Current Events in August 2010

The fake contests are a common ploy used by con artists to swindle money or gain personal information. Since January, the Attorney General's Consumer Protection section has received approximately 900 complaints about sweepstakes or prizes, almost all of them scams.

"The number of sweepstakes scams reported in Ohio is on course to double this year," Cordray said. "Unfortunately, senior citizens are most vulnerable to these sophisticated deceptions. We are seeing tragic instances of trusting consumers, particularly seniors, falling into a trap where they wind up turning over not only their personal information but thousands of dollars. Our best defense against these scam artists is to increase awareness and community vigilance."

In Madison County, an elderly couple received a call informing them that they had won $495,000 and that to receive the award they first had to wire $750 to Las Vegas for insurance. After the couple wired more than $1,800 for the prize, their son became aware of the scam and contacted the Attorney General's office.

A Trumbull County woman received a check as an award for winning the "lottery." In order to collect the winnings, she was required to deposit the $4,800 check and wire $4,000 to Spain. The woman's daughter contacted the Attorney General's office after realizing the check was a fake.

"Many of the fake checks used in sweepstakes scams look very real," Cordray said. "If someone is enduring early stages of dementia or Alzheimer's, they likely could not detect this ploy. In fact the most outrageous aspect of most scams is that they prey on the trust that ordinary, decent people have in one another. I strongly urge family members, friends and neighbors to watch out for those who are most vulnerable to these malicious scammers."

The Attorney General's office has received 919 sweepstakes scam reports to-date in 2010; well past the 622 complaints received last year and double the 447 in 2008.

Cordray is providing the following tips to avoid sweepstakes scams:

• Do not send money to collect a sweepstakes or prize. If you have to pay to collect your winnings, then you did not actually win.

• Be extremely skeptical of anyone who asks you to send money to Canada, Jamaica or other foreign countries.

• Don't trust individuals who contact you unexpectedly and who ask you to wire transfer money, even for a contest or prize.

• Entries to foreign lotteries cannot be sold legally in Ohio. Anyone who informs you that you have won a foreign lottery is trying to defraud you.

• Beware of "recovery scams." Fraudulent telemarketers may contact victims posing as the police or other governmental representatives. They lie, often by saying they have recovered the victims' lost sweepstakes money and asking the victims to send more money to receive it.

The office of Arizona Attorney General Terry Goddard has reached a $1,181,400 settlement with Pulte Home Corporation and Pulte Mortgage, LLC (collectively "Pulte").

The agreement resolves the state's investigation into allegations that Pulte's pre-qualification practices, earnest money deposit policies and Spanish-language marketing efforts violated Arizona's consumer protection law.

The settlement, in which no admission of fault or finding of liability is made, must be approved by the Maricopa County Superior Court.

"Certainly homeowners need to educate themselves about all of their options when buying a home," Goddard said. "But homebuilders and lenders have a legal obligation to provide their customers with complete and accurate information. I commend Pulte's commitment to amend its practices and bring more transparency into buying and financing a Pulte home."

"Pulte respects the concerns of the Arizona attorney general and commends the office for its ongoing efforts to protect consumers throughout the home-buying process," said John Chadwick, Southwest Area President of Pulte Group, Inc. "We hold ourselves to the highest standards in customer services and have always operated in good faith with our customers and the state."

Under the Consent Judgment, Pulte will:

• ensure that Pulte Home's Arizona sales representatives do not represent or imply that they are able to "pre-qualify" Arizona consumers for home loans.

• disclose orally and in writing that communications between a prospective buyer and Pulte sales staff regarding how expensive a home the consumer can afford to buy do not constitute an offer of financing.

• in one document, clearly disclose: (1) Pulte offers buyers incentives, such as free upgrades or money toward closing costs, in exchange for the buyers' use of Pulte Mortgage or other affiliated businesses, and consumers who do decide to use a lender other than Pulte Mortgage will not receive such incentives or discounts. (2) There are other providers of such services, and fees, charges, loan terms and interest rates may vary among providers.

• ensure that the representations made in its English-language and Spanish-language marketing materials are equivalent.

• refund $81,400 to 10 Arizona consumers who the Attorney General alleged wrongly forfeited their earnest money deposits after canceling their purchase agreements.

• pay $200,000 into an escrow account which will fund any new, legitimate claims for earnest money deposit refunds that are filed with the Arizona Attorney General's Office within 12 months of the settlement.

• pay $500,000 to the Consumer Fraud Revolving Fund to fund the attorney general's consumer protection, education and outreach programs.

• pay $100,000 to fund the publication and dissemination of Spanish-language educational materials.

• pay $300,000 as reimbursement of the Attorney General's costs and investigative expenses.

Consumers who believe they have wrongly forfeited earnest money deposits to Pulte should file a refund request with the Arizona Attorney General's Office. Anyone with questions can call 602-542-5763.

The last of a series of new overdraft rules goes into effect August 15, after which banks cannot automatically enroll new or existing customers in an overdraft protection program that smacks consumers with a hefty fee when the bank makes good on an overdraft. The banks have come to rely on the revenue from those fees and are worried about losing them.

It turns out they might not have as much to worry about as they thought. Research shows a surprising number of consumers have already "opted in" for the continued coverage and another large group indicates it plans to do so.

When the Federal Reserve drafted new rules preventing banks from making its overdraft coverage mandatory, consumer advocates were certain that most bank customers would say "no thanks." After all, complaints about overdraft fees, famously making a $5 latte a $40 purchase, have filled pages on ConsumerAffairs.com.

But a new report from Mintel Comperemedia, a service that provides direct marketing competitive intelligence, found that 26 percent of consumers said they had opted in for their bank's standard overdraft services and another 26 percent said they planned to do so in the future.

Marketing blitz

Mintel notes that the banking industry has engaged in a marketing full court press to achieve these results, incorporating direct mail, email, web and phone campaigns to encourage consumers to remain in a program that will charge them fees whenever they overdraw their account with their debit card. Those who decide to live without the overdraft protection will have their cards declined when a purchase would overdraw their account, but will not pay a fee.

In recent years, consumers have paid $23.7 billion per year in costly overdraft fees, which average $34 per incident. However, the Center for Responsible Lending (CRL) says there are a number of less costly alternatives to standard overdraft coverage.

"To avoid costly fees under standard overdraft coverage, customers can sign up for lower cost overdraft alternatives at their bank, such as linking a savings account or credit card for back-up funds, or applying for an overdraft line of credit," the group says on its website.

CLR maintains that banks' recent marketing blitz has been targeted at the most vulnerable consumers because they are the ones most likely to have incurred overdraft fees in the past. To induce these customers to accept overdraft coverage, CLR asserts, many marketing campaigns use scare tactics or incomplete information. For example, they fail to emphasize customers can have debit card transactions declined at no cost rather than incur a $34 overdraft fee.

"Knowing more about what types of foods and foodborne agents have caused outbreaks can help guide public health and the food industry in developing measures to effectively control and prevent infections and help people stay healthy," said Chris Braden, acting director of the CDC's Division of Foodborne, Waterborne and Environmental Diseases.

Despite health officials' efforts, the cause of an outbreak -- either the food or the foodborne agent responsible -- often cannot be determined or confirmed. This most commonly is the case when the outbreak is small.

The culprit

Of 1,097 reported outbreaks in 2007, 497 (or 45 percent) confirmed that one foodborne agent was responsible and in an additional 12 outbreaks more than one foodborne agent was responsible. Thus, in more than half of the outbreaks, a foodborne agent was not identified. Norovirus was the most frequently confirmed foodborne agent (39 percent), followed by Salmonella (27 percent).

Foodborne disease outbreaks due to norovirus occur most often when infected food handlers do not wash their hands well after using the toilet; outbreaks due to salmonella occur most often when foods are contaminated with animal feces. Contaminated foods are often of animal origin, such as beef, poultry, milk, or eggs. But any food, including vegetables, may become contaminated. Thorough cooking kills Salmonella.

The report states that in the 235 outbreaks where one food commodity was identified, the largest number of illnesses listed poultry (691 illnesses), beef (667 illnesses), and leafy vegetables (590 illnesses) as the cause. The CDC tracks 17 food commodity categories.

To prevent foodborne illnesses, CDC recommends that consumers and food handlers appropriately clean, separate, cook and chill foods.

The full report, "Surveillance for Foodborne Disease Outbreaks -- United States, 2007" appears in this week's edition of CDC's Morbidity and Mortality Weekly Report.

Direct access to the Foodborne Outbreak Online Database (FOOD), a searchable database of outbreaks reported to CDC between 1998 and 2007 is available online.

A report in the London Telegraph says computer users unknowingly downloaded the malicious program when they opened an email attachment. The newspaper quotes sources at M86, the British agency that uncovered the scam, as saying all the victims so far were customers of the same bank. The agency says the attacks are continuing.

Trojan viruses can affect computers running the Windows operating system. They lurk in emails and even on websites.

Also called "key loggers," these programs, once installed on a computer, record every keystroke the user makes. That information can be retrieved remotely, giving the hacker access to the victim's user names and passwords.

In the British case, the attacker then used the information to log into the victims' online bank accounts and take all their money.

On the trail

So far British authorities have not identified the particular Trojan being used in this attack, but computer security firm Sophos, in its latest security alert, is warning consumers about the Mal/EncPk-QY, a malicious downloader that is capable of carrying out the current attack on bank accounts. Sophos said it saw Mal/EncPk-QY in almost 44 percent of email attachments in a recent variety of spam campaigns.

Sample subjects of spam campaigns seen distributing the attachment:

• Your Facebook password is changed

• Review your annual Social Security statement DHL Tracking number 397176595115 From

Some attachment names include:

•Facebook_Passw_31.07.2010.zip

• statement.zip

• viewer.zip

• document.zip

The file extracted from the zip file is an executable. When run, the executable contacts a server to deliver information about the target machine, including the hostname, as well as download yet another executable.

Security experts say consumers running Windows can protect themselves by keeping their operating systems, browser, and security software up to date. Most Trojans exploit known vulnerabilities in Windows programs for which patches currently exist.

In her lawsuit, Illinois AG Lisa Madigan asks the Circuit Court of Cook County to prohibit the companies from engaging in the illegal activity and to award as damages the overcharges paid on the purchase of these items by the State of Illinois and its residents. The suit also seeks civil penalties, fees and costs.

"These companies conspired to illegally fix the prices for LCD screens," said Madigan. "This lawsuit seeks to recover the money that Illinois residents and the State paid because of the price-fixing conspiracy."

In his $100 million lawsuit, Oregon Attorney General John Kroger charges that top executives of the firms held special meetings and used a telephone "hotline" in order to share pricing information and production volumes and agreed to inflated prices resulting in artificially high prices to Oregon purchasers of LCD panels and products.

"This important lawsuit will help ensure a fair marketplace and protect Oregon consumers," Kroger said.

Collusion charged

The Japanese, Korean, and Taiwanese companies, in combination with their American and certain foreign subsidiaries, allegedly agreed with each other to raise the prices each would charge for their LCD screens. These companies controlled approximately 90 percent of the sales of LCD screens sold in the United States. As a result, the suits claim, the prices for the products containing these screens were raised to levels significantly above the prices that consumers would otherwise have paid had the prices been set through normal competition.

The Illinois complaint cites evidence that:

• Top-level executives of these companies, including some of their CEOs, attended secret meetings on a regular monthly or quarterly basis to agree on minimum prices, price targets and increases, and prices to be charged for specific screens and screen sizes.

• These companies exchanged price and production information to insure that their consumers would have to pay the agreed prices.

• These companies also met face-to-face and by phone in smaller groups or one-on-one to coordinate their prices and avoid letting competition lead to lower prices.

The defendants named in the actions are AU Optronics Corporation; AU Optronics Corporation America, Inc.; Chi Mei Innolux Corporation; Chi Mei Optoelectronics Corp. USA, Inc.; CMO Japan Co., Ltd.; Epson Imaging Devices Corp.; Epson Electronics America, Inc.; Hitachi, Ltd.; Hitachi Displays, Ltd.; Hitachi America, Ltd.; Hitachi Electronic Devices (USA), Inc.; LG Display Co., Ltd.; LG Display America, Inc.; Samsung Electronics Co., Ltd.; Samsung Semiconductor, Inc.; Samsung Electronics America, Inc.; Sharp Corporation; Sharp Electronics Corporation; Toshiba Corporation; Toshiba America Electronic Components, Inc.; Toshiba Mobile Display Co., Ltd.; and Toshiba America Information Systems, Inc.

Spokesmen for Samsung and Toshiba told Bloomberg.com that their companies don't comment on legal issues.

Prior to filing the lawsuit Kroger and other state attorneys general obtained a settlement with Chunghwa Picture Tubes LTD, the terms of which require the company to cooperate with the states' lawsuits and pay $486,000.

Foreclosure filings increased four percent in July from the previous month, but unless your home is in one of five states, your chance of being affected is less.

In its July report, the real estate data firm RealtyTrac notes that foreclosure activity continues to be centered in California, Florida, Illinois, Michigan and Arizona, with those five states accounting for more than half of all U.S. foreclosure activity last month.

California alone accounted for 21 percent of the national total in July, with 66,910 properties receiving a foreclosure filing during the month -- down three percent from the previous month and down 38 percent from July 2009.

With 51,557 properties receiving a foreclosure filing during the month, Florida accounted for 16 percent of the national total in July despite a nearly nine percent decrease in foreclosure activity from July 2009.

Illinois foreclosure activity increased 33 percent from the previous month -- the biggest monthly increase among states with top 10 foreclosure rates. A total of 19,602 Illinois properties received a foreclosure filing in July, the third highest state total and accounting for six percent of the national total.

Michigan accounted for just under six percent of the national total, with 18,833 properties receiving a foreclosure filing in July, and Arizona accounted for five percent of the national total, with 16,298 properties receiving a foreclosure filing in July.

Repossessions up six percent

Despite the month over month increase in foreclosure activity, RealtyTrac notes that foreclosure filings are down ten percent from July 2009. But that doesn't mean people have stopped losing their homes. In fact, that grim statistic continues to rise.

"July marked the 17th consecutive month with a foreclosure activity total exceeding 300,000," said James J. Saccacio, chief executive officer of RealtyTrac. "Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July, have been offset by near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month."

When it comes to the rate of foreclosure, two smaller states -- Nevada and Idaho -- make the top five. In Nevada, nearly one in every 82 housing units receiving a foreclosure filing in July. Nevada continued to document the nation's highest foreclosure rate for the 43rd straight month.

Foreclosure activity in Idaho increased nearly 19 percent from the previous month, boosting the state's foreclosure rate to fifth highest among all the states. One in every 240 Idaho housing units received a foreclosure filing in July.

Metro foreclosure hot spots

All 10 metro areas with the nation's highest foreclosure rates in July posted year-over-year decreases in foreclosure activity, but five of the top 10 posted increases from the previous month. The two biggest monthly increases were in No. 2 Cape Coral-Fort Myers, Fla., where foreclosure activity was up 21 percent from the previous month, and in No. 9 Phoenix-Mesa-Scottsdale, Ariz., where foreclosure activity was up 19 percent from the month before.

Foreclosure activity increased nearly nine percent from the previous month in the Las Vegas-Paradise, Nev., metro area, which registered the highest foreclosure rate among metropolitan areas with a population of 200,000 or more. One in every 71 Las Vegas housing units received a foreclosure filing in July, more than five times the national average.

Other states with foreclosure activity totals among the nation's 10 highest in July were Nevada (13,727), Ohio (13,511), Georgia (12,577), Texas (11,727) and Maryland (6,961).

As many as 300 students paid $20,000 each to enroll and attend classes at RN Learning Center, which advertised its fast-track program for earning a bachelor of science degree in nursing in less than two years.

California Attorney General Jerry Brown said the school deceived students by pretending to offer an accredited nursing program and tricking graduates into believing they had qualified to become registered nurses.

"By creating the illusion it was training future registered nurses," Brown said, "the school destroyed the aspirations of hundreds of students who also lost thousands of dollars in wasted tuition. The school will shut its doors today and pay back its former students as fully as it can."

In the settlement negotiated by Brown's office on behalf of the Board of Registered Nursing, Junelou Chalico Enterina, owner and operator of RN Learning Center, which operated on Wilshire Boulevard in Los Angeles, agreed to close his business and pay victims restitution of $500,000. He also agreed never again to open a nursing school in California.

Worthless degrees

The board, which is the state agency that oversees the practice and education of nurses, believes no student of RN Learning Center was able to use her degree to qualify for the state's nursing exam or become a registered nurse. However, the board is contacting every medical facility in the state to warn about unaccredited schools such as RN Learning Center.

The settlement concludes a board investigation that began in early 2007. Despite purporting to be a nursing school, Brown said RN Learning Center never applied to the nursing board to obtain accreditation as a school of nursing.

Three years ago, the board ordered the school to close. It also disciplined two licensed registered nurses associated with the school and posted a notice on its website warning prospective students that unaccredited schools were operating in California.

Despite the scrutiny, RN Learning Center continued to operate, targeting mostly Filipino-Americans who already worked in the health field. The school's marketing materials promised the program would, "Advance Your Education. Increase Your Earnings. Secure Your Financial Future."

Just as they would in a real nursing school, students took classes in anatomy, microbiology and learned to do sutures. They traveled to the Philippines for a month of clinical study in hospitals and prisons, and attended classes at a foreign nursing school that also had not been approved by California's board.

Elaborate deception

Brown said RN Learning Center kept the deception going by holding formal graduation ceremonies. About 50 of its students applied to the nursing board to take the National Council Licensing Examination, which qualifies nursing school graduates to become licensed registered nurses.

The students submitted transcripts that were declared fraudulent, so they were unable to meet the eligibility requirements and were not allowed to take the licensing exam. Because RN Learning Center was unlicensed, none of the course work taken there can be counted toward completing a Bachelor of Science in Nursing.

The proposal primarily focuses on finding effective ways for banks to monitor their overdraft programs for excessive or chronic use by customers as a form of short-term, high-cost credit instead of its intended use: protection against inadvertent overdrafts. It also provides an overview of how banks can avoid compliance and safety-and-soundness risks.

"This guidance proposes common-sense ways to mitigate risks to both consumers and banks. Ensuring that their customers are educated on the appropriate use of overdraft payment programs is just one more example of how community banks understand their customers and play a role in helping individuals find suitable financial products," FDIC Chairman Sheila C. Bair said.

Consumers who chose to remain in an overdraft program will continue to pay a fee whenever the bank covers a debit purchase for which there are insufficient funds.

Under new rules that recently took effect, banking institutions already must give customers an opportunity to opt-in to programs that charge a fee to cover ATM and point-of-sale overdrafts.

It's anticipated that most customers will not opt in for this service. Consumer advocates are concerned about those who do.

Less costly options

American families, especially those most vulnerable financially, could save millions of dollars a year in costly overdraft fees if guidelines the FDIC proposed are adopted, said Michael Calhoun, President of the Center for Responsible Lending.

The guidelines would encourage the banks the FDIC oversees to offer customers lower-cost overdraft alternatives rather than charge unlimited high-cost overdraft feesas many banks do, even on small debit card transactions.

Under the proposal, a bank would contact a customer who incurs six overdraft fees within 12 months and offer and explain less costly options. The bank would be encouraged to provide the customer with a reasonable opportunity to choose one of them. Banks the FDIC oversees also would be discouraged from re-ordering transactions to maximize overdraft fees.

The proposal comes just days before new Federal Reserve's August 15th rules take effect requiring banks and credit unions to obtain a customer's signature before enrolling them in a costly overdraft program for debit cards.

Many banks don't give consumers real choices among alternatives, Calhoun said. Instead, they steer customers into the highest cost overdraft coverage they offer.

For many consumers who don't like to carry cash, a debit card is their only alternative. If they can't qualify for a credit card, using a debit card -- with a direct withdrawal from their bank account -- is the only option for paying with plastic.

According to a recent study by MasterCard, debit card users tend to have significantly lower credit scores than credit card users. If you can qualify for a credit card, chances are you have fairly good credit, and tend to pay with a credit card rather than a debit card.

While credit cards and debit cards can look the same, there's one major difference. When you pay using a debit card, the money comes straight out of your bank account. If you pay with a credit card, the purchase is applied to your credit balance.

You get a bill at the end of the billing cycle with the option to pay it in full, or pay a portion. This is where some consumers tend to get into trouble.

It adds up

For example, if a consumer makes a couple of significant purchases during the month, along with the usual meals and gasoline, he could easily add $1,200 or so to the balance. When the bill arrives, she decides paying the full balance would use too much of her bank account, so she pays only $200, planning to pay the remaining $1000 the following month.

But an unexpected car repair the following month, along with the usual smaller purchases, puts another $1,200 on the credit card. Suddenly the balance is $2200, with an interest rate of nearly 30 percent.

Not properly managed, a credit card can easily saddle consumers with high interest debt, preventing them from using their money in other ways. Consumers with a balance of $20,000 or more on credit cards are not uncommon. The $20,000 was not charged all at once, but in smaller amounts over time.

Debit cards are also not without their pitfalls, but fortunately, one of those drawbacks recently went away. Until very recently, debit card users were plagued with overdraft fees.

If they made a purchase with their debit card that overdrew their account, the purchase went through but the bank charged the consumer a "courtesy overdraft protection" fee of $35 or so. If the shopper made two or three other purchases before checking his balance, each of those purchases carried an extra $35 fee.

Rule change

Because of a change in Federal Reserve rules, banks may no longer extend that overdraft "protection" as a matter of course. Now customers must specifically tell their bank they would like that service. If they don't ask for it, purchases will be declined if they overdraw the account -- but the consumer doesn't pay an overdraft fee.

The availability of online banking makes it easier to keep track of debit card purchases and could be another reason this piece of plastic might work better for some people. If you pay as you go, you don't get any surprises at the end of the month when the credit card bill arrives and you're confronted with purchases on credit that you had forgotten you had made.

At the same time, some credit card issuers have begun charging an annual fee, meaning the card can cost you money, whether you use it or not.

All of which makes the lowly debit card look better and better. With the threat of overdraft fees greatly diminished, reaching for your debit card might make the most sense, even if you're giving up the chance to add more airline miles.

For the better part of a year government safety investigators have probed the thousands of reports of sudden acceleration in some Toyota vehicles. In a preliminary report to Congress, they say they have uncovered no evidence of problems in the vehicles' electronics.

Drivers, for years, have reported instances in which their car accelerated on its own and failed to stop, even when they applied brakes. In some cases, these reports of sudden acceleration resulted in crashes.

Toyota has insisted from the start that, whatever the reason for these anomalies, they weren't caused by hiccups in the vehicles' sophisticated electronics. The National Highway Traffic Safety Administration (NHTSA), in its preliminary report, said it had reviewed 58 of the more than 3,000 submitted cases, and found no evidence of an electronics flaw.

Since last September Toyota has recalled about nine million vehicles to either replace floor mats or alter the design of accelerator pedals. The NHTSA report said investigators found only one case in which a floor mat trapped a gas pedal, pressing it to the floor, and no case in which the gas pedal became stuck.

Toyota was quick to embrace the preliminary report, saying it confirms the company's own findings. The carmaker said it had conducted more than 4,000 vehicle inspections in the aftermath of sudden acceleration reports and found no case in which the problem could be attributed to the electronics.

No conclusions

Federal investigators say it is too early to draw any conclusions, but note some of the cases reviewed so far may have been caused by driver error, in which the drivers unknowingly applied pressure to the accelerator, thinking they were pressing on the brakes.

This isn't the first time NHTSA has investigated this problem in Toyotas. After launching an investigation of reports of sudden acceleration in Toyotas during the early 2000s, NHTSA reported in 2004 that it was unable to find a cause for the problem.

At the time, the agency said it analyzed many of the cars involved in the mishaps and found nothing abnormal with the throttle controls. Once again NHTSA pointed to the driver. The agency said sudden surges are sometimes caused by drivers who are unfamiliar with their new vehicles.

Not just Toyota

While Toyotas have figured prominently in reports of sudden acceleration over the years, other models have also been affected.

"My wife pulled our 2004 V8 Jeep Grand Cherokee, into the day care to pick up our toddler and put the gear in park after coming to a stop," Vasanthi, of San Jose, Calif., wrote in March 2009. "The Jeep suddenly accelerated and shot forward, with her foot tightly on the brake, and went over a concrete block, through a fence and into the yard on the other side."

ConsumerAffairs.com has received sudden acceleration complaints over the years from a wide range of makes, including Kia, Jaguar, BMW and Ford. In fact, a December 2009 analysis of NHTSA complaints by Consumer Reports found Ford produced the second largest number of sudden acceleration reports after Toyota.

A two-year investigation by the Washington Attorney General's Office contends Intelius received thousands of consumer complaints regarding unauthorized enrollment in the programs and that company management -- including CEO Naveen Jain -- knew about the complaints but chose to continue the deceptive and tremendously profitable marketing tactics.

"Intelius chose cash over candor," said Attorney General Rob McKenna. "Despite a continuous stream of complaints from consumers about mysterious charges, despite a consultant's belief that Intelius' advertising practices were causing confusion and despite a recommendation from its own staff to make it easier for consumers to opt out of additional purchases, the company wouldn't change course."

McKenna said a $1.3 million settlement with Intelius will protect consumers. The settlement, filed in King County Superior Court, doesn't require the company to admit any wrongdoing, but significantly restricts its future advertising practices. Intelius will also provide refunds to Washington state residents who were enrolled in the company's "Identity Protect" program but never used the service.

Post-transaction marketing

The investigation by McKenna's Consumer Protection High-Tech Unit focused on an Internet sales method commonly referred to as post-transaction marketing In that arrangement, additional services are offered to consumers after they've submitted their credit card data but before they've received the product they intended to purchase.

"Post-transaction marketing plunges you into an online labyrinth where the only way out is to click and click and click," McKenna said. "One wrong turn and you're enrolled in a membership program that costs you $20 or more each month. And you'll never know until you scrutinize your credit-card bill."

A Scottsdale, AZ, consumer, who did not want his name revealed, says he used the People Search website once approximately 12 months ago and paid a $1.00 charge for the service. "Since then," he tells ConsumerAffairs.com, "I was charged a monthly fee for 19.95 for Intelius (which apparently is People Search and was the name of the charge on my account), as well as $19.95 per month for Privacy Matters. I never even signed up on Privacy Matters. I only used that one service on that one incident and now I've been charged a total of $39.90/month."

The sales tactic gained notoriety in November 2009 when the U.S. Senate Commerce, Science and Transportation Committee released an investigative report accusing Web companies of duping consumers. McKenna was the only attorney general to submit testimony in connection with the committee's hearing. He pointed out that investigations suggest more than $50 million has been deceptively obtained from Washington consumers by a handful of businesses.

Washington's case directly addresses the sort of problems spotlighted by the Senate report. Most notably, the settlement prohibits the company from accepting advertising from Vertrue, Inc., WebLoyalty, Inc., and Affinion. It also prohibits Intelius from transmitting a consumer's financial information to any third party to enable that party to bill consumers.

An example of this ploy comes from Joel of Roque Bluffs, ME, who writes, "On April 12, 2008 I charged 2.95 on my American Express Card, payable to Intelius for a phone number look-up On April 23, 2008 a charge of 19.95 showed up on my AMEX card from AP9*PMIDENTITY.COM. It has been charged every month since." Joel tells ConsumerAffairs.com that he reported it to AMEX, which credited the most recent charge and is investigating.

The settlement

The agreement also addresses Intelius' ability to sell its own products through post-transaction marketing and free-to-pay conversion offers, whereby consumers initially receive a free trial and are charged unless they cancel. Consumers must give their expressed agreement before being enrolled in a membership program and all terms must clearly be communicated.

Approximately $300,000 of the $1.3 million will be used to recover the state's litigation costs and monitor the restitution program.

Washington consumers are eligible for refunds under the settlement if they 1) enrolled in Identity Protect before Aug. 12, 2009, (the period when the state felt the ads were deceptive), 2) have not received full refunds and 3) have not used any member-enabled benefit.

Intelius will contact eligible consumers by mail and e-mail with instructions on how to submit a claim. The settlement does not apply to consumers in other states or those who purchased memberships from any third-party marketer.

Using the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund), the Treasury Department will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment.

At the same time, the Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance -- for up to 24 months -- to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

"We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment," said Assistant Secretary for Financial Stability Herb Allison. "This is part of the Administration's comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels."

Bill Apgar, HUD Senior Advisor for Mortgage Finance, said HUD's new Emergency Homeowner Loan Program will build on Treasury's Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures.

"Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration's efforts to stabilize housing markets and communities across the country," he said.

Hardest Hit Fund

President Obama first announced the Hardest Hit Fund in February to allow states hit hard by the recession more flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing.

Under the additional assistance, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage while they seek re-employment, additional employment or undertake job training.

The states eligible to receive funds through this additional assistance are: Alabama; California; Florida; Illinois; Indiana; Kentucky; Michigan; Mississippi; Nevada; New Jersey; North Carolina; Ohio; Oregon; Rhode Island; South Carolina; Tennessee; and Washington, DC.

Florida Attorney General Bill McCollum wants to know if there's a pattern. He's launched three new investigations into allegations of unfair and deceptive actions by Florida law firms handling foreclosure cases.

The Attorney General's Economic Crimes Division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved.

The new investigations name The Law Offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP; and the Law Offices of David J. Stern, P.A. The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages.

Paper chase

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners.

Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation,McCollum said.

The attorney general's office is also investigating whether the law firms have created affiliated companies outside the United States where the allegedly false documents are being prepared and then submitted to the law firms for use.

Subpoenas have been served on each of the law firms listed above, and the investigations are continuing, McCollum said.

Johnston is accused of conducting the scheme from 2005 through March of 2009. It purportedly involved overselling participation in large commercial and personal loans arranged by him through his company, First United Funding ("FUF").

Loan participation is a common practice in which a bank pays an original lender all or a portion of a particular loan and then assumes that loan, along with its associated risk. From that point on, the bank receives the loan payments from the borrower, as if the bank had made the loan in the first place.

Johnston's alleged scam involved selling more than 100 percent participation in at least ten different loans arranged through FUF. In other words, he purportedly sold loan participation to banks after already selling that same participation to other banks. In each instance, Johnston failed to disclose that the total participation exceeded 100 percent of the original loan, making it impossible for the participating bank to receive the full amount of money expected.

The setup

For example, Johnston allegedly oversold loan participation for a project known as White Out Way Investments. The original White Out Way loan, arranged through FUF, was for $7 million. Johnston reportedly sold 100 percent participation in that loan to Western National Bank. At the same time, however, he allegedly conned several other banks into participating in the loan, including 100 percent participation by The National Bank in Bettendord, Iowa, as well as partial participation by four other lending institutions.

In all, Johnston purportedly solicited and received $23.65 million from six banks for the $7 million loan.

In addition, Johnston allegedly oversold loan participation for a project known as JM Land Development II. The original JM Land Development loan was for $8 million, and once again, Johnston sold 100 percent participation in the loan to Western National Bank. Simultaneously, however, he reportedly obtained full loan participation from Choice Financial, The National Bank, and Hillcrest Bank, along with partial participation from four other banks.

Johnston allegedly solicited a total of $38.65 million for an $8 million loan. According to the charging document, six additional lenders were defrauded during the course of this scheme, through overselling participation in other loans.

By Mark Huffman
ConsumerAffairs.Com

August 11, 2010
A new federal rule penalizing airlines for lengthy tarmac delays resulted in a huge drop in such delays in June. Or it could be a coincidence. You be the judge.

In June 2009 there were 268 reports of passengers stranded aboard airliners on the tarmac for three hours or more. In June 2010, there were only three, according to a report from the U.S. Department of Transportation.

A month earlier a new rule went into effect imposing a hefty fine, per passenger, on airlines that keep their passengers on the tarmac more than three hours without the opportunity to return to the terminal. At the time, most airlines bitterly opposed the rule, predicting it would lead to a wave of flight cancellations.

According to information filed with the Bureau of Transportation Statistics (BTS), a part of DOTs Research and Innovative Technology Administration (RITA), the only tarmac delays longer than three hours reported in June by the 18 airlines who file on-time performance with DOT involved three United Airlines flights departing Chicagos OHare airport on June 18, a day in which the Chicago area experienced a severe thunderstorm.

None of the tarmac delays exceeded the three-hour limit by more than five minutes. June was the second full month of data since the new aviation consumer rule went into effect on April 29.

In May, the first full month, there were five reported tarmac times of more than three hours, down from 34 in May 2009. A subsequent DOT investigation determined that four of the five May flights were misreported by the airline. Corrected data will be available from BTS when the airline submits revised data.

The carriers canceled 1.5 percent of their scheduled domestic flights in June, equal to the 1.5 percent cancellation rate of June 2009. They posted a 1.2 percent cancellation rate in May 2010.

The new rule prohibits U.S. airlines operating domestic flights from permitting an aircraft to remain on the tarmac for more than three hours without deplaning passengers, with exceptions allowed only for safety or security or if air traffic control advises the pilot in command that returning to the terminal would disrupt airport operations. The Department said it will investigate tarmac delays that exceed this limit.

The company said it has received reports of four additional fires, including one that caused significant damage to a home, since its previous recall in December 2009.

This recall involves 30-pint portable dehumidifiers sold under the brand names in the chart below. The dehumidifiers are white with a red shut-off button, controls for fan speed and humidity control and a front-loading water bucket. "Goldstar" or "Comfort-Aire" is printed on the front. The model and serial numbers are printed on the interior of the dehumidifiers and can be viewed after the water bucket is removed.

The appliances, made in China, were sold by The Home Depot, Walmart and Heat Controller Inc. nationwide from January 2007 through June 2008 for between $140 and $150.

Consumers should immediately stop using the recalled dehumidifier, contact LG to determine if it is included in the recall and return it to an authorized LG service center for a free repair.

For additional information, contact LG toll-free at (877) 220-0479 between 8 a.m. and 7 p.m. CT Monday through Friday and between 8 a.m. and 2 p.m. CT on Saturday for the location of an authorized LG service center for the repair, or visit the firm's website at www.30pintdehumidifierrecall.com

The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

Mercedes-Benz is recalling certain G Class vehicles from the 2002 through 2010 model years. In some cases, the headlamps are equipped with a protective grill that is not permitted under U.S. safety regulations. In other cases, front turn signals may be covered with a grill that may deteriorate over time.

Dealers will remove the headlamp grills free of charge and replace the turn signal grill covers.

Owners may contact Mercedes-Benz at 1-800-367-6372.

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