pennsylvania Secretary of Banking Steve Kaplan and Secretary of Aging John Michael Hall announced new rules for the reverse mortgage industry, defining proper conduct of mortgage lenders.

Under the policy, homeowners age 62 and older who choose to acquire a reverse mortgage will deal with lenders who understand the complexity of reverse mortgages, adhere to a code of conduct and have the ability to support the loan.

"Because reverse mortgage products are specifically designed for -- and marketed to - older residents, we feel a particular responsibility to safeguard their interests by making sure that they are not unfairly taken advantage of," said Kaplan. "Our policy is designed to make these products, which can be useful to some, available under the right circumstances."

A reverse mortgage is a way to borrow money by using a home as collateral. It differs from a traditional mortgage in that homeowners need not fear the possibility that their home will be lost in foreclosure during their lifetime.

Steep price

However, the price one must pay to achieve this security is often very steep compared with other, more traditional kinds of financing.

Unlike a traditional home equity loan in which the homeowner makes monthly payments to a lender, a reverse mortgage provides the homeowner with monthly payments, a lump sum, a line of credit or a combination of these payments. A reverse mortgage allows older homeowners to withdraw equity from their homes; the money does not have to be paid back until the borrower dies, sells the home or moves out.

The most popular reverse mortgage type is the Federal Housing Administration Home Equity Conversion Mortgage, or HECM. The HECM loan limits some of the fees that can be charged and requires borrowers to receive counseling from an independent, certified agency. Homeowners may also choose a private, proprietary reverse mortgage that does not carry the same eligibility guidelines, fee limits and counseling requirements.

"While not appropriate in every situation, reverse mortgages can be an option for some older homeowners who want to keep their homes, age in place and protect their hard-earned resources," said Hall. "However, some types of loans carry increased risk to the borrower. I applaud the Department of Banking for developing safeguards to protect borrowers against bad advice and outright fraud by some lenders."

Reverse mortgage counseling is available in-person or by telephone. Homeowners can seek counseling from an agency approved by the U.S. Department of Housing and Urban Renewal, or the National Council on Aging.

The company disclosed that a U.S. grand jury in New York has subpoenaed company documents related to flaws in vehicle steering systems. It's possible that criminal charges could result.

A Toyota spokesman said the company is cooperating with the grand jury but would not discuss any specifics concerning the investigation.

In September 2005, Toyota announced what, at the time, was its largest ever recall. The carmaker pulled in 978,000 pickup trucks and sport utility vehicles sold in the U.S. because a steering relay rod on the vehicles may fracture, causing a loss of control.

The recall included the 1989-1996 model years and included power-steering equipped 4Runner sport utility vehicles and compact pickups and T-100 pickups. In May, the National Highway Traffic Safety Administration (NHTSA) announced it was investigating that recall, suggesting Toyota might have violated rules for informing safety regulators about vehicle problems.

Specifically, NHTSA wanted to know if Toyota reported the steering defect within five days of discovering it, as it is required to do by law. The agency might be a little suspicious, since Toyota has agreed to pay a record $16.4 million fine for not reporting what it knew about its sudden acceleration problems for four months.

In 2004, Toyota conducted a recall in Japan for Hilux trucks with steering relay rods prone to fatiguing, cracking and possibly breaking, causing the vehicle to lose steering control. At that time, Toyota informed NHTSA that the safety defect was isolated to vehicles in Japan and that the company had not received similar field information within the U.S.

In 2005, however, Toyota informed NHTSA that the steering relay rod defect was present in several models sold in the U.S. and conducted a recall.

Pre-2004 complaints

At the end of April NHTSA said it was alerted to a number of complaints filed with Toyota by U.S. consumers prior to the 2004 Hilux recall in Japan. As a result, NHTSA decided to open an investigation into whether Toyota met its legal obligation to conduct a timely recall of vehicles with the defect in the United States.

"Safety is our number one priority and we take our responsibility to protect U.S. consumers seriously," said U.S. Transportation Secretary Ray LaHood. "With new assurances from Toyota about their efforts to improve safety, I hope for their cooperation in getting to the bottom of what happened."

It's unclear whether the NHTSA investigation, and that of the New York grand jury, are connected. Though the company has never been hauled before a grand jury in the U.S., Toyota has faced a criminal investigation in Japan.

In 2006 three Toyota Motor Corp. executives who were quality-control managers were the focus of a criminal investigation in Japan into whether they downplayed reports of steering problems at the automaker in the mid-1990s. The steering flaw was cited as the possible cause of a serious accident in Japan that eventually led to a recall by Toyota of more than one million vehicles last year.

Five people were injured, one of them seriously, in Kumamoto in August 2004 when the steering of a Toyota Hilux Surf SUV failed and it hit another vehicle. The SUV was built in 1993.

Most recent recall

At the end of May, Toyota was still dealing with the problem, recalling Prius models from the same era to fix a similar power steering defect. The recall applied to the second-generation model of the hybrid car and covered vehicles made between July 2003 and December 2005.

Toyota said the fault was in a steering shaft, which Toyota said could crack if the steering wheel is turned forcefully or if the car is driven onto the curbing while parking.

By James Limbach
ConsumerAffairs.com

July 21, 2010
Even though it's the most popular website in America, consumers don't like Facebook, according to the 2010 American Customer Satisfaction Index (ACSI) E-Business Report, produced in partnership with ForeSee Results.

The social networking site scored 64 on the ACSI's 100-point scale -- a satisfaction even lower than IRS e-filers. This puts Facebook in the bottom five percent of all measured private sector companies and in the same range as airlines and cable companies -- two perennially low-scoring industries with terrible customer satisfaction.

"Facebook is a phenomenal success, so we were not expecting to see it score so poorly with consumers," said Larry Freed, president and CEO of ForeSee Results. "At the same time, our research shows that privacy concerns, frequent changes to the website, and commercialization and advertising adversely affect the consumer experience. Compare that to Wikipedia, which is a non-profit that has had the same user interface for years, and it's clear that while innovation is critical, sometimes consumers prefer evolution to revolution."

Given the complaints about Facebook received by ConsumerAffairs.com, the low score should not come as a surprise.

"Why can't I communicate with a human who works for Facebook?" wonders Peter of Maridcao, Puerto Rico. "I have complained about a false profile which someone keeps putting up. For some reason FB can't shut down this person. Why do I have to suffer through this?"

Mohamed of Redmond, WA, tells ConsumerAffairs.com, "Facebook disabled my account without giving me any notification, and when I asked them why they did that, they refused to tell me the exact reasons. I asked them to delete all my data on their servers (since they disabled my access to it), but they also refused to do so."

First-time ratings

Social media websites were measured for the first time by ACSI, and the category includes Facebook, MySpace, Wikipedia and YouTube. Twitter was not included in the social media category because a disproportionate number of users access Twitter through third party applications other than the website Twitter.com. Wikipedia leads the category at 77, followed by YouTube at 73, Facebook at 64 and MySpace at 63.

"Social media has become too big to ignore, so we added it to our list of e-business measures," said Claes Fornell, ACSI founder and professor of business at the University of Michigan. "We are quite surprised to find that satisfaction with the category defies its popularity."

Google plunged seven percent, but continues to lead the portals and search engines industry with a score of 80. It is just the second time that Google ceded its top spot, as the "all others" category of search engine competitors jumped five percent to 82. Microsoft's Bing search engine made a strong first showing with a score of 77, trailed by Yahoo! (76), AOL (74), and Ask.com (73).

Rikva from Monticello, NY, has a gripe with Google. "My telephone number is listed in Google as Wal-Mart. I hope you understand that I receive constant phone calls," she writes ConsumerAffairs.com. "I am a busy mother of 12 children and I came to rest for the summer here in upstate New York. It is absolutely ruining my vacation."

Pablo from Salt Lake City, UT, tells ConsumerAffairs.com that his Dell XPS400 computer has all major components linked and set to operate with a Google toolbar that is built into his program and systems. "In other words," he writes, "I bought a 'Google computer set up with a Dell Logo.' If I delete the Google tool bar I loose Internet Explorer and many other features needed on my computer for it to work. I tried to delete the bar but there is a warning message saying your computer may not start properly if you remove these files... WHAT TO DO??"

"Google may be suffering from trying to be too many things to too many people, but it still has the most loyal following with 80 percent of its users citing Google as their primary search engine," said Freed. "That said, Bing's first measure is impressive and could put some pressure on Google. The new search engine is already making gains in market share and using clever marketing and advertising to distinguish itself from the market leader."

Fox shows strong

In the news and information category, FOX News now dominates its competition online as well as on TV. FOXnews.com debuted at the top of the industry with a score of 82, the highest score any news site has received in nine years of measurement. FOX News' cable news competitors MSNBC.com (74) and CNN.com (73) trail in satisfaction as well as ratings. All major news websites improved, including newspaper websites for USATODAY.com (+4 percent to 77) and NYTimes.com (+4 percent to 76).

By Jon Hood
ConsumerAffairs.com

July 21, 2010
A federal appeals court has reinstated a class action brought by angry basketball fans, which claims that the NCAA's system of distributing Final Four tickets constitutes an illegal lottery.

Under the NCAA's system, which has been in place since at least 1994, consumers enter for a chance to win tickets through one of several NCAA-owned websites. To enter, fans have to pay the full face value of the ticket, plus a $6 service fee. Each contestant is allowed up to 10 entries; obviously, more entries means a higher chance of winning a ticket.

While losing consumers are refunded the amount they paid to cover the ticket, they are forced to give up the service fee. Thus, a consumer who entered ten times over to win a $150 ticket would get back $3,060 (the total value of all ten tickets), but she would lose $60 (the $6 service fee, multiplied by ten). If the consumer won, of course, she would also forfeit the cost of the ticket.

The suit claims that the number of applicants greatly exceeds the number of tickets on virtually every occasion, and that the games are held at venues that are much too small to meet ticket demand. The complaint also alleges that the $60 service fee, which grossly exceeds any costs associated with the lottery, generates massive profits for the NCAA -- $100 million in 2008 alone.

The suit, brought in the NCAA's home state of Indiana, was dismissed by a U.S. District Court last September. In ruling for the Association, Judge William Lawrence wrote that a plaintiff could not prevail when, knowing the facts of a transaction, he nonetheless became a participant in the very action of which he complains.

In praising the dismissal, the NCAA reasserted that the system was lawful and provides full disclosure to our applicants.

But the appeals court overturned the dismissal, ruling that the plaintiffs had met all three elements of an illegal lottery in Indiana: a prize, an element of chance, and payment or other consideration by the contestants.

The court disagreed with the NCAA's assertion that the system grants only an opportunity to purchase tickets at full price, noting that the plaintiffs were required to pay the service fee just to enter the lottery, and that, [w]in or lose, the fee was forfeited by all entrants and retained by the NCAA. The court also noted that the plaintiffs allege that the fair-market value of the tickets exceeded their face value such that those tickets constitute something of more value than the amount invested, turning them into a prize of a sort that is illegal under Indiana law.

Judge Richard Cudahy penned a dissent essentially agreeing with the District Court that the plaintiffs' willing participation barred them from making a claim. He also said that the existence of a service fee is without significance to the issue at hand.

U-Haul International, Inc. and its parent company have settled Federal Trade Commission charges that they invited U-Hauls closest competitor, Avis Budget Group, Inc., to collude on prices for truck rentals.

U-Haul and Budget control more than 70 percent of the do-it-yourself one-way truck rental business in the United States. If U-Haul had succeeded in its price-fixing plan, the two companies could have imposed higher prices on truck-rental consumers, according to the FTC.

Its a bedrock principle that you cant conspire with your competitors to fix prices and shouldnt even try. Consumers deserve better. The order announced today will ensure that U-Haul will not try it again, said FTC Chairman Jon Leibowitz when the tentative settlement was reached in June. It was made final today by a 5-0 vote of the commission.

The FTCs complaint alleges that on several occasions between 2006 and 2008, U-Haul tried to increase rates for one-way truck rentals by privately and publicly communicating with Budget, the second-largest truck rental company in the United States. However, the complaint does not allege that U-Haul and Budget actually reached an agreement.

As alleged in the complaint, the problems started after U-Hauls CEO and Chairman Edward J. Shoen discovered in 2006 that competition from Budget was forcing U-Haul to lower prices on its one-way truck rentals. In two companywide memos in 2006, Shoen acknowledged the problem and provided a solution.

For example, Shoen wrote: Budget continues in some markets to undercut us on One-Way rates. Either get below them or go up to a fair rate. Whatever you do, LET BUDGET KNOW. Contact a large Budget Dealer and tell them. Contact their company store and let the manager know.

At the same time, the FTC charges, Shoen told local U-Haul dealers to talk to their counterparts at both Budget and Penske another truck rental competitor and tell them that U-Haul had raised its one-way rates, and that they should now match U-Hauls higher rates.

Budget declined

The complaint alleges that Shoen invited Budget to collude again in 2008 after Budget declined to match U-Hauls price increases this time, during a conference call with industry analysts. During the call, Shoen made statements suggesting that U-Haul would raise its rates, and would maintain the new rates so long as Budget did not respond by price cutting in a way that took market share from U-Haul. He added that Budget need not match the U-Haul prices exactly, but could lag behind by three to five percent.

The settlement order against U-Haul and its parent company AMERCO bars them from colluding or inviting collusion. Specifically, the companies are prohibited from inviting a competitor to divide markets, allocate customers, or fix prices, as well as participating in, maintaining, organizing, implementing, enforcing, offering, or soliciting any other company to engage in such conduct. The order also includes monitoring and compliance provisions to ensure U-Haul and AMERCO comply with its terms. It will expire in 20 years.

By Mark Huffman
ConsumerAffairs.com

July 20, 2010

Being a fastidious housekeeper may not be without its risks. A study published in the international journal Environmental Health found that women who used the most household cleaning products had double the rate of breast cancer as those who used the fewer cleaners.

Researchers conducted telephone interviews with 787 Masachusetts breast cancer patients aged 60 to 80 years old in Massachusetts, and compared them to 721 women who did not have breast cancer.

"Women who reported the highest combined cleaning product use had a doubled risk of breast cancer compared to those with the lowest reported use," said study leader Dr Julia Brody, of the Silent Spring Institute in Newton, Mass. "Use of air fresheners and products for mold and mildew control were associated with increased risk. To our knowledge, this is the first published report on cleaning product use and risk of breast cancer."

Many pesticides, household cleaners and air fresheners contain ingredients known to trigger breast cancer in animals, said the researchers. Some also contain endocrine disrupting chemicals (EDCs) that could theoretically affect the growth of estrogen-sensitive breast cells.

Hormone-disruptors such as synthetic musks and phthalates were commonly used in air fresheners, said the scientists. Air fresheners may also contain chemicals called terpenes which can react with ozone in the air to form cancer triggers such as formaldehyde, benzene and styrene, they added.

"Although exposure levels may be low and EDCs are typically less potent than endogenous hormones, limited knowledge of product formulations, exposure levels and the biological activity and toxicity of chemical constituents alone and in combination make it difficult to assess risks associated with product use," the researchers wrote.

The scientists acknowledged that their results might be swayed by "recall bias" because they depended on answers to questions about activities in the women's past; they called for more extensive research into the question.

"Because exposure to chemicals from household cleaning products is a biologically plausible cause of breast cancer and avoidable, associations reported here should be further examined prospectively," the researchers concluded.

Industry objects

Not surprisingly, the makers of household cleaning products were unhappy with the study. The American Cleaning Institute (ACI) calls the study questionable and said it "overreaches in its conclusions."

"Simply put, this research is rife with innuendo and speculation about the safety of cleaning products and their ingredients," said Richard Sedlak, ACI's Senior Vice President of Technical and International Affairs. "This is all based on the most cursory look at the scientific literature and the recollection of breast cancer survivors as to the products they used 15 to 20 years ago."

"Unfortunately, this work sheds little light on the real causes of breast cancer," he said.